UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment No. 1 to
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
YANGTZE
RIVER PORT AND LOGISTICS LIMITED
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction of incorporation or organization)
27-1636887
(I.R.S.
Employer Identification Number)
41
John Street, Suite 2A, New York, NY 10038
(646)
861-3315
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Mr.
Xiangyao Liu
Chief
Executive Officer
41
John Street, Suite 2A, New York, NY 10038
(646)
861-3315
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Benjamin
Tan, Esq.
Will
Rao, Esq.
Sichenzia
Ross Ference Kesner LLP
1185
Avenue of the Americas, 37
th
Floor,
New
York, NY 10036
Telephone
(212) 930- 9700
Facsimile
(212) 930-9725
Approximate
date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration
Statement.
If
the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please
check the following box:
☐
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, other than securities offered only in connection with dividend or interest reinvestment plans, check
the following box:
þ
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 registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become
effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If
this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register
additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following
box. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
þ
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Accelerated
filer ☐
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Non-accelerated
filer ☐
(Do
not check if a smaller reporting company)
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Smaller
reporting company ☐
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Emerging
growth company ☐
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If
an emerging growth company, 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 Securities Act. ☐
CALCULATION
OF REGISTRATION FEE
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Title
of each class of securities to be registered
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Amount
to be
Registered
(1)(2)
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Proposed maximum
offering
price
per unit (1)(2)
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Proposed maximum
aggregate offering
price
(1)(2)
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Amount of
registration
fee (3)
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Common Stock, par value $0.0001 per share
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Preferred Stock, par value $0.0001 per share
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Debt Securities
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Warrants
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Rights
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Units
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Total
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$
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300,000,000
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-
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$
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300,000,000
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$37,350
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(4)
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(1)
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This
registration statement covers an indeterminate number of shares of common stock, shares of preferred stock, debt securities,
warrants, rights, and units that may be sold by the registrant from time to time, for a maximum aggregate offering price
of all securities not to exceed $300,000,000. Any securities registered hereunder may be sold separately or as units with
other securities registered hereunder. The securities registered also include an indeterminate amount and number of shares
of common stock as may be issued upon exercise of warrants or rights, conversion of preferred stock or debt securities,
etc. or pursuant to the anti-dilution provisions of any such securities. The securities registered also include an indeterminate
amount and number of shares of preferred stock as may be issued upon exercise of warrants or rights, conversion of debt
securities or pursuant to the anti-dilution provisions of any such securities.
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(2)
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The
proposed maximum aggregate offering price per class of security will be determined from time to time by the registrant in
connection with the issuance by the registrant of the securities registered hereunder and is not specified as to each class
of security pursuant to General Instruction II.D. of Form S-3 under the Securities Act of 1933, as amended (the “Securities
Act”).
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(3)
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The
registration fee has been calculated in accordance with Rule 457(o) under the Securities Act.
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(4)
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The registration fee has been p
reviously
paid.
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The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration
statement relating to these securities that has been 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 April 24, 2018)
PROSPECTUS
YANGTZE
RIVER PORT AND LOGISTICS LIMITED
$300,000,000
Common
Stock, par value $0.0001
Preferred
Stock, par value $0.0001
Debt
Securities
Warrants
Rights
Units
We
may offer and sell up to $300,000,000 in the aggregate of the securities identified above from time to time in one or more offerings.
This prospectus provides you with a general description of the securities. Each time we offer and sell securities, we will provide
a supplement to this prospectus that contains specific information about the offering and the amounts, prices and terms of the
securities. The supplement may also add, update or change information contained in this prospectus with respect to that offering.
You should carefully read this prospectus and the applicable prospectus supplement before you invest in any of our securities.
The securities we offer
will have an aggregate public offering price of up to $300 million. We will provide specific terms of any offering, including the
price to the public of the securities, in supplements to this prospectus. These securities may be offered separately or together
in any combination and as separate series. You should read this prospectus and any applicable prospectus supplement and free writing
prospectus carefully before you invest in our securities.
We may sell these securities
on a continuous or delayed basis directly, through agents, dealers or underwriters as designated from time to time, or through
a combination of these methods. For additional information on the methods of sale, you should refer to the section entitled “Plan
of Distribution”. We, as applicable, reserve the sole right to accept, and together with any agents, dealers and underwriters,
reserve the right to reject, in whole or in part, any proposed purchase of securities. If any agents, dealers or underwriters are
involved in the sale of any securities, the applicable prospectus supplement will set forth any applicable commissions or discounts.
Our net proceeds, if applicable, from the sale of securities also will be set forth in the applicable prospectus supplement. The
prospectus supplement will also contain more specific information about the offering.
We
may offer and sell the securities described in this prospectus and any prospectus supplement to or through one or more underwriters,
dealers and agents, or directly to purchasers, or through a combination of these methods. If any underwriters, dealers or agents
are involved in the sale of any of the securities, their names and any applicable purchase price, fee, commission or discount
arrangement between or among them will be set forth, or will be calculable from the information set forth, in the applicable prospectus
supplement. See the sections of this prospectus entitled “About this Prospectus” and “Plan of Distribution”
for more information. No securities may be sold without delivery of this prospectus and the applicable prospectus supplement describing
the method and terms of the offering of such securities.
INVESTING
IN OUR SECURITIES INVOLVES RISKS. SEE THE “
RISK FACTORS
” ON PAGE 17 OF THIS PROSPECTUS AND ANY SIMILAR
SECTION CONTAINED IN THE APPLICABLE PROSPECTUS SUPPLEMENT CONCERNING FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN OUR
SECURITIES.
Our common stock is
listed on the Nasdaq Global Select Market under the symbol “YRIV”. On April 20, 2018, the last reported sale price
of our common stock on the Nasdaq Global Select Market was $4.02 per share.
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.
This
prospectus is dated ________, 2018.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission, or the SEC, using
a “shelf” registration process. By using a shelf registration statement, we may sell securities from time to time
and in one or more offerings up to a total dollar amount of $300,000,000 as described in this prospectus. Each time that we offer
and sell securities, we will provide a prospectus supplement to this prospectus that contains specific information about the securities
being offered and sold and the specific terms of that offering. The prospectus supplement may also add, update or change information
contained in this prospectus with respect to that offering. If there is any inconsistency between the information in this prospectus
and the applicable prospectus supplement, you should rely on the prospectus supplement. Before purchasing any securities, you
should carefully read both this prospectus and the applicable prospectus supplement, together with the additional information
described under the heading “Where You Can Find More Information; Incorporation by Reference.”
We
have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We will not make an offer to sell these securities in any jurisdiction where the offer
or sale is not permitted. You should assume that the information appearing in this prospectus and the applicable prospectus supplement
to this prospectus is accurate as of the date on its respective cover, and that any information incorporated by reference is accurate
only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition,
results of operations and prospects may have changed since those dates.
When
we refer to “we,” “our,” “us” and the “Company” in this prospectus, we mean Yangtze
River Port and Logistics Limited, unless otherwise specified. When we refer to “you,” we mean the holders of the applicable
series of securities.
WHERE
YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
Available
Information
We
file reports, proxy statements and other information with the SEC. Information filed with the SEC by us can be inspected and copied
at the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of
this information by mail from the Public Reference Room of the SEC at prescribed rates. Further information on the operation of
the SEC’s Public Reference Room in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains
a web site that contains reports, proxy and information statements and other information about issuers, such as us, who file electronically
with the SEC. The address of that website is
http://www.sec.gov
.
Our website address
is
http://www.yerr.com.cn
. The information on our website, however, is not, and should not be deemed to be, a part of this
prospectus. We make available free of charge, on or through the investor relations section of our website, annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or
furnish it to, the SEC.
This
prospectus and any prospectus supplement are part of a registration statement that we filed with the SEC and do not contain all
of the information in the registration statement. The full registration statement may be obtained from the SEC or us, as provided
below. Forms of the documents establishing the terms of the offered securities are or may be filed as exhibits to the registration
statement. Statements in this prospectus or any prospectus supplement about these documents are summaries and each statement is
qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for a more
complete description of the relevant matters. You may inspect a copy of the registration statement at the SEC’s Public Reference
Room in Washington, D.C. or through the SEC’s website, as provided above.
Incorporation
by Reference
The
SEC’s rules allow us to “incorporate by reference” information into this prospectus, which means that we can
disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated
by reference is deemed to be part of this prospectus, and subsequent information that we file with the SEC will automatically
update and supersede that information. Any statement contained in a previously filed document incorporated by reference will be
deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus
modifies or replaces that statement.
We
incorporate by reference our documents listed below and any future filings made by us with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act” in this prospectus,
between the date of this prospectus and the termination of the offering of the securities described in this prospectus. We are
not, however, incorporating by reference any documents or portions thereof, whether specifically listed below or filed in the
future, that are not deemed “filed” with the SEC, including any information furnished pursuant to Items 2.02 or 7.01
of Form 8-K or related exhibits furnished pursuant to Item 9.01 of Form 8-K.
This
prospectus and any accompanying prospectus supplement incorporate by reference the documents set forth below that have previously
been filed with the SEC:
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●
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Our
Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on
March 9, 2018.
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Our
Current Report on Form 8-K filed with the SEC on March 6, 2018.
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Our
Current Report on Form 8-K/A (Amendment No. 1) filed with the SEC on February 16, 2018.
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●
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Our
Current Report on Form 8-K filed with the SEC on February 15, 2018.
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●
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Our
Current Report on Form 8-K filed with the SEC on February 14, 2018.
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●
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Our
Current Report on Form 8-K filed with the SEC on February 13, 2018.
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●
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Our
Current Report on Form 8-K filed with the SEC on February 9, 2018.
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●
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Our
Current Report on Form 8-K filed with the SEC on February 9, 2018.
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●
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The
description of our Common Stock contained in the our Registration Statement on Form 8-A
filed April 13, 2017 (File No. 001-38062), including any amendment or report filed for
the purpose of updating such description.
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All reports and other
documents we subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering, including all such documents we may file with the SEC after the date of the initial registration statement and prior
to the effectiveness of the registration statement, but excluding any information furnished to, rather than filed with, the SEC,
will also be incorporated by reference into this prospectus and deemed to be part of this prospectus from the date of the filing
of such reports and documents. We will identify all Exchange Act reports filed prior to effectiveness of the registration statement
(by type, date and Commission file number) in the first Rule 424(b) prospectus used after effectiveness of the registration statement.
You
may request a free copy of any of the documents incorporated by reference in this prospectus (other than exhibits, unless they
are specifically incorporated by reference in the documents) by writing or telephoning us at the following address:
Yangtze
River Port and Logistics Limited
41
John St, Suite 2A
New
York, NY 10038
(646)
861-3315
Exhibits
to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this prospectus
and any accompanying prospectus supplement.
ABOUT
YANGTZE RIVER PORT AND LOGISTICS LIMITED
Overview
Yangtze
River Port and Logistics Limited is a Nevada holding corporation. We operate through our wholly-owned subsidiary, Energetic Mind
Limited (“Energetic Mind”), a British Virgin Islands corporation, which in turn operates through its wholly-owned
subsidiary, Ricofeliz Capital (HK) Limited (“Ricofeliz Capital”), a Hong Kong corporation. Ricofeliz Capital which
operates through its wholly-owned subsidiary, Wuhan Yangtze River Newport Logistics Co., Ltd (“Wuhan Newport”), a
wholly foreign-owned enterprise incorporated in the People’s Republic of China that primarily engages in the business of
real estate and infrastructural development and operating a port logistics center (“Logistics Center”) located in
Wuhan, Hubei Province in the People’s Republic of China (“PRC”).
Situated
in the middle reaches of the Yangtze River, Wuhan Newport is a large infrastructure development project implemented under China’s
latest “One Belt One Road” initiative. We believe that it is strategically positioned in the anticipated “Pilot
Free Trade Zone” of the Wuhan Port, an important trading locale for the PRC, the Middle East and Europe. To be fully developed
upon completion, the Logistics Center will comprise six operating zones: port operation area, warehouse and distribution area,
cold chain logistics area, rail cargo loading area, exhibition area and business related area. The Logistics Center is also expected
to provide a number of shipping berths for cargo ships of various sizes. Wuhan Newport expects to provide domestic and foreign
businesses direct access to the anticipated Pilot Free Trade Zone in Wuhan. The project will include commercial buildings, professional
logistic supply chain centers, direct access to the Yangtze River, Wuhan-Xinjiang-Europe Railway and ground transportation, storage
and processing centers, and IT supporting services, among others.
We
anticipate that income generated from the use of the warehouses, cargo loading and unloading, railway and highway transportation
and logistics services and other logistics supporting services will comprise the main source of our income. It is also expected
that income from real estate sales and leasing will be a relatively minor portion of our expected income since we are planning
to sell or lease only a small portion of our real estate properties such as office spaces. We will begin construction on the Logistics
Center once we are able to raise funds for it.
In the meantime, we
have been developing a commercial building project called the Wuhan Centre China Grand Steel Market (Phase 1) Commercial Building
(“Phase 1 Project”) located in the south of Hans Road, Wuhan Yangluo Economic Development Zone which covers an approximate
construction area of 222,496.6 square meters. We have been financing the Phase 1 Project with bank loans and shareholder advances.
The Phase 1 Project comprises 7 buildings, four of which covering 35,350.4 square meters have been completed and three of which
covering an approximate area of 57,450.4 square meters are still under construction as of December 31, 2017. We have sold approximately
22,780 square meters of commercial building space.
We
plan to use the majority of our real estate properties for the development of our Logistics Center, from which our main source
of expected income will be derived.
Wuhan
Yangtze River Newport Logistics Center
The
Logistics Center will be an extensive complex located in Wuhan Newport Yangluo Port. Wuhan, the capital of the Hubei Province
in the People’s Republic of China is a major transportation hub city with access to numerous railways, roads and expressways
passing through the city and connecting to major cities in China, as well as other international centers of commerce and business.
The
Logistics Center will be on the upper stream of the Yangtze River, and close to the northern base of Wuhan Iron and Steel, China’s
first mega-sized iron and steel production complex. The Logistics Center is expected to include a port terminal that will be located
approximately 26.5km from the Wuhan Guan and 5.5km from the Yangluo Yangtze River Bridge. The operation area of the port is expected
to consist of a riverbank of 1,039 meters with eight 5,000-to-10,000-ton berths, two of which are multi-purpose berths and the
other six are general cargo berths. It is designed to be able to handle up to 5,000,000 tons of cargo annually, including up to
100,000 TEU for annual container throughput (including 20,000 TEU in freezer areas), 1,000,000 tons of iron and steel and 3,000,000
tons of general cargo.
Within
the Logistics Center, functional areas will be divided into six operating zones: a port operation area, a warehouse and distribution
area, a cold chain supply logistics area, a rail cargo loading area, an exhibition area and a business related area. The Logistics
Center will also be complemented with container storage areas, multi-functional areas, general storage areas, a multi-functional
warehouse and infrastructural development, including new roads, gas stations, parking areas, gas and water pipes, electricity
lines and all other facilities and equipment to operate the Logistics Center.
Aside
from being situated in the Wuhan Yangluo Comprehensive Bonded Zone, the Yangluo development area is among the third group of China’s
Pilot Free Trade Zone (“FTZ”) applicants to submit FTZ applications to the State Council. As of the date hereof, approvals
have been granted to Shanghai, Tianjin, Guangdong and Fujian. Corporations within the approved free-trade zones are typically
entitled to a series of favorable regulations and policies that could help the businesses grow and succeed.
The
Logistics Center is expected to occupy approximately 1,918,000 square meters, for which the construction and development are expected
to be completed in three phases in three years and reach its target maximum annual profit by the end of 2022 assuming the entire
funding required for construction of the Logistics Center of $1.03 billion is in place by 2021 and the Logistics Center is in
operation per our business plan. We have updated our original time-frame and the following table illustrates the anticipated timeframe
of our investment and construction progress.
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Time
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Phase of
Investment/Construction
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Percentage of Total
Anticipated
Investment/
Construction (1)
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Production
Capacity (2)
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1
st
Year (2018)
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1
st
Phase
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40
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%
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30
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%
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2
nd
Year (2019)
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2
nd
Phase
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70
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%
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40
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%
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3
rd
Year (2020)
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3
rd
Phase
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100
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%
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60
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%
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4
th
Year (2021)
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Completed
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100
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%
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75
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%
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5
th
Year (2022)
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Completed
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100
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%
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100
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%
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(1)
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The
percentage of construction in a certain phase reflects the anticipated contribution of the investment in such particular phase.
For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40% of total value of the
Logistics Center.
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(2)
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The
percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned when the Wuhan Project
is fully operational. We target to reach its maximum annual profit by the end of 2021 assuming the entire funding required
for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according
to our business plan.
|
Wuhan
Newport has signed a twenty-year lease agreement effective April 27, 2015, the maximum number of years permitted by the applicable
PRC laws, with rights to renew, at its sole discretion, for another twenty-years, to lease approximately 1,200,000 square meters
of land for building logistics warehouses in support of the Logistics Center. The warehouses are expected to be comprised port
terminal zones, warehouse logistics zones, cold chain supply zones and railroad loading and unloading zones. The warehouses, once
constructed, will connect the port terminal along the Yangtze River and the railway leading to Europe, satisfying the requirement
of China’s latest “One Belt, One Road” initiative. It will also be able to support large logistics companies
in Wuhan and other nearby provinces which will rent the warehouses, terminals and offices within the Logistics Center.
Logistics
Center Highlights:
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●
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The
shipping center will be implemented under China’s latest “One Belt, One Road” initiative to promote the
“Yangtze River Economic Belt”;
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●
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Wuhan
Newport is part of the Yangluo port, which is part of the area that is currently seeking approval for status as a “Free-Trade
Zone”;
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●
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Wuhan
Newport is part of the “Yangluo Comprehensive Bonded Zone”, which allows the enterprises in the zone to receive
certain favorable tax treatments such as export tax rebates and less or free of value-added tax and consumption tax.
|
Wuhan
Economic Development Port Limited
On
December 26, 2017,we entered into a purchase agreement (the “Purchase Agreement”) with the shareholders (the “Wuhan
Port Shareholders”) of Wuhan Economic Development Port Limited (the “Wuhan Port”) to acquire all the equity
interests of Wuhan Port (the “Wuhan Port Acquisition”). In exchange, the Wuhan Shareholders will acquire all the ordinary
shares of Energetic Mind and in turn, Ricofeliz Capital, Wuhan Newport and the abovementioned plans for the Logistics Center.
The
closing of the transaction, which shall be no later than March 31, 2018 and is conditioned upon satisfactory due diligence, the
completion of auditing of the financial statements of Wuhan Port, and the approval of relevant regulatory agencies.
In
addition to the exchange of Energetic Mind for Wuhan Port, we will also have to pay RMB 600 million (approximately, US$91 million)
to the Wuhan Port Shareholders (“Additional Consideration”). The Additional Consideration is to be paid as follows:
(i) a refundable deposit of RMB 30 million upon the issuance of an initial due diligence report and audit and (ii) the remaining
RMB 570 million on closing in cash or in the form of a 7% convertible note. Our Board of Directors and majority shareholders have
approved this transaction.
Wuhan
Port owns all the equity interests in Hubei Taiding Container Port Limited (“Hubei Taiding”) and Wuhan Economic Development
Port Logistics Limited (“Wuhan Economic Development”). It has the following major operations: (i) its owns 7,060 meters
of the Yangtze River shoreline located in the Hannan District Port, Wuhan City. Currently three berths along the 330 meters of
the coastline has been completed and in operation. Additional six berths have been approved by the local government and waiting
to be built. Also, more than ten berths are pending approval by the local government; (ii) its owns a total of 1,371,960 square
meters of industrial land near the Hannan District Port for the construction of logistics warehouses and supporting office buildings.
A warehouse totaling 11,340 square meters has been built and is in operation; (iii) its owns an office building comprising 4,575.7
square meters if office space; and (iv) it has received a registration certificate issued by China Wuhan Customs. The total value
of its fixed assets plus intangible assets as of December 31, 2017 was RMB 3 billion, or approximately USD$454M, based on an assessment
report issued by a local appraisal company.
If
the Wuhan Port Acquisition were to be consummated, we would be divested of our interests in Energetic Mind and correspondingly,
our interests in Wuhan Newport and the Logistics Center and will assume the business of Wuhan Port. Conversely, if the Wuhan Port
Acquisition were to fail to be consummated, then we shall continue our plans to develop the Logistics Center.
The
“One Belt, One Road” Initiative.
According
to the
Vision and Actions on Jointly Building Belt and Road
issued by the National Development and Reform Commission, Ministry
of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council authorization in March
2015, “One Belt, One Road” (the “Initiative”) is a infrastructural development concept initiated by the
leaders of the Chinese government in 2013. It refers to the New Silk Road Economic Belt, which will link China with Europe through
Central and Western Asia, and the 21st Century Maritime Silk Road, which will connect China with Southeast Asian countries, Africa
and Europe through the Pacific and Indian Ocean. Neither the belt, nor the road, follows a designated route, but serves as a conceptual
roadmap for China’s plan to expand its presence commercially to the regions outside of the country and strengthen its economic
relationships with the nations in these regions.
The
“Belt” and the “Road” run through the continents of Asia, Europe and Africa, connecting the vibrant East
Asian economic circle on one end and developed European economic circle on the other, and encompassing countries with huge potential
for economic development. The Silk Road Economic Belt focuses on bringing together China, Central Asia, Russia and Europe (the
Baltic), linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia, and connecting China
with Southeast Asia, South Asia and the countries along the Indian Ocean. The 21st-Century Maritime Silk Road is designed to go
from China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from China’s coast
through the South China Sea to the South Pacific in the other.
On
land, the Initiative is expected to focus on jointly building a new Eurasian Land Bridge and developing China-Mongolia-Russia,
China-Central Asia-West Asia and China-Indochina Peninsula economic corridors by taking advantage of international transport routes,
relying on core cities along the Belt and Road and using key economic industrial parks as cooperation platforms. At sea, the Initiative
is expected to focus on jointly building smooth, secure and efficient transportation routes connecting major sea ports along the
Belt and the Road. The China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor are closely related
to the Belt and Road Initiative, and therefore require closer cooperation and greater progress. (Source:
http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html
;
National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic
of China, with State Council authorization
).
Corporate
History
On
December 23, 2009, we were incorporated under the laws of the State of Nevada under the name of “Ciglarette International,
Inc.”.
On
March 1, 2011, we completed a reverse acquisition transaction through a share exchange with Kirin China Holding, a British Virgin
Islands company (“Kirin China”), whereby acquired all of the issued and outstanding shares of Kirin China in exchange
for 18,547,297 shares of common stock, which represented approximately 98.4% of the total shares outstanding immediately following
the closing of this share exchange (the “First Share Exchange”). Upon consummation of the First Share Exchange,
we changed our name to “Kirin International Holding, Inc.” and traded under the symbol “KIRI” on OTC Markets.
As a result of the First Share Exchange, Kirin China became a wholly-owned subsidiary. We ceased the smokeless cigarette business
and became a holding company, through various controlled entities in the China, engaged in the development and operation of real
estate in China. Through Kirin China, we engaged in private real estate development focusing on residential and commercial real
estate development in “tier-three” cities in China. Tier-three cities are provincial capital cities with ordinary
economic development and prefecture cities with relatively strong economic development.
On
December 19, 2015, we entered into certain share exchange agreements with Energetic Mind and all the shareholders of Energetic
Mind whereby the Company acquired 100% of the issued and outstanding ordinary shares of Energetic Mind (the “Second Share
Exchange”). Pursuant to the terms of the agreements for the Second Share Exchange, in exchange for 100% of the issued and
outstanding ordinary shares of Energetic Mind, we agreed to issue to (i) the shareholders of Energetic Mind an aggregate of one
hundred fifty-one million (151,000,000) shares of Company’s common stock and (2) a certain related party an additional 8%
convertible promissory note in the principal amount of one hundred fifty million dollars ($150,000,000), with a conversion price
of $10.00 per share.
On
December 31, 2015, we disposed all of our interests in i) Brookhollow Lake, LLC, ii) Newport Property Holding, LLC, iii) Kirin
China, iv) Kirin Hopkins Real Estate Group LLC, v) Archway Development Group LLC, vi) Specturm International Enterprise, LLC and
vii) wholly-owned subsidiary HHC-6055 Centre Drive LLC. The sale of Kirin China also effectively terminated Company’s contractual
relationship with Hebei Zhongding Real Estate Development Co. Ltd and Xingtai Zhongding Jiye Real Estate Development Co., Ltd,
both of which are companies formed under the laws of the People’s Republic of China and were deemed Company’s variable
interest entities prior to this sale (“Subsidiaries Sale”).
As
a result of the Second Share Exchange and the Subsidiaries Sale, the Company currently operates its business solely through its
wholly-owned subsidiary Energetic Mind, which is the sole shareholder of Ricofeliz, which engages its business through its wholly-owned
subsidiary, Wuhan Newport.
On
January 13, 2016, we filed a Certificate of Amendment to our Articles of Incorporation (the “Amendment”) with the
Secretary of the State of the State of Nevada, to change our name from “Kirin International Holding, Inc.” to “Yangtze
River Development Limited”. Effective January 22, 2016, Company changed its stock symbol from “KIRI” to “YERR”.
The
Company, by and among Armada Enterprises GP (“Armada”) and Wight International Construction, LLC (“Wight”),
e
ntered into (i) a Contribution, Conveyance and Assumption Agreement (“Contribution
Agreement”) dated October 3, 2016, first and second addendums, dated October 3, 2016 and November 30, 2016, respectively,
and (ii) an Amended and Restated Limited Liability Company Agreement dated November 16, 2016 (collectively with the Contribution
Agreement, the “Agreement”), whereby the Company acquired 100 million preferred B membership units of Wight, which
would ultimately convert into 100 million LP units in Armada Enterprises LP. In exchange, the Company issued a $500 million convertible
promissory note (“Note”) and 50,000,000 shares of the Company’s common stock to Wight. As a result of the Agreement
and the conversion of the Note on November 17, 2016, Wight owned 100,000,000 shares of the Company’s common stock representing
36.73% of the Company’s voting power and the Company owned 100 million preferred B membership units in Wight representing
a 62.5% non-voting equity interest in Wight.
Under
the terms of the Agreement, at the first closing, Wight was required to provide an aggregate total of $200 million, including
$50 million in working capital and $150 million in construction funding (the “Funding”) to the Company, by January
18, 2017. Wight did not provide the Funding on January 18, 2017 and the Company provided to Wight a “Notice of Default and
Request for Cure”. Wight proposed to provide $50 million in working capital funding on or before February 15, 2017 and secure
$150 million in construction funding on or before March 15, 2017. Wight failed to provide the $50 million in working capital funding
as proposed by February 15, 2017. Therefore, the Company, on February 24, 2017 decided to terminate the Agreement for non-performance
by Wight. Pursuant to the Agreement, the termination thereof calls for the immediate return of the 100,000,000 shares of common
stock issued by the Company to Wight.
On
February 27, 2017, the Company issued a “Termination and Demand” letter to Wight which terminated the Agreement with
Wight and Armada and demanded the return of the 100,000,000 shares of common stock.
On
March 1, 2017, the 100,000,000 shares of the Company’s common stock were canceled and returned by Wight, and were subsequently
returned to the Company’s treasury.
The
Company reserves the right to pursue any further legal action with respect to Armada’s and Wight’s default under the
Agreement.
On
April 19, 2017, our common stock commenced trading on the NASDAQ Capital Market under the symbol of “YERR”. On August
18, 2017, our common stock started trading on the NASDAQ
Global Select Market under the
same symbol.
On
February 8, 2018, we filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State
of Nevada, to change our name from “Yangtze River Development Limited” to “Yangtze River Port and Logistics
Limited” (the “Name Change”). In connection with the Name Change, our trading symbol was changed from “YERR”
to “YRIV”.
Organization
& Subsidiaries
Upon
completion of the Second Share Exchange and Subsidiaries Sale described above in “Corporate History”, we hold 100%
of the ordinary shares of our wholly owned subsidiary, Energetic Mind. Energetic Mind in turn operates through its wholly-owned
subsidiary, Ricofeliz Capital and Ricofeliz Capital operates through its wholly-owned subsidiary, Wuhan Newport. Wuhan Newport
primarily engages in the business of real estate and infrastructural development and operating the Logistics Center.
On
January 30, 2018, we incorporated Avenal River Limited in the British Virgin Islands. Avenal River Limited owns all of the shares
of Ricofeliz Investment (China) Limited, a Hong Kong company, which in turn owns 100% of the equity interest of Wuhan Yangtze
River Newport Trading Limited, a PRC company.
The
following diagram illustrates our current corporate structure:
However,
if the Wuhan Port Acquisition were to be consummated and Energetic Mind divested to the Wuhan Port Shareholders, our corporate
structure will be altered as follows:
Office
Complex Project
Taking
into consideration the Comprehensive Bonded Zone and Free Trade Zone status of the Logistic Center, Wuhan Newport has obtained
the land use rights to own approximately 500,000 square meters of commercial lands on which Wuhan Newport will build a mixed residential
and office complex of approximately 700,000 square meters. As of the date of this Annual Report, mixed-use complex totaling
approximately 100,000 square meters have been completed and there are outstanding 600,000 square meters to be constructed in three
phases within the next five (5) years.
To
support the office complex, a light railway from downtown Wuhan to the complex is undergoing construction, for which the complex
will be accessible by two stations along the light railway line. In addition, an expressway along the north shore of the Yangtze
River in Wuhan is currently under construction; the completion of the highway is also expected to provide direct ground access
between Wuhan city center and the Logistics Center and cut down the commute time to only 20 minutes.
Upon
completion of the construction of the office buildings, Wuhan Newport plans to sell half of the complex while leasing out the
remaining half for long-term income. It is Company’s goal to recover the initial investment costs through sale of half of
the complex and generate a stable return based on rent of the other half complex upon completion of the project.
Transportation
and Logistics Services
Taking
the regional advantage of the highways, railways and waterways in Yangluo area, We plan to develop a shipping hub with access
to all types of cargo transportation and offer complementary services to businesses within this logistics center. We intend to
create an efficient, reliable and comprehensive logistics service system by utilizing the third-party service providers with offices
within the Logistics Center to provide professional logistics services.
We
are currently constructing the port terminal which will be the focal point of the Yangtze River Economic Belt. The Yangtze River
riverbank within our properties measures 1,039 meters, where we plan to complete eight cargo berths handling ships ranging from
5,000 to 10,000 tons.
A
cargo transportation railway invested by the government has been built next to the Logistic Center. The railway is known as the
Wuhan-Xinjiang-Europe (“WXE”) Railway in the Silk Road Economic Zone as it is in the “One Belt, One Road”
initiative introduced by the Chinese government. The WXE Freight Train sets out from Wuhan to Xinjiang and finally ends in Mainland
Europe. Wuhan Newport’s terminal is therefore an important component of the “Silk Road Economic Belt” under
the “One Belt, One Road” framework.
The
customs facility at the Yangluo Comprehensive Bonded Area allows cargo vessels ranging from 5,000 to 10,000 tons to set out from
Shanghai downstream via the Yangtze River in order to transport “Made in China” commodities to the Pacific Ocean and
further to any other ports across the Indian Ocean. In return, transporting commodities from other countries will be shipped directly
back to Wuhan and then distributed throughout rest of the Mainland China. Aside from being situated in the Wuhan Yangluo Comprehensive
Bonded Zone, the Yangluo development area is amongst the third group of China’s Free-Trade Zone applicants to submit FTZ
applications to the State Council through the Wuhan municipal government for approval. Approvals have so far been granted to Shanghai,
Tianjin, Guangdong and Fujian. Enterprises within the approved free-trade zones are typically entitled to a series of favorable
regulations and policies that could help the businesses grow and succeed.
Cold
Chain Logistics Services
A
cold chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of storage and distribution
activities which maintain a given temperature range. It is used to help extend and ensure the shelf life of products such as fresh
agricultural produce, seafood and frozen food.
Within
the Logistics Center, we will be able to provide extensive storage and processing services to its customers. Meanwhile, a cold
chain logistics service system will be established to better help our clients’ processing needs for their frozen foods,
meats and other products that need special processing and handling. In addition, we will offer professional services with temperature
control, sorting, processing, packaging and delivery to ensure the reliability and safety of the logistics process.
Information
Platform
To
adapt to the needs of modern logistics service and meet the standards of the industry worldwide, we will establish comprehensive
automated management systems, as well as develop an operation system, enquiry system and decision-making systems for all types
of business information such as warehouse, storage, trade, distribution and transportation, movable assets supervision and freight
forwarding. We plan to launch an integrated and information-sharing platform geared towards the demand of its targeted markets
and potential clients.
We
will establish a uniform information platform including an internet-based logistics information portal and an e-commerce platform
to provide our clients with services such as logistics services tracking, service rating, online operation, electronic transaction,
etc. We expect this information portal to be equally reliable for both service providers and their respective clients.
We
will also establish an e-commerce system based on the logistics information portal and we will provide clients with many updated
services such as online transactions, online payments, online inquiries and business information communication. This will create
a comprehensive service system and a business model with high integration of information flow, capital flow, trade flow and goods
flow.
Portside
Service
We
also plan to provide incentives for companies that specialize in IT, production of new material and high-end equipment and manufacturing
companies to station nearby the Logistics Center so that these companies can grow with the Logistics Center, leveraging each other’s
specialization to serve each other’s business needs.
Logistics
Financing
Logistics
financing is mainly based on using supplies as collateral to obtain financing for supply chains to improve its overall economic
efficiency. Developing an innovative logistics financing is significant because traditionally mortgages or loans are concentrated
in real estate and logistics financing provides a lower systematic risk for lenders.
Compared
to developed countries, we believe that logistics financing is a rather new field in China. The driving force for logistics financial
service in western countries is mainly attributable to financial institutions as opposed to third-party private logistics companies
in China who would occasionally provide financing options.
Logistics
financial services became a popular investment vehicle among these third-party lenders. However, the business of logistics financing
has become more complex for these private lenders to handle as they will need professionals to guide them through the process
and thus safeguard their investments.
Even
though the history of logistics financing has been relatively short in China, the appetite for this is expected to grow as the
Free Trade Zones in Shanghai, Tianjin and soon-to-be Wuhan will likely attract more business and international financial institutions.
Logistics financing not only provides businesses with a new alternative to meet their capital needs, but also opens a new channel
for commercial banks to reach small and mid-size businesses. While interest income generated from logistics financing transaction
is often an important source of income for many multinational logistics companies, companies who are able to provide financing
are often the industry leaders. Because logistics financing can be an effective channel for the Company to reach its targeted
market, we plan to capture this first-mover advantage when logistics financing is still in its development stage in China.
In
light of this market opportunity, we plan to establish and utilize e-commerce platforms to offer online booking, online dealing
and online exhibiting services to provide professional transaction services for electronic products, commodity, foods and metals.
We also plan to provide comprehensive support services to complement logistics financing. Maritime insurance and training services
will be offered within the Logistic Center. We plan to help our clients to raise construction capital through Build-Transfer (“BT”),
Build-Operate-Transfer (“BOT”), corporate debt and equity financing. Finally, we plan to collaborate and develop strategic
alliances with other logistics or cargo shipping centers around the world.
Sales
and Marketing
We
plan to sell our properties by forming strategic alliances with CMST Development (Hankou) Co. Ltd. (“CMST-Hankou”),
the Shanxi Chamber of Commerce in Hubei (“SCCH”) and the Wuhan Coal Business Association (“WCBA”).
Partnership
with CMST
CMST-Hankou
is a regional subsidiary of the CMST Development Co. Ltd, which is a state-owned enterprise that principally engages in the logistics
and import & export businesses. CMST-Hankou’s core business includes warehouse storage, sale and distribution of commodities,
and freight forwarding. Pursuant to the Memorandum of Understanding executed with CMST-Hankou on August 20, 2015, CMST-Hankou has
agreed to transfer all of its warehouse storage and processing division, distribution service division and other existing businesses
to the premises of the Logistics Center. In addition, CMST-Hankou has agreed to move its warehouse for steel trading business
with the Shanghai Future Exchange to the Logistics Center. In consideration, we have agreed to offer CMST-Hankou a 5% discount
on all services provided within the Logistics Center, including those within the warehouses, port terminal, and railway operating
zones. In addition, CMST-Hankou has agreed to assist the Company with the establishment of an online commodity exchange platform
to provide a comprehensive support system through the supply chain and provide necessary personnel to help with the management
of the warehouse operations within the Logistics Center. Though at a slight discount, the Company is expected to receive fees
based on CMST-Hankou’s large volume of commodities that need to be stored and use of complementary services at the warehouse
facilities and operating areas, as well as rental income and/or property sales generated from the office complex. However, the
partnership is subject to the terms and conditions of a definitive agreement between CMST-Hankou and the Company. No assurances
can be provided at this point that such a definitive agreement will be executed.
Partnership
with SCCH
SCCH
is a non-profit business coalition with 252 businesses across various industries as members. Pursuant to the Memorandum of Understanding
executed with SCCH on July 27, 2015, SCCH has agreed to move its headquarters to the office complex within the Logistics Center
by purchasing or leasing certain units. In consideration of a 7% discount to the purchase price of $2,729 per square meter of
our properties, approximately 50 businesses within the organization plan to open offices in the Logistics Center and purchase
at least 100,000 square meters of space within the office complex. SCCH, on behalf of 50 businesses, also executed a letter of
intent to purchase approximately 100,000 square meters of storefront. In addition, because we expect the 50 businesses to have
a total annual turnover of commodities of more than 5,000,000 tons, we have agreed to offer members of SCCH a 5% discount on all
services provided within the Logistics Center, including those within the warehouses, port terminal, and railway operating zones.
However, the partnership is subject to the terms and conditions of a definitive agreement between SCCH and the Company. No assurances
can be provided at this point that such a definitive agreement will be executed.
Partnership
with WCBA
WCBA
is a non-profit business coalition with more than 300 businesses within the coal mining industry as members. Pursuant to the Memorandum
of Understanding executed with WCBA on September 17, 2015, WCBA has agreed to move its headquarters to the office complex within
the Logistics Center by purchasing or leasing certain units. We have agreed to offer WCBA member businesses a 5% discount to the
purchase price of $2,729 per square meter of our properties. In addition, because we expect WCBA members to have a total annual
turnover of coal-related commodities of more than 20,000,000 tons and will use the Company’s warehouse storage for at least
3,000,000 tons, we have agreed to offer members of WCBA a 5% discount on all services provided within the Logistics Center, including
those within the warehouses, port terminal, and railway operating zones. However, the partnership is subject to the terms and
conditions of a definitive agreement between WCBA and the Company. No assurances can be provided at this point that such a definitive
agreement will be executed.
Market
Opportunity for Logistics Finance
Logistics
financing provides financial services such as financing, clearance and insurance to support the logistics industry. It evolves
as the logistics industry develops. Not only can logistics financing services improve the service capability and increase the
profitability of third party logistics companies; it can also expand financing channels, decrease financing cost and increase
the capital efficiency.
The
major target clients for logistics finance services are small and medium sized companies, which are an important sector of China’s
economy and have great weight in the market. One of the biggest hurdles in the life cycle of these small and medium sized companies
is lack of cash flow, which can become the “bottle neck” of their development and prevent progress. The need for logistics
financing results from the lack of available credit financing facilities and the difficulty of obtaining financing on the capital
markets. Therefore, logistics financing services protect against the financing problems by allowing these small and medium companies
to use their raw materials and commodities as collateral to borrow money. Logistics financing increases the liquidity of cash
flow, lowers the clearance risks and improves the efficiency of the economic operation. Upon completion of the Logistics Center,
we expect to house many small and mid-size logistics companies. The offering of logistics financing will therefore become an important
component of the business, as these businesses are expected to have financing needs as they grow their businesses.
Market
Overview of Wuhan
Located
in the middle reaches of the Yangtze River, Wuhan has been regarded as the gateway to nine provinces nearby. Beijing-Guangzhou
Railway and the Yangtze River converge in Wuhan and also Beijing-Jiulong Railway and Beijing-Guangzhou Railway intersect in it,
thus forming a railway network linking North China, Southwest China, Central South China and East China. Moreover, Beijing-Zhuhai
Expressway and Shanghai-Chengdu Expressway converge in Wuhan and a high-speed railway along the Yangtze River will be completed
here soon. Therefore, a “flexible multimodal transportation system” combining expressways, high-speed railways and
water transportation on the Yangtze River will give greater prominence to Wuhan’s position of strategic importance as a
junction of water and land transportation in China (Source: http://www.maxxelli-blog.com/introduction-to-wuhan/).
Wuhan
is the largest inland logistics and cargo distribution center in China, with its service covering approximately a 400 million
population in the five neighboring provinces including Hunan, Jiangxi, Anhui, Henan and Sichuan. At present, there are over 10,000
commercial organizations, 105,000 commodity networks, four commercial listed enterprises as well as eight comprehensive shopping
centers on the list of China Top 100 Retail Shopping Centers (Source: http://www.maxxelli-blog.com/introduction-to-wuhan/).
China
is thoroughly implementing the strategy of coordinated regional development, expanding domestic demand, innovation-driven development
and new urbanization, and building a new economic support belt relying on the Yangtze River. As a central city in the central
region and the middle reach of the Yangtze River, and the country’s major transportation hub and science and technology
base, Wuhan faces multiple overlapping strategic opportunities. Location, transportation, science, education, market and other
advantages will be further enhanced and fully released and more quickly transformed into development and competitive advantage
(Source: http://www.maxxelli-blog.com/introduction-to-wuhan/).
Wuhan
is a major transportation hub of China situated at the midstream of the Yangtze River. Going west alongside the Yangtze, upstream
are the cities in Chongqing, Sichuan, Yunnan and Qinghai. Going east downstream are provinces of Hunan, Anhui and Jiangsu, as
well as the cities of Nanjing and Shanghai, until finally arriving at the sea. The railway runs north bound to Harbin, westbound
to Urumqi, east bound to Shanghai and south bound to the Shenzhen Highway and expressways that stretch in all directions ensuring
easy and convenient transportation to all provinces in China. Likewise, Wuhan is largest economic city in central China with an
annual GDP beyond 1,000 billion RMB. In 2015, the China State Council introduced and implemented the Midstream Yangtze River City
Group Development Plan headed by Wuhan. In fact, the city was once called “The Oriental Chicago” by the US Harper’s
Magazine back in 1918.
With
the rapid development of inland water shipping in China, logistics and port management industry has grown significantly. Wuhan
is one of the major inland water ports in China. In 2014, Wuhan government released an
Opinion On Accelerating The Establishment
Of Shipping Center In The Middle Reach Of Yangtze River
, and indicated that the government will help the Wuhan shipping center
to be a well-equipped, surrounding industry developed internationally with a scaled and intelligent inland water shipping center
with highly concentrated port and shipping resources . In the
Development Plan On Wuhan Logistics Space (2012-2020)
, Wuhan
is strategically positioned as the critical joint of the global supply chain and the logistics transportation hub and information
center of China.
However,
in Wuhan, logistics for domestic trade operate separately from that for international trade and all resources are scattered and
not concentrated enough to form a well-organized and well-managed international supply chain. It is very difficult for Wuhan to
realize the synergy of business, logistics, money and information. In addition, a majority of the current logistics companies
in Wuhan focus on traditional cargo transportation and storage services. Therefore, there exists an opportunity for an efficient,
comprehensive and modern logistics service center to facilitate the channel of both regional and global logistics.
Competitive
Advantages
The
following factors reflect our advantages over our competitors:
|
|
●
|
Experienced
Logistics Management Team.
We have a professional team with significant experience in logistics management. Members
of the Company’s team have had work experience with well-known logistics management companies in different cities. In
addition, the management members are well educated with degrees from top universities such as Huazhong University of Science
and Technology, Wuhan University, University of British Columbia and the Chinese Academy of Social Sciences.
|
|
|
●
|
Encouraging
Policy Environment.
Under China’s latest “One Belt, One Road” initiative, we are strategically positioned
in the anticipated “Pilot Free Trade Zone” of the Wuhan Port, a crucial trading window between China, the Middle
East and Europe. In May 2015, the China State Council approved the nation’s economic strategic plan, the
Vigorous
Development Plan of Yangtze River Economic Be
lt. The Yangtze River Economic Belt has sharpened the focus on the Wuhan
New Port Yangluo Terminal, where the port project that we are currently developing is located.
|
|
|
●
|
Unique
Transportation Network.
Wuhan is located in the middle reaches of the Yangtze River, east facing south-eastern coastal
economic developed area and west linking north-western raw material base. The distance to metropolitan cities,
such as Beijing, Shanghai, Hong Kong and Chongqing are within 1,200 kilometers. As a central city in mainland
China, Wuhan is capable of reaching over 30 provinces like Yunnan Province, Henan Province, Sichuan Province, Shanxi Province,
Jiangxi Province and Hunan Province and 600 cities and counties in China.
|
|
|
●
|
Highway:
The Logistics Center is in close proximity to the Beijing-Zhuhai expressway, the Shanghai-Chengdu Expressway, and
the Jiangbei Expressway.
|
|
|
●
|
Waterway:
The project adjacent to the Yangluo deep-water port, has eight 5,000-ton berths, directly leading to Jianghai. Yangluo
Port is the largest national shipping port in Central China and the largest container port in the upper reaches of the Yangtze
River. We will be strategically located for international procurement, distribution and delivery.
|
|
|
●
|
Railway:
The Beijing-Guangzhou, Beijing-Kowloon Railway, the Beijing-Guangzhou railway extension line and special railway lines
offer direct access to the Logistics Center. The Logistics Center will, through the Jiangbei railway- Xianglushan station,
connect all of the domestic railway freight stations, and through the construction of the “Chinese new Europe”
railway, throughout the Continent.
|
|
|
●
|
Airport:
30 kilometers from the Wuhan Tianhe airport.
|
|
|
●
|
Light-rail
transit:
By 2018, two light rail stations are expected to be completed next to the Logistics Center, cutting the
commute to downtown Wuhan to only 20 minutes.
|
|
|
|
|
|
|
●
|
Jiangbei
Expressway:
After the completion of Jiangbei Expressway, commute by car from downtown Wuhan to the Logistics Centers
is expected to be only about 20 minutes.
|
The
following map shows the location of the proposed Logistics Center and surrounding transportation network:
Employees
As
of March 9, 2018, we have a total of 20 employees, including our executive officers. The following table sets forth the number
of our employees by function as of the same date:
|
Functional Area
|
|
Number of Employees
|
|
|
% of Total
|
|
|
Management
|
|
|
3
|
|
|
|
15
|
%
|
|
Engineer
|
|
|
3
|
|
|
|
15
|
%
|
|
Sales
|
|
|
7
|
|
|
|
35
|
%
|
|
Administrative
|
|
|
3
|
|
|
|
15
|
%
|
|
Property management
|
|
|
1
|
|
|
|
5
|
%
|
|
Accounting
|
|
|
3
|
|
|
|
15
|
%
|
|
Total
|
|
|
20
|
|
|
|
100
|
%
|
Our
employees are not represented by any collective bargaining agreement and we have never experienced a work stoppage. We believe
we have good relations with our employees.
Competition
The
real estate and logistics industries in the PRC are both highly competitive. Many of our competitors are well capitalized and
have greater financial, marketing, and other resources than we do. Some of our competitors also have larger land banks, greater
economies of scale, broader name recognition, a longer track record, and more established relationships in certain markets.
Intellectual
Property
Trademark
We
are currently applying for trademark protection in China for our Company’s logo and we anticipate that we will be able to
obtain the trademark within the next 12 months.
Set
forth below is a detailed description of our trademark under application.
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Country
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Trademark
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Application
Number
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Classes
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Our
Ref
|
Status
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Mainland
China
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18367978
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39*
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TMZC18367978ZCSL01
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In
process
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Transport;
packaging and storage of goods; travel arrangement.
Domain
Names
We
have added the domain names i)
www.yerr.com.cn
; ii)
www.cjxgwl.com
; and iii)
www.cjxgwl.cn
to
the Internet Content Provider License that we currently hold and we have received the updated ICP License covering the foregoing
domain name. The ICP record number is 15016982.
Customers/Suppliers
Until
the Logistics Center is built and operational, we do not currently have customers or suppliers.
Legal
Proceedings
We
are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition
or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company
or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s
or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could
have a material adverse effect.
RISK
FACTORS
Risks
Relating to Our Business
MAJORITY
OF OUR BUSINESS, ASSETS AND OPERATIONS ARE LOCATED IN THE PEOPLE’S REPUBLIC OF CHINA.
The
majority of our business, assets and operations are located in the People’s Republic of China. The economy of the PRC differs
from the economies of most developed countries in many respects. The economy of the PRC has been transitioning from a planned
economy to a market-oriented economy. Although in recent years the PRC’s government has implemented measures emphasizing
the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment
of sound corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by
the PRC’s government. In addition, the PRC’s government continues to play a significant role in regulating industry
by imposing industrial policies. The PRC’s government exercises significant control over the PRC’s economic growth
through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy
and providing preferential treatment to particular industries or companies. Some of these measures benefit the overall economy
of the PRC, but may have a negative effect on us.
ACTIONS
OF GOVERNMENT OR CHANGE OF POLICIES MAY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We
are at risk from significant and rapid change in the legal systems, regulatory controls, and practices in areas in which we operate.
These affect a wide range of areas including the real estate development approval system, employment practices, transportation,
cargo storage, logistics, financing and sale of the buildings; our property rights; data protection; environment, health and safety
issues; macro-economic policies, central government directions and instructions, China’s Five Year Plan, “One Belt
One Road” initiative; and accounting, taxation and stock exchange regulation. Accordingly, changes to, or violation of,
these systems, controls or practices could increase costs and have material and adverse impacts on the reputation, performance
and financial condition of our development and operation.
IF
WE NEED ADDITIONAL CAPITAL TO FUND OUR FUTURE OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO
LIMIT THE SCOPE OF OUR OPERATIONS.
If
adequate additional financing is not available on reasonable terms, we may not be able to undertake ongoing real estate construction
or continue to develop and expand the services of our Logistics Center, which may as a result impact our cash flow and we would
have to modify our business plans accordingly. We will not be able to fully implement our business plan unless the $1 billion
funding (as described in the prospectus summary) is in place by 2021 and we do not have any definitive agreement nor letter
of intent for such financing except for this offering. There is no assurance that additional financing will be available
to us.
In
connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital
to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including
(i) our profitability; (ii) the development of competitive projects undertaken by our competition; and (iii) the level of our
investment in construction and development. We cannot assure you that we will be able to obtain capital in the future to meet
our needs.
If
we cannot obtain additional funding, we may be required to: (i) limit our operations and expansion; (ii) limit our marketing efforts;
and (iii) decrease or eliminate capital expenditures. Such reductions could have a materially adverse effect on our business and
our ability to compete.
Even
if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving such additional
capital that are favorable to us. Any future capital investments could dilute or otherwise materially and adversely affect the
holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain
financing could have rights, preferences and privileges senior to the common stock offered hereof. We cannot give you any assurances
that any additional financing will be available to us, or if available, will be on terms favorable to us.
WE
HAVE SUSTAINED SIGNIFICANT RECURRING OPERATING LOSSES AND EXPERIENCED NEGATIVE CASH FLOW FOR OPERATIONS SINCE INCEPTION.
We
have sustained recurring losses and experienced negative cash flow from operations since inception. Since inception, we have focused
on developing and implementing our business plan. As of December 31, 2017, we have generated cumulative losses of approximately
$41,238,467 since inception, and we expect to continue to incur losses until 2020. We believe that our existing cash resources
will not be sufficient to sustain operations during the next twelve months. We need to generate revenue and raise funding in order
to sustain our operations and continue to implement our business plan. If we are unable to obtain additional funds when they are
needed or if such funds cannot be obtained on terms acceptable to us, we would likely be unable to execute upon the business plan
or pay expenses as they are incurred, which would have a material, adverse effect on our business, financial condition and results
of operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain.
WE
BELIEVE THAT WE WILL DERIVE THE MAJORITY OF OUR REVENUE FROM SALES IN THE PRC AND ANY DOWNTURN IN THE CHINESE ECONOMY COULD HAVE
A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.
The
majority of our revenues are expected to be generated from sales of our properties and services in the PRC and we anticipate that
revenue from such sales will continue to represent the substantial portion of our total revenue in the near future. Our sales
and earnings can also be affected by changes in the general economy. Our success is influenced by a number of economic factors
which affect consumer income, such as employment levels, business conditions, interest rates, oil and gas prices and taxation
rates. Adverse changes in these economic factors, among others, may restrict consumer spending, thereby negatively affecting our
sales and profitability.
WE
ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION THAT COULD CAUSE US TO INCUR SIGNIFICANT LIABILITIES OR RESTRICT OUR BUSINESS ACTIVITIES.
Regulatory
requirements could cause us to incur significant liabilities and operating expenses and could restrict our business activities.
We are subject to statutes and rules regulating, among other things, certain developmental matters, building and site design,
and matters concerning the protection of health and the environment. Our operating expenses may be increased by governmental regulations,
such as building permit allocation ordinances and impact and other fees and taxes that may be imposed to defray the cost of providing
certain governmental services and improvements. For example, our proposed Wuhan Port Acquisition will require approvals from local
State Administration for Industry and Commerce. Any delay or refusal from government agencies to grant us necessary licenses,
permits, and approvals could have an adverse effect on our operations or our ability to implement on business plans.
OUR
SALES WILL BE AFFECTED IF MORTGAGE FINANCING BECOMES MORE COSTLY OR OTHERWISE BECOMES LESS ATTRACTIVE.
Certain
purchasers of our properties are expected to rely on mortgages to finance their purchases. An increase in interest rates may significantly
increase the cost of mortgage financing, thus affecting the affordability of our properties. The PRC’s government and commercial
banks may also increase the down payment requirement, impose other conditions or otherwise change the regulatory framework in
a manner that would make mortgage financing unavailable or unattractive to potential property purchasers. If the availability
or attractiveness of mortgage financing is reduced or limited, many of our prospective customers may not be able to purchase our
properties and, as a result, our business, liquidity and results of operations could be adversely affected.
THE
PRACTICE OF PRE-SELLING PROJECTS MAY EXPOSE US TO SUBSTANTIAL LIABILITIES.
It
is common practice by property developers in China to pre-sell properties (while still under construction), which involves certain
risks. For example, we may fail to complete a property development that may have been fully or partially pre-sold, which
would leave us liable to purchasers of pre-sold units for losses suffered by them without adequate resources to pay the liability
if funds have been used on the project. In addition, if a pre-sold property development is not completed on time, the purchasers
of pre-sold units may be entitled to compensation for late delivery. If the delay extends beyond a certain period, the purchasers
may be entitled to terminate the pre-sale agreement and pursue a claim for damages that exceeds the amount paid and our ability
to recoup the resulting liability from future sales.
WE
ARE DEPENDENT ON THIRD-PARTY SUBCONTRACTORS, MANUFACTURERS, AND DISTRIBUTORS FOR ALL ARCHITECTURE, ENGINEERING AND CONSTRUCTION
SERVICES, AND CONSTRUCTION MATERIALS. A DISCONTINUED SUPPLY OF SUCH SERVICES AND MATERIALS WILL ADVERSELY AFFECT OUR PROJECTS.
We
are dependent on third-party subcontractors, manufacturers, and distributors for all architecture, engineering and construction
services, and construction materials. A discontinued supply of such services and materials will adversely affect our construction
projects and the success of the Company.
WE
MAY BE ADVERSELY AFFECTED BY FLUCTUATIONS IN THE PRICE OF RAW MATERIALS AND SELLING PRICES OF OUR PROPERTIES.
The
land and raw materials that are used in our projects have experienced significant price fluctuations in the past. There is no
assurance that they will not be subject to future price fluctuations or pricing control. The land and raw materials that are used
in our projects may experience price volatility caused by events such as market fluctuations or changes in governmental programs.
The market price of land and raw materials may also experience significant upward adjustment, if, for instance, there is a material
under-supply or over-demand in the market. These price changes may ultimately result in increases in the selling prices of our
properties, and may, in turn, adversely affect our sales volume, sales, operating income, and net income.
WE
FACE INTENSE COMPETITION FROM OTHER REAL ESTATE DEVELOPERS AND/OR LOGISTICS COMPANIES.
The
real estate and logistics industries in the PRC are both highly competitive. Many of our competitors are well capitalized and
have greater financial, marketing, and other resources than we do. Some of our competitors also have larger land banks, greater
economies of scale, broader name recognition, a longer track record, and more established relationships in certain markets. Competition
among property developers may result in increased costs for the acquisition of land for development, increased costs for raw materials,
shortages of skilled contractors, oversupply of properties, decrease in property prices in certain parts of the PRC, a slowdown
in the rate at which new buildings are approved and/or reviewed by the relevant government authorities and an increase in administrative
costs for hiring or retaining qualified personnel, any of which may adversely affect our business and financial condition. Furthermore,
property developers that are better capitalized than we are may be more competitive in acquiring land through the auction process.
If we cannot respond to changes in market conditions as promptly and effectively as our competitors or effectively compete for
land acquisition through the auction systems and acquire other factors of production, our business and financial condition will
be adversely affected.
OVER-SUPPLY
OF REAL ESTATE PROPERTIES COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR RESULTS OF OPERATIONS.
Most
of our assets consist of real estate properties within the premise of our Logistics Center. While our business will primarily
revolve around the services provided by the Logistics Center, we expect to sell and/or lease properties to other businesses to
generate revenue. Although we expect the value of our real estate properties to appreciate upon Yangluo Port’s obtaining
the approval of the “Free Trade Zone” status, risk of property over-supply is increasing in parts of China on a macro-level,
where property investment, trading and speculation have become overly active. We are exposed to the risk that in the event of
actual or perceived over-supply, property prices may fall drastically, and our revenue and profitability will be adversely affected.
If we cannot sell or lease our properties at a favorable price, we may not have the necessary capital resources to fully execute
our business plan and therefore our results of operations will be adversely affected.
WE
MAY NOT HAVE SUFFICIENT EXPERIENCE AS A COMPANY CONDUCTING STORAGE AND PROCESSING SERVICES, INFORMATION SERVICES AND LOGISTICS
FINANCING, OR IN OTHER AREAS REQUIRED FOR THE SUCCESSFUL IMPLEMENTATION OF OUR BUSINESS PLAN.
We
may not have sufficient experience as a company in conducting storage and processing services, information services, logistics
financing or other areas required for the successful implementation of our business plan. This may result in the Company
experiencing difficulty in adequately operating and growing its business. If our operating or management abilities
consistently perform below expectations, then our business is unlikely to thrive.
WE
ARE HEAVILY DEPENDENT UPON THE SERVICES OF EXPERIENCED PERSONNEL WHO POSSESS SKILLS THAT ARE VALUABLE IN OUR INDUSTRY, AND WE
MAY HAVE TO ACTIVELY COMPETE FOR THEIR SERVICES.
We
are heavily dependent upon our ability to attract, retain and motivate skilled personnel to serve our customers. Many of our personnel
possess skills that would be valuable to all companies engaged in our industry. Consequently, we expect that we will have to actively
compete for these employees. Some of our competitors may be able to pay our employees more than we are able to pay to retain them.
Our ability to profitably operate is substantially dependent upon our ability to locate, hire, train and retain our personnel.
There can be no assurance that we will be able to retain our current personnel, or that we will be able to attract and assimilate
other personnel in the future. If we are unable to effectively obtain and maintain skilled personnel, the development and quality
of our services could be materially impaired.
DEFAULTING
ON BANK LOANS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS
We
plan to develop a full-service logistics center using the properties we have obtained land-use rights to. To finance the development,
part of Company’s properties held for development and land lots under development have been pledged as collateral for financial
institution loans. As of December 31, 2017, we have an outstanding loan payable to China Construction Bank totaling $44,211,399.
The loan has a maturity date of May 29, 2020. The loan is a
floating rate loan whose
rate (2017: 6% per annum and 2016: 6% per annum) is set at 5% above the over 5 years base borrowing rate stipulated by the People’s
Bank of China.
The secured bank loan with China Construction Bank contains certain protective contractual provisions
that limit our activities in order to protect the lender. The risk of default may increase in the event of an economic downturn
or due to our failure to successfully execute our business plan. Defaulting on our bank loans could result in loss of our collateralized
assets and cause a material adverse effect on our results of operations.
WE
HAVE LIMITED INSURANCE COVERAGE AGAINST DAMAGES OR LOSS WE MIGHT SUFFER.
We
do not carry business interruption insurance and therefore any business disruption or natural disaster could result in substantial
damages or losses to us. In addition, there are certain types of losses (such as losses from forces of nature) that are generally
not insured because either they are uninsurable or insurance cannot be obtained on commercially reasonable terms. Should an uninsured
loss or a loss in excess of insured limits occur, our business could be materially adversely affected. If we were to suffer any
losses or damages to our properties, our business, financial condition and results of operations would be materially and adversely
affected.
OUR
OPERATING COMPANIES MUST COMPLY WITH ENVIRONMENTAL PROTECTION LAWS THAT COULD ADVERSELY AFFECT OUR PROFITABILITY.
We
are required to comply with the environmental protection laws and regulations promulgated by the national and local governments
of the PRC. Some of these regulations govern the level of fees payable to government entities providing environmental protection
services and the prescribed standards relating to construction. Although construction technologies allow us to efficiently control
the level of pollution resulting from our construction process, due to the nature of our business, wastes are unavoidably generated
in the process. If we fail to comply with any of the environmental laws and regulations of the PRC, depending on the type and
severity of the violation, we may be subject to, among other things, warnings from relevant authorities, imposition of fines,
specific performance and/or criminal liability, forfeiture of profits made, or an order to close down our business operations
and suspension of relevant permits.
THE
OPERATING HISTORIES OF OUR OPERATING COMPANIES MAY NOT SERVE AS ADEQUATE BASES TO JUDGE OUR FUTURE PROSPECTS AND RESULTS OF OPERATIONS.
The
operating history of Wuhan Newport may not provide a meaningful basis for evaluating our business following consummation of the
Second Share Exchange. We cannot guarantee that we can achieve profitability or that we will have net profit in the future.
We will encounter risks and difficulties that companies at a similar stage of development frequently experience, including the
potential failure to:
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obtain
sufficient working capital to support our development and construction;
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manage
our expanding operations and continue to meet customers’ demands;
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maintain
adequate control of our expenses allowing us to realize anticipated income growth;
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implement,
adapt and modify our property development, sales, and business strategies as needed;
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successfully
integrate any future acquisitions; and
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anticipate
and adapt to changing conditions in the real estate industry resulting from changes in government regulations, mergers and
acquisitions involving our competitors, technological developments and other significant competitive and market
dynamics.
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If
we are not successful in addressing any or all of the foregoing risks, our business may be materially and adversely affected.
WE
MAY NOT BE ABLE TO SUCCESSFULLY EXECUTE OUR BUSINESS STRATEGY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND
RESULTS OF OPERATIONS.
Since
China is a large and diverse market, consumer trends and demands can vary significantly by region and Wuhan Newport’s experience
in the markets in which it currently operates may not be applicable in other parts of China. As a result, we may not be able to
leverage Wuhan Newport’s experience to fully execute our business strategy and plan. When we enter new markets, we may face
intense competition from companies with greater experience or a more established presence in the targeted geographical areas or
from other companies with similar business strategies. Therefore, we may not be able to adequately grow our sales due to intense
competitive pressures and/or the substantial costs involved.
OUR
FAILURE TO EFFECTIVELY MANAGE GROWTH MAY CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE AT
THE LEVELS WE EXPECT.
In
order to maximize potential growth in Wuhan Newport’s current and potential markets, we believe that we must be able to
sell our properties and obtain clients to use the services provided by our Logistics Center to ensure the sustainable development
capability of the Company and to maintain our operations. This strategy may place a significant strain on our management and our
operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating
procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our
failure to effectively manage our operations could prevent us from generating the revenues we expect and therefore have a material
adverse effect on the results of our operations.
WE
MAY NEED ADDITIONAL EMPLOYEES TO MEET OUR OPERATIONAL NEEDS.
Our
future success also depends upon our ability to attract and retain highly qualified personnel. We may need to hire additional
managers and employees with industry experience from time to time, and our success will be highly dependent on our ability to
attract and retain skilled management personnel and other employees. There can be no assurance that we will be able to attract
or retain highly qualified personnel. Competition for skilled personnel in the real estate and logistics industries is significant.
This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.
WE
WILL INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.
We
will incur significant costs associated with our public company reporting requirements, costs associated with newly applicable
corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by
the SEC. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance
costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may
make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to
accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result,
it may be more difficult for us to attract or retain qualified individuals to serve on our board of directors or as executive
officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
WE
HAVE IDENTIFIED MATERIAL WEAKNESSES IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING WHICH HAVE RESULTED IN MATERIAL MISSTATEMENTS
IN OUR PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 AND 2016.
We
have concluded that there are material weaknesses in our internal control over financial reporting for the fiscal year ended December
31, 2015, as we did not maintain effective controls over the selection and application of GAAP related to classification of capital
transactions. Specifically, the members of our management team with the requisite level of accounting knowledge, experience and
training commensurate with our financial reporting requirements did not analyze certain accounting issues at the level of detail
required to ensure the proper application of GAAP in certain circumstances. These material weaknesses resulted in the restatement
of our financial statements for the year ended December 31, 2015. Our management concluded that the Company’s previously
issued financial statements for the year ended December 31, 2015 should no longer be relied upon. In light of the errors, management
re-evaluated its assessment of our disclosure controls and procedures and internal control over financial reporting as of December
31, 2015 and concluded each was ineffective as of December 31, 2015.
A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected and corrected on a timely basis.
Management
identified the following material weaknesses in its assessment of the effectiveness of internal control over financial reporting
as of December 31, 2015:
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Lack
of adequate policies and procedures in internal audit function, which resulted in: (1) lack of communication between the internal
audit department and the Audit Committee and the Board of Directors; (2) insufficient internal audit work to ensure that the
Company’s policies and procedures have been carried out as planned;
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Lack
of sufficient full-time accounting staff in our accounting department that have experience and knowledge in identifying and
resolving complex accounting issues under U.S. Generally Accepted Accounting Principles (“GAAP”); and
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Lack
of sufficient accounting personnel which would provide segregation of duties within our internal control procedures to support
the accurate reporting of our financial results.
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In
addition to the above, management also identified the following material weaknesses in its assessment of the effectiveness of
internal control over financial reporting as of December 31, 2016:
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Lack
of sufficient full-time accounting staff in our accounting department that have experience and knowledge in identifying and
resolving complex accounting issues under U.S. Generally Accepted Accounting Principles (“GAAP”); The weakness
resulted in the restatement of consolidated balance sheet and consolidated income statement to treat an extinguishment transaction
between related entities as a capital transaction in the Form 10-K for the year ended December 31, 2015, and such weakness
had not been fully remediated as of December 31, 2016;
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Lack
of sufficient accounting personnel which would provide segregation of duties within our internal control procedures to support
the accurate reporting of our financial results. The weakness resulted in the amendment and additions of the disclosure of
real estate properties and land lots under development in the Form 10-K for the year ended December 31, 2015, and such weakness
had not been fully remediated as of December 31, 2016.
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Any
actions we have taken or may take to address the material weaknesses we had for the fiscal years ended December 31, 2015 and 2016
are subject to continued management review supported by testing, as well as oversight by the Audit Committee of our Board of Directors.
Although we believe that the steps we have taken sufficiently remediate the material weaknesses we had for the fiscal years ended
December 31, 2015 and 2016, we cannot assure you that these material weaknesses will not occur in the future and that we will
be able to remediate such weaknesses in a timely manner, which could impair our ability to accurately and timely report our financial
position, results of operations or cash flows. If our remedial measures are again insufficient to address the material weaknesses,
or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered
or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to further
restate our financial results. In addition, if we are unable to successfully remediate the material weaknesses in our internal
controls or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and
we may be unable to maintain compliance with applicable stock exchange listing requirements.
OUR
CERTIFICATES, PERMITS, AND LICENSES RELATED TO OUR OPERATIONS ARE SUBJECT TO GOVERNMENTAL CONTROL AND RENEWAL, AND FAILURE TO
OBTAIN OR RENEW SUCH CERTIFICATES, PERMITS, AND LICENSES WILL CAUSE ALL OR PART OF OUR OPERATIONS TO BE TERMINATED.
Our
operations require licenses, permits and, in some cases, renewals of these licenses and permits from various governmental authorities
in the PRC. Our ability to obtain, maintain, or renew such licenses and permits on acceptable terms is subject to change, as are,
among other things, the regulations and policies of applicable governmental authorities.
If
our land use permits are revoked or suspended or we are unable to renew the permits for any reason, we cannot assure you that
our business operations will not be stopped and, accordingly, our financial performance would be adversely affected.
IF
THE LEGALITY OR VALIDITY OF OUR LEASE OF THE COLLECTIVE-OWNED LAND USE RIGHTS IS CHALLENGED, THERE MAY BE DISRUPTION TO THE DEVELOPMENT
OF THE LAND AND SUCH DISRUPTION COULD HAVE A MATERIALLY ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
We
leased collective-owned land use rights from the Chunfeng Villagers’ Committees. The right to operate and manage such land
is vested in the relevant local villagers’ committee or rural collective leadership who are allowed to divide the land into
parcels and contracts the rights to operate such parcels of land to individual farmer households or, subject to the approval of
local governments and the requisite vote of the farmer households, to any entity or person outside that village or rural collective.
Any
change in law and the administrative system could render our lease unenforceable. According to the PRC Law on Land Administration,
all lands in the PRC are either state-owned or collectively owned. Generally, lands in the urban areas of a city or town are state-owned,
whereas lands in the rural areas of a city or town and all rural lands are, unless otherwise specified by law, collectively owned.
When required, the state has the right to reclaim the collectively owned lands in accordance with law if such reclaim is beneficial
to the public.
Additionally,
the lease may subject to the preemptive rights of other farmers in the same village or rural collective. If the preemptive rights
are not exercised within two months from the date on which we start using the parcels of land, it is very likely that the PRC
courts will not enforce such preemptive rights. As of the date of this prospectus, two months or more have passed since we started
using the land we leased from Chunfeng villagers’ committee and we have not received any claim from person purporting to
assert the pre-emption rights.
If
the legality or validity of our leases become subject to disputes or challenges, we may need to suspend at least part of our constructions
on the respective land areas. We may incur costs and losses if we are required to remove our improvements, such as buildings and
facilities that we have constructed or purchased. We could also lose our rights to use the land and our business, financial condition
and results of operations could be materially and adversely affected.
OUR
FACILITIES MAY BE AFFECTED BY FIRE OR NATURAL CALAMITIES. OUR OPERATIONS ARE ALSO SUBJECT TO THE RISK OF POWER OUTAGES, EQUIPMENT
FAILURES OR LABOR DISTURBANCES AND OTHER BUSINESS INTERRUPTIONS. WE HAVE LIMITED INSURANCE COVERAGE AND DO NOT CARRY ANY BUSINESS
INTERRUPTION INSURANCE.
A
fire, floods or other natural calamity may result in significant damage to our facilities. Our operations are subject to risks
of various business interruptions, including power outages, equipment failures or disturbances from labor unrest. If we are unable
to obtain timely replacements of damaged equipment, or if we are unable to find an acceptable general contractor to repair our
facilities damaged by a catastrophic event, then major disruptions to our operations would result, which would have significant
adverse effect on our operations and financial results. Our property insurance may not be sufficient to cover damages to our facilities,
and we do not carry any business interruption insurance covering lost profits as a result of the disruption to our operations.
Risks
Relating to Doing Business in China
IF
OUR LAND USE RIGHTS ARE REVOKED, WE WOULD HAVE NO OPERATIONAL CAPABILITIES.
Under
the PRC law, land is owned by the state or rural collective economic organizations. The state issues to tenants the rights to
use property. Use rights can be revoked and the tenants may be forced to vacate at any time when redevelopment of the land is
in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be
less than transparent. If this happens, we may be forced to (i) delay the construction of commercial facilities or (ii) curtail
or cease construction on that land. We relied on these land use rights as the cornerstone of our operations, and the loss of such
rights would have a material adverse effect on our business and results of operation.
IN
THE EVENT THE ACQUISITION OF WUHAN NEWPORT BY RICOFELIZ REQUIRES MOFCOM’S APPROVAL AND WE ARE NOT ABLE TO OBTAIN SUCH APPROVAL,
THE ACQUISITION MAY BE UNWOUND.
On
August 8, 2006, the PRC Ministry of Commerce (“
MOFCOM
”), the State Assets Supervision and Administration Commission,
the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission
and the State Administration of Foreign Exchange jointly promulgated the Provisions on the Acquisition of Domestic Enterprises
by Foreign Investors (the “
M&A Rules
”), as amended by the Ministry of Commerce of the PRC on June 22, 2009.
The M&A Rules require that a merger and acquisition of a domestic company with a “related party relationship”
by a domestic company, enterprise or natural person in the name of an overseas company legitimately incorporated or controlled
by the domestic company, enterprise or natural person shall be subject to examination and approval by MOFCOM. However, there is
no definition or explanation of what constitutes a “related party relationship” in the M&A Rules, and, as a result,
we are uncertain as to the interpretation of the M&A Rules with regard to the existing relationship between Mr. Xiangyao Liu,
Ricofeliz and Wuhan Newport at the moment immediately before the acquisition of Wuhan Newport by Ricofeliz. If such relationship
is considered as a “related party relationship”, the acquisition of Wuhan Newport by Ricofeliz, which has been approved
by the local Wuhan Bureau of MOFCOM, may be subject to the approval of the national MOFCOM. Although M&A Rules have been effective
since September 2006, we are not aware of any precedent for approval by MOFCOM of any related party acquisition conducted
by PRC domestic individuals. Since there is no clear guidance under the M&A Rules, it is difficult to determine
whether MOFCOM or other PRC regulatory agencies would consider such approval necessary and, if so, whether we would be able to
obtain MOFCOM approval, or if we fail to obtain such approval, what would be the consequence of such failure. Failure to obtain
MOFCOM’s approval may result in regulatory actions or other sanctions (including administrative order to unwind the acquisition)
from MOFCOM or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the
PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from our financing, investment,
or operating activities into the PRC, or take other actions that could have a material adverse effect on our business, financial
condition, results of operations, reputation and prospects.
WE
MAY NOT COMPLETE THE ACQUISITION OF WUHAN ECONOMIC DEVELOPMENT PORT LIMITED AS THE CLOSING OF THE ACQUISITION IS SUBJECT TO CLOSING
CONDITIONS
On
December 26, 2017, the Company entered into an agreement with shareholders holding 100% of the equity interest of Wuhan Economic
Development Port Limited (the “Acquiree”). Our future growth is likely to depend to some degree on our ability to
successfully acquire the Acquiree. Although we currently expect the acquisition to close before April 30, 2018, subject to customary
closing conditions, including satisfaction of due diligence by both parties, the completion of auditing of the financial statements
of the Acquiree, and the approval of relevant regulatory agencies, there can be no assurance that the acquisition will be completed
in accordance with the anticipating timing or at all. If the acquisition is not completed on a timely basis, or at all, the Company’s
business and future growth may be adversely affected.
LABOR
LAWS IN THE PRC MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
On
June 29, 2007, the PRC’s government promulgated the Labor Contract Law of the PRC, which became effective on January 1,
2008. The Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s
decision to reduce its workforce. Further, the law requires certain terminations be based upon seniority and not merit. In the
event that we decide to significantly change or decrease our workforce, the Labor Contract Law could adversely affect our ability
to enact such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially
and adversely affecting our financial condition and results of operations.
WE
MAY BE EXPOSED TO LIABILITIES UNDER THE FOREIGN CORRUPT PRACTICES ACT AND CHINESE ANTI-CORRUPTION LAW.
We
are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), and other laws that prohibit improper payments or
offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by
the statute for the purpose of obtaining or retaining business. We are also subject to Chinese anti-corruption laws, which strictly
prohibit the payment of bribes to government officials. We have operations, agreements with third parties, and make sales in China,
which may experience corruption . Our activities in China create the risk of unauthorized payments or offers of payments
by one of the employees or consultants of our Company, because these parties are not always subject to our control. We are in
the process of implementing an anticorruption program, which will prohibit the offering or giving of anything of value to foreign
officials, directly or indirectly, for the purpose of obtaining or retaining business. The anticorruption program also requires
that clauses mandating compliance with our policy be included in all contracts with foreign sales agents, sales consultants and
distributors and that they certify their compliance with our policy annually. It further requires that all hospitality involving
promotion of sales to foreign governments and government-owned or controlled entities be in accordance with specified guidelines.
In the meantime, we believe to date we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption
laws. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees,
consultants and/or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the
FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities,
which could negatively affect our business, operating results and financial condition. In addition, the government may seek to
hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
UNCERTAINTIES
WITH RESPECT TO THE PRC’S LEGAL SYSTEM COULD ADVERSELY AFFECT US.
We
conduct a substantial amount of our business through our subsidiary in China. Our operations in China are governed by PRC laws
and regulations. Our PRC subsidiary is generally subject to laws and regulations applicable to foreign investments in China and,
in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes.
Prior court decisions may be cited for reference but have limited precedential value.
Since
1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments
in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently
cover all aspects of economic activities in China. In particular, because some of these laws and regulations are relatively new,
and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these
laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal
rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not
be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China
may be protracted and result in substantial costs and diversion of resources and management attention.
GOVERNMENTAL
CONTROL OF CURRENCY CONVERSION MAY AFFECT THE VALUE OF YOUR INVESTMENT.
The
PRC government imposes controls on the convertibility of the Renminbi, or “RMB” into foreign currencies and, in certain
cases, the remittance of currency out of China. We receive some revenue and incur some expenses in U.S. dollars but incur other
expenses primarily in RMB. Although our main business is based in mainland China or based in Hong Kong with Chinese operating
subsidiaries, some of our business may require us to use U.S. dollars. We choose quotations based on price competitiveness.
Under
our current corporate structure, our income is primarily derived from dividend payments from our PRC subsidiary. Shortages in
the availability of foreign currency may restrict the ability of our PRC subsidiary to remit sufficient foreign currency to pay
dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign
exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from
trade-related transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural
requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The
PRC government may also, at its discretion, restrict access in the future to foreign currencies for current account transactions.
If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands,
we may not be able to pay dividends in foreign currencies to our security-holders.
WE
ARE A HOLDING COMPANY AND WE RELY ON FUNDING FOR DIVIDEND PAYMENTS FROM OUR SUBSIDIARIES, WHICH ARE SUBJECT TO RESTRICTIONS UNDER
PRC LAWS.
We
are a holding company incorporated in Nevada and we operate our core businesses through our subsidiary in the PRC. Therefore,
the availability of funds for us to pay dividends to our shareholders and to service our indebtedness depends upon dividends received
from such PRC subsidiary. If our subsidiary incurs debt or losses, its ability to pay dividends or other distributions to us may
be impaired. As a result, our ability to pay dividends and to repay our indebtedness will be restricted. PRC laws require that
dividends be paid only out of the after-tax profit of our PRC subsidiary calculated according to PRC accounting principles, which
differ in many aspects from generally accepted accounting principles in other jurisdictions. PRC laws also require enterprises
established in the PRC to set aside part of their after-tax profits as statutory reserves. These statutory reserves are not available
for distribution as cash dividends. In addition, restrictive covenants in bank credit facilities or other agreements that we or
our subsidiary may enter into in the future may also restrict the ability of our subsidiary to pay dividends to us. These restrictions
on the availability of our funding may impact our ability to pay dividends to our shareholders and to service our indebtedness.
OUR
BUSINESS MAY BE MATERIALLY AND ADVERSELY AFFECTED IF OUR PRC SUBSIDIARY DECLARES BANKRUPTCY OR BECOMES SUBJECT TO A DISSOLUTION
OR LIQUIDATION PROCEEDING.
The
Enterprise Bankruptcy Law of the PRC, or the Bankruptcy Law, came into effect on June 1, 2007. The Bankruptcy Law provides that
an enterprise will be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise’s
assets are, or are demonstrably, insufficient to clear such debts.
Our
PRC subsidiary hold certain assets that are important to our business operations. If our PRC subsidiary undergoes a voluntary
or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby
hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and
results of operations.
According
to the SAFE’s Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange
Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign
Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if our PRC subsidiary undergoes a
voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders
abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch. It is not clear
whether “registration” is a mere formality or involves the kind of substantive review process undertaken by SAFE and
its relevant branches in the past.
FLUCTUATIONS
IN EXCHANGE RATES COULD ADVERSELY AFFECT OUR BUSINESS AND THE VALUE OF OUR SECURITIES.
Changes
in the value of the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes
in China’s political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect
on our revenue and financial condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. For example,
to the extent that we need to convert U.S. dollars we receive from any capital raises into RMB for our operations, appreciation
of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely,
if we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our common stock or for other business
purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to
us.
Since
July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the
foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate
significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities
may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.
Very
limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not
entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness
of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign
currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign
currencies.
IF WE BECOME
DIRECTLY SUBJECT TO THE RECENT SCRUTINY, CRITICISM AND NEGATIVE PUBLICITY INVOLVING U.S.-LISTED CHINESE COMPANIES, WE MAY HAVE
TO EXPEND SIGNIFICANT RESOURCES TO INVESTIGATE AND RESOLVE THE MATTER WHICH COULD HARM OUR BUSINESS OPERATIONSAND OUR REPUTATION
AND COULD RESULT IN A LOSS OF YOUR INVESTMENT IN OUR SHARES, ESPECIALLY IF SUCH MATTER CANNOT BE ADDRESSED AND RESOLVED FAVORABLY.
Recently,
U.S. public companies that have substantially all of their operations in the PRC, have been the subject of intense scrutiny, criticism
and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism
and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over
financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations
of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese
companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject
to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations.
It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company and our business
. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have
to expend significant resources to investigate such allegations and/or defend the Company. This situation may be a major distraction
to our management. If such allegations are not proven to be groundless, our Company and business operations will be severely hampered
and your investment in our shares could be rendered worthless.
CERTAIN
POLITICAL AND ECONOMIC CONSIDERATIONS RELATING TO THE PRC COULD ADVERSELY AFFECT OUR COMPANY.
While
the PRC’s government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of
the PRC’s economy is still operating under five-year plans and annual state plans. Through these plans and other economic
measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various
industries, the PRC’s government exerts considerable direct and indirect influence on the economy. Many of the economic
reforms carried out by the PRC’s government are unprecedented or experimental, and are expected to be refined and improved.
Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment
process may not necessarily have a positive effect on our operations or future business development. Our operating results may
be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the
PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced
to control inflation, changes in the interest rate or method of taxation, and the imposition of restrictions on currency conversion
in addition to those described below.
SINCE
MOST OF OUR ASSETS ARE LOCATED IN PRC, ANY DIVIDENDS OF PROCEEDS FROM LIQUIDATION WILL BE SUBJECT TO THE APPROVAL OF THE RELEVANT
CHINESE GOVERNMENT AGENCIES.
Our
operating assets are located inside the PRC. Under the laws governing Foreign Invested Enterprise (“FIE”) in the PRC,
dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividends
of proceeds from liquidation will be paid through Wuhan Newport, our PRC subsidiary, which is subject to the decision of the Board
of Directors and subject to foreign exchange rules governing such repatriation. Any liquidation of a FIE is subject to the relevant
commerce authority’s approval, registration in relevant Administration for Industry and Commerce and supervision as well
as the foreign exchange control. Though the dividends of proceeds from liquidation can be remitted out of China to the investor
after they have been approved by the commerce authority and SAFE, we cannot assure that we can always obtain such approvals. This
may generate additional risk for our investors in case of dividend payment and liquidation.
IT
MAY BE DIFFICULT TO EFFECT SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL JUDGMENTS UPON OUR COMPANY AND OUR OFFICERS AND DIRECTORS
BECAUSE THEY RESIDE OUTSIDE THE UNITED STATES.
As
our operations are based in the PRC and a majority of our directors and officers reside in the PRC, service of process on the
Company and such foreign directors and officers may be difficult to effect within the United States. Also, our main assets are
located in the PRC and any judgment obtained in the United States against us may not be enforceable outside the United States.
THE
CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH WE MUST CONDUCT OUR BUSINESS ACTIVITIES.
We
are dependent on our relationship with the local government in the provinces in which we operate our business. The Chinese government
has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation
and state ownership. Our ability to operate in the PRC may be harmed by changes in its laws and regulations, including those relating
to taxation, environmental regulations, land use rights, property and other matters. We believe that Wuhan Newport’s operations
in the PRC are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments
of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold
in Chinese properties.
Future
inflation in China may inhibit our ability to conduct business in the PRC. In recent years, the Chinese economy has experienced
periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising
inflation. If prices for our properties rise at a rate that is insufficient to compensate for the rise in the costs of supplies,
it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time,
of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High
inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action,
which could inhibit economic activity in China, and thereby harm the market for our products and services.
OUR
SALES AND OPERATING REVENUE COULD DECLINE DUE TO MACRO-ECONOMIC AND OTHER FACTORS OUTSIDE OF OUR CONTROL, SUCH AS CHANGES IN CLIENT
CONFIDENCE AND DECLINES IN EMPLOYMENT LEVELS.
The
real estate and logistics markets in the PRC are susceptible to fluctuations in economic conditions. Our business substantially
depends on the prevailing economic conditions in the PRC. Changes in national and regional economic conditions, as well as local
economic conditions where we conduct our operations, may result in more caution on the part of market participants and consequently
fewer purchases. These economic uncertainties involve, among other things, conditions of supply and demand in local markets and
changes in client confidence and income, employment levels, and government regulations. These risks and uncertainties could periodically
have an adverse effect on consumer demand for and the pricing of our properties, which could cause our operating revenue to decline.
A reduction in our revenue could in turn negatively affect the market price of our securities.
LIMITATIONS
ON CHINESE ECONOMIC MARKET REFORMS MAY DISCOURAGE FOREIGN INVESTMENT IN CHINESE BUSINESSES.
The
value of investments in Chinese businesses could be adversely affected by political, economic and social uncertainties in China.
The economic reforms introduced in China in recent years are regarded by China’s national government as a way to introduce
economic market forces into China. Given the overriding desire of the national government leadership to maintain stability in
China amid rapid social and economic changes in the country, the economic market reforms of recent years could be slowed, or even
reversed.
PRC
REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT
SHAREHOLDERS TO PENALTIES AND LIMIT OUR ABILITY TO INJECT CAPITAL INTO OUR PRC SUBSIDIARY, LIMIT OUR PRC SUBSIDIARY’S ABILITY
TO DISTRIBUTE PROFITS TO US, OR OTHERWISE ADVERSELY AFFECT US.
The
SAFE promulgated the Notice on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment
through Special Purpose Vehicles, or Notice 37, in July 2014 that requires PRC residents or entities to register with SAFE or
its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas
investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special
purpose vehicle undergoes material events relating to material change of capitalization or structure of the PRC resident itself
(such as capital increase, capital reduction, share transfer or exchange, merger or spin off). As of November 21, 2016, Mr. Xiangyao
Liu, Mr. Linyu Chen and Mr. Long Zhao who are Chinese residents have completed the registration with SAFE under this Notice.
THE
CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH WE MUST CONDUCT OUR BUSINESS ACTIVITIES.
We
are dependent on our relationship with the local government in the provinces in which we operate our business. The Chinese government
has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation
and state ownership. Our ability to operate in the PRC may be harmed by changes in its laws and regulations, including those relating
to taxation, environmental regulations, land use rights, property and other matters. We believe that Wuhan Newport’s operations
in the PRC are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments
of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold
in Chinese properties.
Future
inflation in China may inhibit our ability to conduct business in the PRC. In recent years, the Chinese economy has experienced
periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising
inflation. If prices for our properties rise at a rate that is insufficient to compensate for the rise in the costs of supplies,
it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time,
of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High
inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action,
which could inhibit economic activity in China, and thereby harm the market for our products and services.
OUR
SALES AND OPERATING REVENUE COULD DECLINE DUE TO MACRO-ECONOMIC AND OTHER FACTORS OUTSIDE OF OUR CONTROL, SUCH AS CHANGES IN CLIENT
CONFIDENCE AND DECLINES IN EMPLOYMENT LEVELS.
The
real estate and logistics markets in the PRC are susceptible to fluctuations in economic conditions. Our business substantially
depends on the prevailing economic conditions in the PRC. Changes in national and regional economic conditions, as well as local
economic conditions where we conduct our operations, may result in more caution on the part of market participants and consequently
fewer purchases. These economic uncertainties involve, among other things, conditions of supply and demand in local markets and
changes in client confidence and income, employment levels, and government regulations. These risks and uncertainties could periodically
have an adverse effect on consumer demand for and the pricing of our properties, which could cause our operating revenue to decline.
A reduction in our revenue could in turn negatively affect the market price of our securities.
LIMITATIONS
ON CHINESE ECONOMIC MARKET REFORMS MAY DISCOURAGE FOREIGN INVESTMENT IN CHINESE BUSINESSES.
The
value of investments in Chinese businesses could be adversely affected by political, economic and social uncertainties in China.
The economic reforms introduced in China in recent years are regarded by China’s national government as a way to introduce
economic market forces into China. Given the overriding desire of the national government leadership to maintain stability in
China amid rapid social and economic changes in the country, the economic market reforms of recent years could be slowed, or even
reversed.
PRC
REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT
SHAREHOLDERS TO PENALTIES AND LIMIT OUR ABILITY TO INJECT CAPITAL INTO OUR PRC SUBSIDIARY, LIMIT OUR PRC SUBSIDIARY’S ABILITY
TO DISTRIBUTE PROFITS TO US, OR OTHERWISE ADVERSELY AFFECT US.
The
SAFE promulgated the Notice on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment
through Special Purpose Vehicles, or Notice 37, in July 2014 that requires PRC residents or entities to register with SAFE or
its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas
investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special
purpose vehicle undergoes material events relating to material change of capitalization or structure of the PRC resident itself
(such as capital increase, capital reduction, share transfer or exchange, merger or spin off). As of November 21, 2016, Mr. Xiangyao
Liu, Mr. Linyu Chen and Mr. Long Zhao who are Chinese residents have completed the registration with SAFE under this Notice.
FAILURE
TO COMPLY WITH THE INDIVIDUAL FOREIGN EXCHANGE RULES RELATING TO THE OVERSEAS DIRECT INVESTMENT OR THE ENGAGEMENT IN THE ISSUANCE
OR TRADING OF SECURITIES OVERSEAS BY OUR PRC RESIDENT STOCKHOLDERS MAY SUBJECT SUCH STOCKHOLDERS TO FINES OR OTHER LIABILITIES.
Other
than Notice 37, our ability to conduct foreign exchange activities in the PRC may be subject to the interpretation and enforcement
of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007
(as amended and supplemented, the “
Individual Foreign Exchange Rules
”). Under the Individual Foreign Exchange
Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities
or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions. PRC individuals who fail to
make such registrations may be subject to warnings, fines or other liabilities.
We
may not be fully informed of the identities of all our beneficial owners who are PRC residents. For example, because the investment
in or trading of our shares will happen in an overseas public or secondary market where shares are often held with brokers in
brokerage accounts, it is unlikely that we will know the identity of all of our beneficial owners who are PRC residents. Furthermore,
we have no control over any of our future beneficial owners and we cannot assure you that such PRC residents will be able to complete
the necessary approval and registration procedures required by the Individual Foreign Exchange Rules.
It
is uncertain how the Individual Foreign Exchange Rules will be interpreted or enforced and whether such interpretation or enforcement
will affect our ability to conduct foreign exchange transactions. Because of this uncertainty, we cannot be sure whether the failure
by any of our PRC resident stockholders to make the required registration will subject our PRC subsidiaries to fines or legal
sanctions on their operations, delay or restriction on repatriation of proceeds of any capital raise into the PRC, restriction
on remittance of dividends or other punitive actions that would have a material adverse effect on our business, results of operations
and financial condition.
PRC
REGULATIONS RELATING TO ACQUISITIONS OF PRC COMPANIES BY FOREIGN ENTITIES MAY LIMIT OUR ABILITY TO ACQUIRE PRC COMPANIES AND ADVERSELY
AFFECT THE IMPLEMENTATION OF OUR ACQUISITION STRATEGY AS WELL AS OUR BUSINESS AND PROSPECTS.
The
PRC State Administration of Foreign Exchange, or SAFE, issued a public notice in January 2005 concerning foreign exchange regulations
on mergers and acquisitions in the PRC. The public notice states that if an offshore company controlled by PRC’s residents
intends to acquire a PRC company, such acquisition will be subject to strict examination by the relevant foreign exchange authorities.
The public notice also states that the approval of the relevant foreign exchange authorities is required for any sale or transfer
by the PRC’s residents of a PRC company’s assets or equity interests to foreign entities, such as us, for equity interests
or assets of the foreign entities.
In
April 2005, SAFE issued another public notice further explaining the January notice. In accordance with the April notice, if an
acquisition of a PRC company by an offshore company controlled by PRC residents has been confirmed by a Foreign Investment Enterprise
Certificate prior to the promulgation of the January notice, the PRC residents must each submit a registration form to the local
SAFE branch with respect to their respective ownership interests in the offshore company, and must also file an amendment to such
registration if the offshore company experiences material events, such as changes in the share capital, share transfer, mergers
and acquisitions, spin-off transactions or use of assets in China to guarantee offshore obligations.
On
May 31, 2007, SAFE issued another official notice known as “Circular 106,” which requires the owners of any Chinese
company to obtain SAFE’s approval before establishing any offshore holding company structure to facilitate foreign financing
or subsequent acquisitions in China.
If
we decide to acquire a company organized under the laws of the PRC, we cannot assure investors that we or the owners of such company,
as the case may be, will be able to obtain the necessary approvals, filings and registrations for the acquisition. This may restrict
our ability to implement our acquisition strategy and adversely affect our business and prospects.
CAPITAL
OUTFLOW POLICIES IN THE PRC MAY HAMPER OUR ABILITY TO REMIT INCOME TO THE UNITED STATES AND RESTRICTIONS ON CURRENCY EXCHANGE
MAY LIMIT OUR ABILITY TO UTILIZE OUR REVENUES EFFECTIVELY.
The
PRC’s government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance
of currency out of the PRC. We receive all of our revenue in RMB. Under our current corporate structure, our U.S. holding company
may rely on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing
PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade
and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration
of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. Therefore, our PRC subsidiary is able
to pay dividends in foreign currencies to us without prior approval from SAFE by complying with certain procedural requirements.
However, approval from or registration with appropriate government authorities is required where RMB is to be converted into a
foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
This could affect the ability of our PRC subsidiary to obtain foreign exchange through debt or equity financings, including by
means of loans or capital contributions from us. In the future, the PRC government may also, at its discretion, restrict access
to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient
foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our stockholders.
The
majority of our revenue would be and operating expenses are denominated in RMB. The PRC government imposes controls on the convertibility
of the RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Pursuant to the Foreign Currency
Administration Rules, promulgated on January 29, 1996 and amended on January 14, 1997, and various regulations issued by SAFE
and other relevant PRC government authorities, RMB is freely convertible only to the extent of current account items, such as
trade-related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and
repatriation of investments, require the prior approval from SAFE or its local branch for conversion of RMB into a foreign currency
such as U.S. dollars, and remittance of the foreign currency outside the PRC. Shortages in the availability of foreign currency
may restrict the ability of our PRC subsidiary to remit sufficient foreign currency to pay dividends or other payments to us,
or otherwise satisfy its foreign currency-denominated obligations. Currently, e our PRC subsidiary and its affiliates may purchase
foreign exchange for settlement of “current account transactions,” including payment of dividends to us and payment
of licensing fees and service fees to foreign licensors and service providers, without the approval of SAFE. However, approval
from the SAFE or its local branch is required where RMB is to be converted into foreign currency and remitted out of China to
pay capital expenses, such as the repayment of loans denominated in foreign currencies.
BECAUSE
OUR FUNDS ARE HELD IN BANKS THAT DO NOT PROVIDE INSURANCE, THE FAILURE OF ANY BANK IN WHICH WE DEPOSIT OUR FUNDS MAY AFFECT OUR
ABILITY TO CONTINUE TO OPERATE.
Banks
and other financial institutions in the PRC do not provide insurance for funds held on deposit. As a result, in the event of a
bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails,
our inability to have access to our cash may impair our operations, and, if we are not able to access funds to pay our suppliers,
employees and other creditors, we may be unable to continue to operate.
IF
WE ARE UNABLE TO OBTAIN BUSINESS INSURANCE IN THE PRC, WE MAY NOT BE PROTECTED FROM RISKS THAT ARE CUSTOMARILY COVERED BY INSURANCE
IN THE UNITED STATES.
Business
insurance is not readily available in the PRC. To the extent that we suffer a loss of a type that would normally be covered by
insurance in the United States, such as general liability insurance, we would incur significant expenses in both defending any
action and in paying any claims that result from a settlement or judgment. We have not obtained fire, casualty and theft insurance,
and there is no insurance coverage for our furniture or buildings in China. Any losses incurred by us will have to be borne by
us without any assistance, and we may not have sufficient capital to cover material damage to, or the loss of, our facilities
due to fire, severe weather, flood or other causes, and such damage or loss may have a material adverse effect on our financial
condition, business and prospects.
UNDER
THE NEW ENTERPRISE INCOME TAX LAW, WE MAY BE CLASSIFIED AS A “RESIDENT ENTERPRISE” OF CHINA. SUCH CLASSIFICATION MAY
RESULT IN UNFAVORABLE TAX CONSEQUENCES TO US AND OUR NON-PRC SHAREHOLDERS.
China
passed a New Enterprise Income Tax Law, or the New EIT Law, which became effective on January 1, 2008. Under the New EIT Law,
an enterprise established outside of China with
de facto
management bodies within China is considered a resident enterprise,
meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing
rules of the New EIT Law define
de facto
management as “substantial and overall management and control over the production
and operations, personnel, accounting, and properties” of the enterprise. In addition, a circular issued by the State Administration
of Taxation on April 22, 2009 clarified that dividends and other income paid by such resident enterprises will be considered to
be the PRC’s source income and subject to the PRC’s withholding tax. This recent circular also subjects such resident
enterprises to various reporting requirements with the PRC’s tax authorities.
Although
substantially all of our management is currently located in the PRC, it remains unclear whether the PRC’s tax authorities
would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider
our company to be a PRC resident enterprise. However, if the PRC’s tax authorities determine that we are a resident enterprise
for the PRC’s enterprise income tax purposes, a number of unfavorable PRC tax consequences may follow. First, we may be
subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as the PRC’s enterprise income
tax reporting obligations. This would also mean that income such as interest on offering proceeds and non-China source income
would be subject to the PRC’s enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing
rules, dividends paid to us from our PRC subsidiary would qualify as tax-exempt income, we cannot guarantee that such dividends
will not be subject to a 10% withholding tax, as the PRC authorities responsible for enforcing the withholding tax have not yet
issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for
the PRC’s enterprise income tax purposes. Finally, dividends paid to stockholders with respect to their shares of our common
stock or any gains realized from transfer of such shares may generally be subject to the PRC’s withholding taxes on such
dividends or gains at a rate of 10% if the shareholders are deemed to be non-resident enterprises or at a rate of 20% if the shareholders
are deemed to be non-resident individuals.
PRICE
INFLATION IN CHINA COULD AFFECT OUR RESULTS OF OPERATIONS IF WE ARE UNABLE TO PASS ALONG CONSTRUCTION PRICE INCREASES TO OUR CUSTOMERS.
Inflation
in China has continued to rise over the last few years. Because our builders will purchase raw materials from suppliers in China,
price inflation has caused an increase in the cost of construction. Price inflation may affect the results of our operations
if we are unable to pass along the price increases to our customers. Similarly, the purchase and installation of equipment
or furniture may increase as a result of these recent inflationary trends, which are expected to continue for the near future.
Accordingly, inflation in China may weaken our competitiveness domestically and in international markets.
WE
MAY RELY PRINCIPALLY ON DIVIDENDS AND OTHER DISTRIBUTIONS OF EQUITY PAID BY OUR PRC SUBSIDIARY TO FUND ANY CASH AND FINANCING
REQUIREMENTS WE MAY HAVE, AND ANY LIMITATION ON THE ABILITY OF OUR PRC SUBSIDIARY TO PAY DIVIDENDS TO US COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR ABILITY TO CONDUCT OUR BUSINESS.
We
are a holding company, and we may rely principally on dividends and other distributions of equity paid by our PRC subsidiary for
our cash and financing requirements, which include the funds necessary to pay dividends and other cash distributions to our stockholders
and to service any debt we may incur. In the future, if our PRC subsidiary incurs debt on its own behalf, the instruments governing
the debt may restrict its ability to pay dividends or make other distributions to us.
Under
PRC laws and regulations, our PRC subsidiary, as a foreign-invested enterprise in the PRC, may pay dividends only out of accumulated
profits as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise
is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve
funds, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, it may allocate a portion
of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare
and bonus funds are not distributable as cash dividends.
Any
limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely
limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.
THE
PRC GOVERNMENT MAY ISSUE FURTHER RESTRICTIVE MEASURES IN THE FUTURE.
We
cannot assure you that the PRC’s government will not issue further restrictive measures in the future. The PRC government’s
restrictive regulations and measures could increase our operating costs in adapting to these regulations and measures, limit our
access to capital resources or even restrict our business operations, which could further adversely affect our business and prospects.
OUR
PRC SUBSIDIARY HAS TAKEN THE POSITION THAT IT IS COMPLIANT WITH THE TAXATION, ENVIRONMENTAL, EMPLOYMENT AND SOCIAL SECURITY RULES
OF CHINA, AND IF THAT POSITION TURNS OUT TO BE WRONG, THEY MAY FACE PENALTIES IMPOSED BY THE PRC GOVERNMENT.
While
we believe our PRC subsidiary has been in compliance with PRC taxation, environmental, employment and social security rules during
their operations in China, we have not obtained letters from the PRC government authorities confirming such compliance. If any
PRC government authority takes the position that there is non-compliance with the taxation, environmental protection, employment
and/or social security rules by our PRC subsidiary, they may be exposed to penalties from PRC government authorities, in which
case the operation of our PRC subsidiary in question may be adversely affected.
IF
RELATIONS BETWEEN THE UNITED STATES AND CHINA WORSEN, OUR STOCK PRICE MAY DECREASE AND WE MAY HAVE DIFFICULTY ACCESSING THE U.S.
CAPITAL MARKETS.
At
various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies
may arise in the future between these two countries. Any political or trade conflicts between the United States and China could
adversely affect the market price of our common stock and our ability to access U.S. capital markets.
INTERPRETATION
OF PRC LAWS AND REGULATIONS INVOLVES UNCERTAINTY.
Our
core business is conducted within China and is governed by PRC’s laws and regulations. The PRC’s legal system is based
on written statutes, and prior court decisions can only be used as a reference. Since 1979, the PRC’s government has promulgated
laws and regulations in relation to economic matters such as foreign investment, corporate organization and governance, commerce,
taxation and trade, with a view to developing a comprehensive system of commercial law, including laws relating to property ownership
and development. However, due to the fact that these laws and regulations have not been fully developed, and because of the limited
volume of published cases and the non-binding nature of prior court decisions, interpretation of PRC’s laws and regulations
involves a degree of uncertainty. Some of these laws may be changed without immediate publication or may be amended with retroactive
effect. Depending on the government agency or how an application or case is presented to such agency, we may receive less favorable
interpretations of laws and regulations than our competitors, particularly if a competitor has long been established in the locality
of, and has developed a relationship with such agency. In addition, any litigation in China may be protracted and result in substantial
costs and a diversion of resources and management attention. All of these uncertainties may cause difficulties in the enforcement
of our land use rights, entitlements under our permits and other statutory and contractual rights and interests.
Risks
Related to Ownership of Our Common stock
THE
MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE OR MAY DECLINE REGARDLESS OF OUR OPERATING PERFORMANCE, AND YOU MAY NOT BE ABLE
TO RESELL YOUR SHARES AT OR ABOVE THE OFFERING PRICE.
The
market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control,
including:
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fluctuations in our revenue and other operating results;
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the financial projections
we may provide to the public, any changes in these projections or our failure to meet these projections;
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actions of securities
analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our
company, or our failure to meet these estimates or the expectations of investors;
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announcements by
us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint
ventures, or capital commitments;
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price and volume
fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
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lawsuits threatened
or filed against us; and
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other events or
factors, including those resulting from war or incidents of terrorism, or responses to these events.
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addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the
market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or
disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action
litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us
to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
WE
DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We
currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to
declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common
stock if the market price of our common stock increases.
SHARES
ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK, AS THE FUTURE SALE OF A SUBSTANTIAL AMOUNT
OF OUTSTANDING COMMON STOCK IN THE PUBLIC MARKETPLACE COULD REDUCE THE PRICE OF OUR COMMON STOCK.
The
market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the
perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through
future offerings of our common stock.
JASPER
LAKE HOLDINGS LIMITED, OUR MAJORITY STOCKHOLDER, MAY HAVE SIGNIFICANT INFLUENCE OVER THE OUTCOME OF MATTERS SUBMITTED TO OUR STOCKHOLDERS
FOR APPROVAL, WHICH MAY PREVENT US FROM ENGAGING IN CERTAIN TRANSACTIONS.
As
of March 8, 2018 Jasper Lake Holdings Limited beneficially owns 52.94% of our outstanding common stock. Mr. Xiangyao Liu,
our CEO and President, has sole voting and dispositive power of Jasper Lake Holdings Limited. As a result, this majority stockholder
may exercise significant influence over all matters requiring stockholder approval, including the appointment of our directors
and the approval of significant corporate transactions. This ownership and control may also have the effect of delaying or preventing
a future change in control, impeding a merger, consolidation, takeover or other business combination that may be in the best interest
of the Company.
IF
WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR
PREVENT FRAUD.
The
SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management
report on such company’s internal controls over financial reporting in its annual report, which contains management’s
assessment of the effectiveness of internal controls over financial reporting.
Our
reporting obligations as a public company place a significant strain on our management and operational and financial resources
and systems. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable
financial reports and are important to prevent fraud. As a result, our failure to achieve and maintain effective internal controls
over financial reporting may result in the loss of investor confidence in the reliability of our financial statements, which in
turn may harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will continue
to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and
other requirements of the Sarbanes-Oxley Act.
THERE
IS A LIMITED MARKET FOR OUR COMMON STOCK, WHICH MAY MAKE IT DIFFICULT FOR HOLDERS OF OUR COMMON STOCK TO SELL THEIR STOCK.
On
August 18, 2017, the Company our common stock started trading on the NASDAQ Global Select Market under the symbol “YRIV”.
There is a limited trading market for our common stock . Accordingly, there can be no assurance as to the liquidity of any markets
that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which
holders may be able to sell our common stock. Further, many brokerage firms will not process transactions involving low price
stocks, especially those that come within the definition of a “penny stock.” If we cease to be quoted, holders of
our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our common
stock, and the market value of our common stock would likely decline.
WE
MAY BE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL.
We
may be subject now and in the future to the SEC’s “penny stock” rules if our shares of common stock sell below
$5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require
broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks
and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements
showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction
and must be given to the customer in writing before or with the customer’s confirmation.
In
addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The
penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common
stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock
may find it more difficult to sell their securities.
IF
A MORE ACTIVE TRADING MARKET FOR OUR COMMON STOCK DEVELOPS, THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE
AND SUBJECT TO WIDE FLUCTUATIONS, AND HOLDERS OF OUR COMMON STOCK MAY BE UNABLE TO SELL THEIR SHARES AT OR ABOVE THE PRICE AT
WHICH THEY WERE ACQUIRED.
The
market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number
of factors that are beyond our control, including:
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quarterly variations in our revenues and operating
expenses;
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developments in the financial markets and worldwide
economies;
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announcements of innovations or new products
or services by us or our competitors;
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announcements by the PRC government relating
to regulations that govern our industry;
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significant sales of our common stock or other
securities in the open market;
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variations in interest rates;
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changes in the market valuations of other comparable
companies; and
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changes in accounting principles.
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addition, the market for Chinese companies that went public in the U.S. through reverse mergers, such as ours, is currently extremely
volatile primarily due to recent allegations and, in some instances, findings of fraud among some of these companies. If
a stockholder were to file a class action suit against us following a period of volatility in the price of our securities, we
would incur substantial legal fees and our management’s attention and resources would be diverted from operating our business
to responding to such litigation, which may harm our business and reputation.
THE
RIGHTS OF THE HOLDERS OF OUR COMMON STOCK MAY BE IMPAIRED BY THE POTENTIAL ISSUANCE OF PREFERRED STOCK.
Our
Board of Directors has the right to create a new series of preferred stock. As a result, the Board of Directors may, without stockholder
approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights that may adversely affect the voting
power and equity interest of the holders of our common stock. Although we have no present intention to issue any additional shares
of preferred stock or to create any new series of preferred stock, we may issue such shares in the future.
SPECIAL
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that involve risks and uncertainties, principally in the sections entitled “Risk
Factors.” All statements other than statements of historical fact contained in this prospectus, including statements regarding
future events, our future financial performance, business strategy and plans and objectives of management for future operations,
are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,”
“believes,” “can,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “should,”
or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking
statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are
only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk
Factors” or elsewhere in this prospectus, which may cause our or our industry’s actual results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements.
Forward-looking
statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications
of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information
available at the time they are made and/or management’s good faith belief as of that time with respect to future events,
and are subject to risks and uncertainties that could cause actual performance or results to differ materially from what is expressed
in or suggested by the forward-looking statements.
Forward-looking
statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume
no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more
forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking
statements.
USE
OF PROCEEDS
We
intend to use the net proceeds from the sale of the securities as set forth in the applicable prospectus supplement.
DESCRIPTION
OF CAPITAL STOCK
The
following description of our capital stock is not complete and may not contain all the information you should consider before
investing in our capital stock. This description is summarized from, and qualified in its entirety by reference to, our Certificate
of Incorporation and Bylaws, which have been publicly filed with the SEC. See “Where You Can Find More Information; Incorporation
by Reference.”
Introduction
In
the discussion that follows, we have summarized selected provisions of our Articles of Incorporation relating to our capital stock.
This summary is not complete. This discussion is subject to the relevant provisions of Nevada law and is qualified in its entirety
by reference to our Articles of Incorporation and our Bylaws. You should read our articles of incorporation and our bylaws as
currently in effect for provisions that may be important to you.
Authorized
Capital Stock
Our
authorized share capital consists of 500,000,000 shares of common stock, par value $0.0001 per share, and 100,000,000 shares of
preferred stock, par value $0.0001 per share. As of March 8, 2018, 172,344,446 shares of our common stock and no shares of
our preferred stock were outstanding.
Common
Stock
Each
share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally
by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or
the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers,
privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This
means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors
to be elected if they choose to do so.
Holders
of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion
may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary
cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on
the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after
taking into account various factors, including:
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general business
conditions;
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industry practice;
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our financial condition
and performance;
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our future prospects;
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our cash needs and
capital investment plans;
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our obligations
to holders of any preferred stock we may issue;
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income tax consequences;
and
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the restrictions
Nevada and other applicable laws and our credit arrangements then impose.
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If
we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available
for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred
stock, if any, receive their liquidation preferences in full.
Our
common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase
fund.
Preferred
Stock
At
the direction of our Board of Directors, without any action by the holders of our common stock, we may issue one or more series
of preferred stock from time to time. Our Board of Directors can determine the number of shares of each series of preferred stock,
the designation, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations
or restrictions applicable to any of those rights, including dividend rights, voting rights, conversion or exchange rights, terms
of redemption and liquidation preferences, of each series.
Undesignated
preferred stock may enable our Board of Directors to render more difficult or to discourage an attempt to obtain control of our
company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management.
The issuance of shares of preferred stock may adversely affect the rights of our common stockholders. For example, any preferred
stock issued may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited
voting rights and may be convertible into shares of common stock. As a result, the issuance of shares of preferred stock, or the
issuance of rights to purchase shares of preferred stock, may discourage an unsolicited acquisition proposal or bids for our common
stock or may otherwise adversely affect the market price of our common stock or any existing preferred stock.
Warrants
There
are no outstanding warrants.
The
NASDAQ Global Select Market
Our
common stock is listed on the Nasdaq Global Select Market under the symbol “YRIV”.
Transfer
Agent and Registrar
The
transfer agent for our common stock is VStock Transfer, LLC located at 18 Lafayette Pl, Woodmere, NY 11598. The telephone number
is: (212) 828-8436.
DESCRIPTION
OF THE DEBT SECURITIES
The
debt securities may be either secured or unsecured and will either be our senior debt securities or our subordinated debt securities.
The debt securities will be issued under one or more separate indentures between us and a trustee to be specified in an accompanying
prospectus supplement. Senior debt securities will be issued under a senior indenture and subordinated debt securities will be
issued under a subordinated indenture. Together, the senior indenture and the subordinated indenture are called indentures in
this description. This prospectus, together with the applicable prospectus supplement, will describe the terms of a particular
series of debt securities.
The
following is a summary of selected provisions and definitions of the indentures and debt securities to which any prospectus supplement
may relate. The summary of selected provisions of the indentures and the debt securities appearing below is not complete and is
subject to, and qualified entirely by reference to, all of the provisions of the applicable indenture and certificates evidencing
the applicable debt securities. For additional information, you should look at the applicable indenture and the certificate evidencing
the applicable debt security that is filed as an exhibit to the registration statement that includes this prospectus. In this
description of the debt securities, the words “we,” “us,” or “our” refer only to “Yangtze
River Port and Logistics Limited” and not to any of our subsidiaries, unless we expressly state otherwise or the context
otherwise requires.
The
following description sets forth selected general terms and provisions of the applicable indenture and debt securities to which
any prospectus supplement may relate. Other specific terms of the applicable indenture and debt securities will be described in
the applicable prospectus supplement. If any particular terms of the indenture or debt securities described in a prospectus supplement
differ from any of the terms described below, then the terms described below will be deemed to have been superseded by that prospectus
supplement.
Debt
securities may be issued in separate series without limitation as to aggregate principal amount. We may specify a maximum aggregate
principal amount for the debt securities of any series. We
are not limited as to the amount of debt securities we may issue under the indentures. Unless otherwise provided in a prospectus
supplement, a series of debt securities may be reopened to issue additional debt securities of such series.
The prospectus supplement
relating to a particular series of debt securities will set forth:
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whether
the debt securities are senior or subordinated;
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any
limit on the aggregate principal amount;
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the
person who shall be entitled to receive interest, if other than the record holder on
the record date;
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the
date or dates the principal will be payable;
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the
interest rate or rates, which may be fixed or variable, if any, the date from which interest
will accrue, the interest payment dates and the regular record dates, or the method for
calculating the dates and rates;
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the
place where payments may be made;
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any
mandatory or optional redemption provisions or sinking fund provisions and any applicable
redemption or purchase prices associated with these provisions;
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if
issued other than in denominations of U.S. $1,000 or any multiple of U.S. $1,000, the
denominations in which the debt securities shall be issuable;
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if
applicable, the method for determining how the principal, premium, if any, or interest
will be calculated by reference to an index or formula;
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if
other than U.S. currency, the currency or currency units in which principal, premium,
if any, or interest will be payable and whether we or a holder may elect payment to be
made in a different currency;
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the
portion of the principal amount that will be payable upon acceleration of maturity, if
other than the entire principal amount;
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if
the principal amount payable at stated maturity will not be determinable as of any date
prior to stated maturity, the amount or method for determining the amount which will
be deemed to be the principal amount;
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if
applicable, whether the debt securities shall be subject to the defeasance provisions
described below under “Satisfaction and Discharge; Defeasance” or such other
defeasance provisions specified in the applicable prospectus supplement for the debt
securities;
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any
conversion or exchange provisions;
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whether
the debt securities will be issuable in the form of a global security;
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any
subordination provisions applicable to the subordinated debt securities if different
from those described below under “Subordinated Debt Securities;”
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any
paying agents, authenticating agents, security registrars or other agents for the debt
securities, if other than the trustee;
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any
provisions relating to any security provided for the debt securities, including any provisions
regarding the circumstances under which collateral may be released or substituted;
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any
deletions of, or changes or additions to, the events of default, acceleration provisions
or covenants;
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any
provisions granting special rights to holders when a specified event occurs;
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any
special tax provisions that apply to the debt securities;
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with
respect to the debt securities that do not bear interest, the dates for certain required
reports to the applicable trustee;
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any
and all additional, eliminated or changed terms that will apply to the debt securities;
and
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any
other specific terms of such debt securities.
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Unless
otherwise specified in the prospectus supplement, the debt securities will be registered debt securities. Debt securities may
be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at time
of issuance is below market rates. The material U.S. federal income tax considerations applicable to debt securities sold at a
discount will be described in the applicable prospectus supplement.
Exchange
and Transfer
Debt securities may
be transferred or exchanged at the office of the security registrar or at the office of any transfer agent designated by us.
We will not impose
a service charge for any transfer or exchange, but we may require holders to pay any tax or other governmental charges associated
with any transfer or exchange.
In the event of any
partial redemption of debt securities of any series, we will not be required to:
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issue,
register the transfer of, or exchange, any debt security of that series during a period
beginning at the opening of business 15 days before the day of mailing of a notice
of redemption and ending at the close of business on the day of the mailing; or
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register
the transfer of or exchange any debt security of that series selected for redemption,
in whole or in part, except the unredeemed portion being redeemed in part.
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We will appoint the
trustee as the initial security registrar. Any transfer agent, in addition to the security registrar initially designated by us,
will be named in the prospectus supplement. We may designate additional transfer agents or change transfer agents or change the
office of the transfer agent.
However,
we will be required to maintain a transfer agent in each place of payment for the debt securities of each series.
Global
Securities
The
debt securities of any series may be represented, in whole or in part, by one or more global securities. Each global security
will:
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be
registered in the name of a depositary, or its nominee, that we will identify in a prospectus
supplement;
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be
deposited with the depositary or nominee or custodian; and
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bear
any required legends.
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No global security
may be exchanged in whole or in part for debt securities registered in the name of any person other than the depositary or any
nominee unless:
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the
depositary has notified us that it is unwilling or unable to continue as depositary or
has ceased to be qualified to act as depositary and we do not appoint another institution
to act as depositary within 90 days;
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an
event of default is continuing with respect to the debt securities of the applicable
series; or
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any
other circumstance described in a prospectus supplement has occurred permitting or requiring
the issuance of any such security.
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As
long as the depositary, or its nominee, is the registered owner of a global security, the depositary or nominee will be considered
the sole owner and holder of the debt securities represented by the global security for all purposes under the indentures. Except
in the above limited circumstances, owners of beneficial interests in a global security will not be:
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entitled
to have the debt securities registered in their names;
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entitled
to physical delivery of certificated debt securities; or
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considered
to be holders of those debt securities under the indenture.
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Payments
on a global security will be made to the depositary or its nominee as the holder of the global security. Some jurisdictions have
laws that require that certain purchasers of securities take physical delivery of such securities in definitive form. These laws
may impair the ability to transfer beneficial interests in a global security.
Institutions
that have accounts with the depositary or its nominee are referred to as “participants.” Ownership of beneficial interests
in a global security will be limited to participants and to persons that may hold beneficial interests through participants. The
depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of debt securities
represented by the global security to the accounts of its participants.
Ownership
of beneficial interests in a global security will be shown on and effected through records maintained by the depositary, with
respect to participants’ interests, or any participant, with respect to interests of persons held by participants on their behalf.
Payments,
transfers and exchanges relating to beneficial interests in a global security will be subject to policies and procedures of the
depositary. The depositary policies and procedures may change from time to time. Neither any trustee nor we will have any responsibility
or liability for the depositary’s or any participant’s records with respect to beneficial interests in a global security.
Payment
and Paying Agents
Unless
otherwise indicated in a prospectus supplement, the provisions described in this paragraph will apply to the debt securities.
Payment of interest on a debt security on any interest payment date will be made to the person in whose name the debt security
is registered at the close of business on the record date. Payment on debt securities of a particular series will be payable at
the office of a paying agent or paying agents designated by us. However, at our option, we may pay interest by mailing a check
to the record holder. The trustee will be designated as our initial paying agent.
We
may also name any other paying agents in a prospectus supplement. We may designate additional paying agents, change paying agents
or change the office of any paying agent. However, we will be required to maintain a paying agent in each place of payment for
the debt securities of a particular series.
All
moneys paid by us to a paying agent for payment on any debt security that remain unclaimed for a period ending the earlier of:
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10
business days prior to the date the money would be turned over to the applicable state;
or
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at
the end of two years after such payment was due,
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will
be repaid to us thereafter, and the holder may then look only to us for such payment.
No
Protection in the Event of a Change of Control
Unless
otherwise indicated in a prospectus supplement with respect to a particular series of debt securities, the debt securities will
not contain any provisions that may afford holders of the debt securities protection in the event we have a change in control
or in the event of a highly leveraged transaction, whether or not such transaction results in a change in control.
unless
otherwise indicated in a prospectus supplement with respect to a particular series of debt securities, the debt securities will
not contain any financial or restrictive covenants.
Consolidation,
Merger and Sale of Assets
Unless we indicate otherwise
in a prospectus supplement with respect to a particular series of debt securities, we may not consolidate with or merge into any
other person (other than one of our subsidiaries), in a transaction in which we are not the surviving corporation, or convey,
transfer or lease our properties and assets substantially as an entirety to, any person (other than one of our subsidiaries),
unless:
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the
successor entity, if any, is a U.S. corporation, limited liability company, partnership,
trust or other business entity;
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the
successor entity assumes our obligations on the debt securities and under the indentures;
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immediately
after giving effect to the transaction, no default or event of default shall have occurred
and be continuing; and
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certain
other conditions specified in the indenture
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Events
of Default
Unless
we indicate otherwise in a prospectus supplement, the following will be events of default for any series of debt securities under
the indentures:
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we
fail to pay principal of or any premium on any debt security of that series when due;
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we
fail to pay any interest on any debt security of that series for 30 days after it becomes
due;
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we
fail to deposit any sinking fund payment when due;
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we
fail to perform any other covenant in the indenture and such failure continues for 90
days after we are given the notice required in the indenture; and
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certain
events involving our bankruptcy, insolvency or reorganization.
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Additional
or different events of default applicable to a series of debt securities may be described in a prospectus supplement. An event
of default of one series of debt securities is not necessarily an event of default for any other series of debt securities.
The
trustee may withhold notice to the holders of any default, except defaults in the payment of principal, premium, if any, interest,
any sinking fund installment on, or with respect to any conversion right of, the debt securities of such series. However, the
trustee must consider it to be in the interest of the holders of the debt securities of such series to withhold this notice.
Unless
we indicate otherwise in a prospectus supplement, if an event of default, other than an event of default described in the last
bullet point above, shall occur and be continuing with respect to any series of debt securities, either the trustee or the holders
of at least 25 percent in aggregate principal amount of the outstanding securities of that series may declare the principal amount
and premium, if any, of the debt securities of that series, or if any debt securities of that series are original issue discount
securities, such other amount as may be specified in the applicable prospectus supplement, in each case together with accrued
and unpaid interest, if any, thereon, to be due and payable immediately.
Unless
we indicate otherwise in a prospectus supplement, if an event of default described in the last bullet point above shall occur,
the principal amount and premium, if any, of all the debt securities of that series, or if any debt securities of that series
are original issue discount securities, such other amount as may be specified in the applicable prospectus supplement, in each
case together with accrued and unpaid interest, if any, thereon, will automatically become immediately due and payable. Any payment
by us on the subordinated debt securities following any such acceleration will be subject to the subordination provisions described
below under “Subordinated Debt Securities.”
Notwithstanding
the foregoing, each indenture may provide that we may, at our option, elect that the sole remedy for an event of default relating
to our failure to comply with our obligations described under the section entitled “Reports” below or our failure to
comply with the requirements of Section 314(a)(1) of the Trust Indenture Act will for the first 180 days after the occurrence
of such an event of default consist exclusively of the right to receive additional interest on the relevant series of debt securities
at an annual rate equal to (i) 0.25% of the principal amount of such series of debt securities for the first 90 days
after the occurrence of such event of default and (ii) 0.50% of the principal amount of such series of debt securities from
the 91st day to, and including, the 180th day after the occurrence of such event of default, which we call “additional
interest.” If we so elect, the additional interest will accrue on all outstanding debt securities from and including the
date on which such event of default first occurs until such violation is cured or waived and shall be payable on each relevant
interest payment date to holders of record on the regular record date immediately preceding the interest payment date. On the
181st day after such event of default (if such violation is not cured or waived prior to such 181st day), the debt securities
will be subject to acceleration as provided above. In the event we do not elect to pay additional interest upon any such event
of default in accordance with this paragraph, the debt securities will be subject to acceleration as provided above.
In
order to elect to pay the additional interest as the sole remedy during the first 180 days after the occurrence of any event
of default relating to the failure to comply with the reporting obligations in accordance with the preceding paragraph, we must
notify all holders of debt securities and the trustee and paying agent of such election prior to the close of business on the
first business day following the date on which such event of default occurs. Upon our failure to timely give such notice or pay
the additional interest, the debt securities will be immediately subject to acceleration as provided above.
After
acceleration, the holders of a majority in aggregate principal amount of the outstanding securities of that series may, under
certain circumstances, rescind and annul such acceleration if all events of default, other than the non-payment of accelerated
principal, or other specified amounts or interest, have been cured or waived.
Other
than the duty to act with the required care during an event of default, the trustee will not be obligated to exercise any of its
rights or powers at the request of the holders unless the holders shall have offered to the trustee reasonable indemnity. Generally,
the holders of a majority in aggregate principal amount of the outstanding debt securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust
or power conferred on the trustee.
A
holder of debt securities of any series will not have any right to institute any proceeding under the indentures, or for the appointment
of a receiver or a trustee, or for any other remedy under the indentures, unless:
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the
holder has previously given to the trustee written notice of a continuing event of default
with respect to the debt securities of that series;
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the
holders of at least 25 percent in aggregate principal amount of the outstanding
debt securities of that series have made a written request and have offered reasonable
indemnity to the trustee to institute the proceeding; and
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the
trustee has failed to institute the proceeding and has not received direction inconsistent
with the original request from the holders of a majority in aggregate principal amount
of the outstanding debt securities of that series within 60 days after the original
request.
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Holders
may, however, sue to enforce the payment of principal, premium or interest on any debt security on or after the due date or to
enforce the right, if any, to convert any debt security (if the debt security is convertible) without following the procedures
listed above.
We
will furnish the trustee an annual statement from our officers as to whether or not we are in default in the performance of the
conditions and covenants under the indenture and, if so, specifying all known defaults.
Modification
and Waiver
Unless
we indicate otherwise in a prospectus supplement, the applicable trustee and we may make modifications and amendments to an indenture
with the consent of the holders of a majority in aggregate principal amount of the outstanding securities of each series affected
by the modification or amendment.
We
may also make modifications and amendments to the indentures for the benefit of holders without their consent, for certain purposes
including, but not limited to:
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evidencing
the succession of another person to us, or successive successions, and the assumption
by any such successor of our covenants in the indentures in compliance with Article 8
of the indentures;
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adding
covenants or events of default;
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making
certain changes to facilitate the issuance of the securities;
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adding
to, changing or eliminating any of the provisions of the indentures or more series of
securities, provided that any such addition, change or elimination (A) shall neither
(i) apply to any security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii) modify the rights
of the holder of any such security with respect to such provision or (B) shall become
effective only when there is no such security outstanding;
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securing
the debt securities;
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providing
for a successor trustee or additional trustees;
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conforming
the indenture to the description of the debt securities set forth in this prospectus
or the accompanying prospectus supplement;
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curing
any ambiguity, defect or inconsistency; provided that such action shall not adversely
affect the interest of the holders in any material respect;
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permitting
or facilitating the defeasance and discharge of the securities;
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making
such other provisions in regard to matters or questions arising under the indentures
or under any supplemental indentures as our board of directors may deem necessary or
desirable, and which does not in each case adversely affect the interests of the holders
of the debt securities of a series; and
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complying
with requirements of the U.S. Securities and Exchange Commission in order to effect or
maintain the qualifications of the indentures under the Trust Indenture Act of 1939,
as amended (the “Trust Indenture Act”).
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However,
neither the trustee nor we may make any modification or amendment without the consent of the holder of each outstanding security
of that series affected by the modification or amendment if such modification or amendment would:
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change
the stated maturity of the principal of, or any installment of principal or interest
on, any debt security;
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reduce
the principal, premium, if any, or interest on any debt security or any amount payable
upon redemption or repurchase, whether at our option or the option of any holder, or
reduce the amount of any sinking fund payments;
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reduce
the principal of an original issue discount security or any other debt security payable
on acceleration of maturity;
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change
the place of payment or the currency in which any debt security is payable;
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impair
the right to enforce any payment after the stated maturity or redemption date;
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if
subordinated debt securities, modify the subordination provisions in a materially adverse
manner to the holders;
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adversely
affect the right to convert any debt security if the debt security is a convertible debt
security; or
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change
the provisions in the indenture that relate to modifying or amending the indenture.
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Satisfaction
and Discharge; Defeasance
We
may be discharged from our obligations on the debt securities, subject to limited exceptions, of any series that have matured
or will mature or be redeemed within one year if we deposit enough money with the trustee to pay all the principal, interest and
any premium due to the stated maturity date or redemption date of the debt securities.
Each
indenture contains a provision that permits us to elect either or both of the following:
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We
may elect to be discharged from all of our obligations, subject to limited exceptions,
with respect to any series of debt securities then outstanding. If we make this election,
the holders of the debt securities of the series will not be entitled to the benefits
of the indenture, except for the rights of holders to receive payments on debt securities
or the registration of transfer and exchange of debt securities and replacement of lost,
stolen or mutilated debt securities.
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We
may elect to be released from our obligations under some or all of any financial or restrictive
covenants applicable to the series of debt securities to which the election relates and
from the consequences of an event of default resulting from a breach of those covenants.
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To
make either of the above elections, we must irrevocably deposit in trust with the trustee enough money to pay in full the principal,
interest and premium on the debt securities. This amount may be made in cash and/or U.S. government obligations or, in the case
of debt securities denominated in a currency other than U.S. dollars, cash in the currency in which such series of securities
is denominated and/or foreign government obligations. As a condition to either of the above elections, for debt securities denominated
in U.S. dollars we must deliver to the trustee an opinion of counsel that the holders of the debt securities will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of the action.
With
respect to debt securities of any series that are denominated in a currency other than United States dollars, “foreign government
obligations” means:
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direct
obligations of the government that issued or caused to be issued the currency in which
such securities are denominated and for the payment of which obligations its full faith
and credit is pledged, or, with respect to debt securities of any series which are denominated
in Euros, direct obligations of certain members of the European Union for the payment
of which obligations the full faith and credit of such members is pledged, which in each
case are not callable or redeemable at the option of the issuer thereof; or
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obligations
of a person controlled or supervised by or acting as an agency or instrumentality of
a government described in the bullet above the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by such government, which are not callable
or redeemable at the option of the issuer thereof.
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The
indentures provide that any reports or documents that we file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act will be filed with the trustee within 15 days after the same are filed with the SEC, and that documents filed by us with
the SEC via the EDGAR system will be deemed filed with the trustee as of the time such documents are filed with the SEC.
Notices
to holders will be given by mail to the addresses of the holders in the security register.
Governing
Law
The
indentures and the debt securities will be governed by, and construed under, the laws of the State of New York.
No
Personal Liability of Directors, Officers, Employees or Stockholders
No
incorporator, stockholder, employee, agent, officer, director or subsidiary of ours will have any liability for any obligations
of ours, or because of the creation of any indebtedness under the debt securities, the indentures or supplemental indentures.
The indentures provide that all such liability is expressly waived and released as a condition of, and as a consideration for,
the execution of such indentures and the issuance of the debt securities.
Regarding
the Trustee
The
indentures limit the right of the trustee, should it become our creditor, to obtain payment of claims or secure its claims.
The
trustee will be permitted to engage in certain other transactions with us. However, if the trustee acquires any conflicting interest,
and there is a default under the debt securities of any series for which it is trustee, the trustee must eliminate the conflict
or resign.
Subordinated
Debt Securities
The
following provisions will be applicable with respect to each series of subordinated debt securities, unless otherwise stated in
the prospectus supplement relating to that series of subordinated debt securities.
The
indebtedness evidenced by the subordinated debt securities of any series is subordinated, to the extent provided in the subordinated
indenture and the applicable prospectus supplement, to the prior payment in full, in cash or other payment satisfactory to the
holders of senior debt, of all senior debt, including any senior debt securities.
Upon
any distribution of our assets upon any dissolution, winding up, liquidation or reorganization, whether voluntary or involuntary,
marshalling of assets, assignment for the benefit of creditors, or in bankruptcy, insolvency, receivership or other similar proceedings,
payments on the subordinated debt securities will be subordinated in right of payment to the prior payment in full in cash or
other payment satisfactory to holders of senior debt of all senior debt.
In
the event of any acceleration of the subordinated debt securities of any series because of an event of default with respect to
the subordinated debt securities of that series, holders of any senior debt would be entitled to payment in full in cash or other
payment satisfactory to holders of senior debt of all senior debt before the holders of subordinated debt securities are entitled
to receive any payment or distribution.
In
addition, the subordinated debt securities will be structurally subordinated to all indebtedness and other liabilities of our
subsidiaries, including trade payables and lease obligations. This occurs because our right to receive any assets of our subsidiaries
upon their liquidation or reorganization, and your right to participate in those assets, will be effectively subordinated to the
claims of that subsidiary’s creditors, including trade creditors, except to the extent that we are recognized as a creditor of
such subsidiary. If we are recognized as a creditor of that subsidiary, our claims would still be subordinate to any security
interest in the assets of the subsidiary and any indebtedness of the subsidiary senior to us.
We
are required to promptly notify holders of senior debt or their representatives under the subordinated indenture if payment of
the subordinated debt securities is accelerated because of an event of default.
Under
the subordinated indenture, we may also not make payment on the subordinated debt securities if:
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a
default in our obligations to pay principal, premium, if any, interest or other amounts
on our senior debt occurs and the default continues beyond any applicable grace period,
which we refer to as a payment default; or
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any
other default occurs and is continuing with respect to designated senior debt that permits
holders of designated senior debt to accelerate its maturity, which we refer to as a
non-payment default, and the trustee receives a payment blockage notice from us or some
other person permitted to give the notice under the subordinated indenture.
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We
will resume payments on the subordinated debt securities:
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in
case of a payment default, when the default is cured or waived or ceases to exist, and
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in
case of a nonpayment default, the earlier of when the default is cured or waived or ceases
to exist or 179 days after the receipt of the payment blockage notice.
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No
new payment blockage period may commence on the basis of a nonpayment default unless 365 days have elapsed from the effectiveness
of the immediately prior payment blockage notice. No nonpayment default that existed or was continuing on the date of delivery
of any payment blockage notice to the trustee shall be the basis for a subsequent payment blockage notice.
As
a result of these subordination provisions, in the event of our bankruptcy, dissolution or reorganization, holders of senior debt
may receive more, ratably, and holders of the subordinated debt securities may receive less, ratably, than our other creditors.
The subordination provisions will not prevent the occurrence of any event of default under the subordinated indenture.
The
subordination provisions will not apply to payments from money or government obligations held in trust by the trustee for the
payment of principal, interest and premium, if any, on subordinated debt securities pursuant to the provisions described under
the section entitled “Satisfaction and Discharge; Defeasance,” if the subordination provisions were not violated at
the time the money or government obligations were deposited into trust.
If
the trustee or any holder receives any payment that should not have been made to them in contravention of subordination provisions
before all senior debt is paid in full in cash or other payment satisfactory to holders of senior debt, then such payment will
be held in trust for the holders of senior debt.
Senior
debt securities will constitute senior debt under the subordinated indenture.
Additional
or different subordination provisions may be described in a prospectus supplement relating to a particular series of debt securities.
“Designated
senior debt” means our obligations under any particular senior debt in which the instrument creating or evidencing the same
or the assumption or guarantee thereof, or related agreements or documents to which we are a party, expressly provides that such
indebtedness shall be designated senior debt for purposes of the subordinated indenture. The instrument, agreement or other document
evidencing any designated senior debt may place limitations and conditions on the right of such senior debt to exercise the rights
of designated senior debt.
“Indebtedness”
means the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of the
indenture for such series of securities or thereafter created, incurred or assumed:
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our
indebtedness evidenced by a credit or loan agreement, note, bond, debenture or other
written obligation;
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all
of our obligations for money borrowed;
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all
of our obligations evidenced by a note or similar instrument given in connection with
the acquisition of any businesses, properties or assets of any kind,
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as
lessee under leases required to be capitalized on the balance sheet of the lessee under
generally accepted accounting principles, or
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as
lessee under leases for facilities, capital equipment or related assets, whether or not
capitalized, entered into or leased for financing purposes;
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all
of our obligations under interest rate and currency swaps, caps, floors, collars, hedge
agreements, forward contracts or similar agreements or arrangements;
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all
of our obligations with respect to letters of credit, bankers’ acceptances and similar
facilities, including reimbursement obligations with respect to the foregoing;
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all
of our obligations issued or assumed as the deferred purchase price of property or services,
but excluding trade accounts payable and accrued liabilities arising in the ordinary
course of business;
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all
obligations of the type referred to in the above clauses of another person, the payment
of which, in either case, we have assumed or guaranteed, for which we are responsible
or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise,
or which are secured by a lien on our property; and
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renewals,
extensions, modifications, replacements, restatements and refundings of, or any indebtedness
or obligation issued in exchange for, any such indebtedness or obligation described in
the above clauses of this definition.
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“Senior
debt” means the principal of, premium, if any, and interest, including all interest accruing subsequent to the commencement
of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such
proceeding, and rent payable on or in connection with, and all fees and other amounts payable in connection with, our indebtedness.
However, senior debt shall not include:
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any
debt or obligation if its terms or the terms of the instrument under which or pursuant
to which it is issued expressly provide that it shall not be senior in right of payment
to the subordinated debt securities or expressly provide that such indebtedness is on
the same basis or “junior” to the subordinated debt securities; or
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debt
to any of our subsidiaries, a majority of the voting stock of which is owned, directly
or indirectly, by us.
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“Subsidiary”
means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by us or by one or
more of our other subsidiaries or by a combination of us and our other subsidiaries. For purposes of this definition, “voting
stock” means stock or other similar interests which ordinarily has or have voting power for the election of directors, or
persons performing similar functions, whether at all times or only so long as no senior class of stock or other interests has
or have such voting power by reason of any contingency.
DESCRIPTION
OF WARRANTS
General
We
may issue warrants to purchase shares of our common stock and preferred stock in one or more series together with other securities
or separately, as described in the applicable prospectus supplement. Below is a description of certain general terms and provisions
of the warrants that we may offer. Particular terms of the warrants will be described in the warrant agreements to be entered
into by us, a warrant agent to be named by us, and the holders from time to time of the warrants and the prospectus supplement
relating to the warrants. Copies of the form agreement for each warrant and the warrant certificate, if any, reflecting the provisions
to be included in such agreements that will be entered into with respect to a particular offering of each type of warrant, will
be filed with the SEC and incorporated by reference as exhibits to the registration statement of which this prospectus forms a
part. You should read the applicable warrant agreement for additional information before you purchase any of our warrants.
The
prospectus supplement relating to any warrants we offer will describe the specific terms relating to the offering. These terms
may include some or all of the following:
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the
specific designation and aggregate number of, and the price at which we will issue, the warrants;
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the currency or
currency units in which the offering price, if any, and the exercise price are payable;
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the designation,
amount and terms of the securities purchasable upon exercise of the warrants;
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if applicable, the
exercise price for shares of our common stock and the number of shares of common stock to be received upon exercise of the
warrants;
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if
applicable, the exercise price for shares of our preferred stock, the number of shares of preferred stock to be received
upon exercise, and a description of that series of our preferred stock;
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if applicable, the
exercise price for shares of our preferred stock, the number of shares of preferred stock to be received upon exercise, and
a description of that series of our preferred stock;
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the date on which
the right to exercise the warrants will begin and the date on which that right will expire or, if you may not continuously
exercise the warrants throughout that period, the specific date or dates on which you may exercise the warrants;
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whether the warrants
will be issued in fully registered form or bearer form, in definitive or global form or in any combination of these forms,
although, in any case, the form of a warrant included in a unit will correspond to the form of the unit and of any security
included in that unit;
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any applicable material
U.S. federal income tax consequences;
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the identity of
the warrant agent for the warrants and of any other depositaries, execution or paying agents, transfer agents, registrars
or other agents;
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the proposed listing,
if any, of the warrants or any securities purchasable upon exercise of the warrants on any securities exchange;
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if applicable, the
date from and after which the warrants and the common stock and preferred stock will be separately transferable;
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if applicable, the
minimum or maximum amount of the warrants that may be exercised at any one time;
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the procedures and
conditions relating to the exercise of the warrants;
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information with
respect to book-entry procedures, if any;
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the triggering event
and the terms upon which the exercise price and the number of underlying securities that the warrants are exercisable into
may be adjusted;
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the
anti-dilution provisions of the warrants, if any;
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any redemption or
call provisions;
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whether the warrants
may be sold separately or with other securities as parts of units; and
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any additional terms
of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.
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Until
the warrants are exercised, holders of the warrants will not have any rights of holders of the underlying securities.
Outstanding
Warrants
As
of March 19, 2018, we have no outstanding warrants.
DESCRIPTION
OF RIGHTS
We
may issue rights to our stockholders to purchase shares of our common stock or preferred stock described in this prospectus. We
may offer rights separately or together with one or more additional rights, preferred stock, common stock, warrants or any combination
of those securities in the form of units, as described in the applicable prospectus supplement. Each series of rights will be
issued under a separate rights agreement to be entered into between us and a bank or trust company, as rights agent. The rights
agent for any rights we offer will be set forth in the applicable prospectus supplement. The rights agent will act solely as our
agent in connection with the certificates relating to the rights of the series of certificates and will not assume any obligation
or relationship of agency or trust for or with any holders of rights certificates or beneficial owners of rights. The following
description sets forth certain general terms and provisions of the rights to which any prospectus supplement may relate. The particular
terms of the rights to which any prospectus supplement may relate and the extent, if any, to which the general provisions may
apply to the rights so offered will be described in the applicable prospectus supplement. To the extent that any particular terms
of the rights, rights agreement or rights certificates described in a prospectus supplement differ from any of the terms described
below, then the terms described below will be deemed to have been superseded by that prospectus supplement. We encourage you to
read the applicable rights agreement and rights certificate for additional information before you decide whether to purchase any
of our rights.
The
prospectus supplement relating to any rights that we offer will include specific terms relating to the offering, including, among
other matters:
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the
date of determining the stockholders entitled to the rights distribution;
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the aggregate number
of shares of common stock, preferred stock or other securities purchasable upon exercise of the rights;
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the exercise price;
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the aggregate number
of rights issued;
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whether the rights
are transferrable and the date, if any, on and after which the rights may be separately transferred;
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the date on which
the right to exercise the rights will commence, and the date on which the right to exercise the rights will expire;
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the method by which
holders of rights will be entitled to exercise;
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the conditions to
the completion of the offering;
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the withdrawal,
termination and cancellation rights;
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whether
there are any backstop or standby purchaser or purchasers and the terms of their commitment;
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whether stockholders
are entitled to oversubscription right;
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any U.S. federal
income tax considerations; and
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any other terms
of the rights, including terms, procedures and limitations relating to the distribution, exchange and exercise of the rights.
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If
less than all of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to
persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including
pursuant to standby arrangements, as described in the applicable prospectus supplement. In connection with any rights offering,
we may enter into a standby underwriting or other arrangement with one or more underwriters or other persons pursuant to which
such underwriters or other persons would purchase any offered securities remaining unsubscribed for after such rights offering.
DESCRIPTION
OF UNITS
We
may issue units consisting of any combination of the other types of securities offered under this prospectus in one or more series.
We may evidence each series of units by unit certificates that we will issue under a separate agreement. We may enter into unit
agreements with a unit agent. We will indicate the name and address of the unit agent in the applicable prospectus supplement
relating to a particular series of units.
The
following description, together with the additional information included in any applicable prospectus supplement, summarizes the
general features of the units that we may offer under this prospectus. You should read any prospectus supplement and any free
writing prospectus that we may authorize to be provided to you related to the series of units being offered, as well as the complete
unit agreements that contain the terms of the units. Specific unit agreements will contain additional important terms and provisions
and we will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference
from another report that we file with the SEC, the form of each unit agreement relating to units offered under this prospectus.
If
we offer any units, certain terms of that series of units will be described in the applicable prospectus supplement, including,
without limitation, the following, as applicable:
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the
title of the series of units;
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identification
and description of the separate constituent securities comprising the units;
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the
price or prices at which the units will be issued;
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the
date, if any, on and after which the constituent securities comprising the units will be separately transferable;
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a
discussion of certain United States federal income tax considerations applicable to the units; and
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any
other terms of the units and their constituent securities.
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PLAN
OF DISTRIBUTION
We
may sell the securities from time to time pursuant to underwritten public offerings, negotiated transactions, block trades or
a combination of these methods or through underwriters or dealers, through agents and/or directly to one or more purchasers. The
securities may be distributed from time to time in one or more transactions:
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at a
fixed price or prices, which may be changed;
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at market prices
prevailing at the time of sale;
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at prices related
to such prevailing market prices; or
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at negotiated prices.
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Each
time that we sell securities covered by this prospectus, we will provide a prospectus supplement or supplements that will describe
the method of distribution and set forth the terms and conditions of the offering of such securities, including the offering price
of the securities and the proceeds to us, if applicable.
Offers
to purchase the securities being offered by this prospectus may be solicited directly. Agents may also be designated to solicit
offers to purchase the securities from time to time. Any agent involved in the offer or sale of our securities will be identified
in a prospectus supplement.
If
a dealer is utilized in the sale of the securities being offered by this prospectus, the securities will be sold to the dealer,
as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the
time of resale.
If
an underwriter is utilized in the sale of the securities being offered by this prospectus, an underwriting agreement will be executed
with the underwriter at the time of sale and the name of any underwriter will be provided in the prospectus supplement that the
underwriter will use to make resales of the securities to the public. In connection with the sale of the securities, we or the
purchasers of securities for whom the underwriter may act as agent, may compensate the underwriter in the form of underwriting
discounts or commissions. The underwriter may sell the securities to or through dealers, and those dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for which they
may act as agent. Unless otherwise indicated in a prospectus supplement, an agent will be acting on a best efforts basis and a
dealer will purchase securities as a principal, and may then resell the securities at varying prices to be determined by the dealer.
Any
compensation paid to underwriters, dealers or agents in connection with the offering of the securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers will be provided in the applicable prospectus supplement. Underwriters,
dealers and agents participating in the distribution of the securities may be deemed to be underwriters within the meaning of
the Securities Act of 1933, as amended, and any discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and commissions. We may enter into agreements to indemnify
underwriters, dealers and agents against civil liabilities, including liabilities under the Securities Act, or to contribute to
payments they may be required to make in respect thereof and to reimburse those persons for certain expenses.
Any
common stock will be listed on the Nasdaq Capital Market, but any other securities may or may not be listed on a national securities
exchange. To facilitate the offering of securities, certain persons participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities. This may include over-allotments or short sales of the securities,
which involve the sale by persons participating in the offering of more securities than were sold to them. In these circumstances,
these persons would cover such over-allotments or short positions by making purchases in the open market or by exercising their
over-allotment option, if any. In addition, these persons may stabilize or maintain the price of the securities by bidding for
or purchasing securities in the open market or by imposing penalty bids, whereby selling concessions allowed to dealers participating
in the offering may be reclaimed if securities sold by them are repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the market price of the securities at a level above that which might
otherwise prevail in the open market. These transactions may be discontinued at any time.
We
may engage in at the market offerings into an existing trading market in accordance with Rule 415(a)(4) under the Securities Act.
In
addition, we may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third
parties in privately negotiated transactions. If the applicable prospectus supplement so indicates, in connection with those derivatives,
the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short
sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales
or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives
to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and, if not
identified in this prospectus, will be named in the applicable prospectus supplement (or a post-effective amendment). In addition,
we may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities
short using this prospectus and an applicable prospectus supplement. Such financial institution or other third party may transfer
its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
We
do not make any representation or prediction as to the direction or magnitude of any effect that the transactions described above
might have on the price of the securities. In addition, we do not make any representation that underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued without notice.
The
specific terms of any lock-up provisions in respect of any given offering will be described in the applicable prospectus supplement.
To
comply with applicable state securities laws, the securities offered by this prospectus will be sold, if necessary, in such jurisdictions
only through registered or licensed brokers or dealers. In addition, securities may not be sold in some states unless they have
been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement
is available and is complied with.
The
underwriters, dealers and agents may engage in transactions with us, or perform services for us, in the ordinary course of business
for which they receive compensation.
VALIDITY
OF THE SECURITIES
Unless
otherwise stated in any prospectus supplement, the validity of the securities offered by this prospectus will be passed upon for
the Company by Sichenzia Ross Ference Kesner LLP. Any underwriters or placement agents will be represented by their own counsel.
EXPERTS
The
consolidated financial statements and schedule of Yangtze River Port and Logistics Limited as of December 31, 2017 and 2016,
and for each of the years in the three-year period ended December 31, 2017, and management’s assessment of the effectiveness
of internal control over financial reporting as of December 31, 2017 have been incorporated by reference herein in reliance
upon the reports of Centurion ZD CPA Ltd. (fka DCAW (CPA) Ltd. as successor to Dominic K.F. Chan & Co.), independent registered
public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
PART
II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other
Expenses of Issuance and Distribution
The
following table sets forth the estimated costs and expenses (other than the actual registration fee), other than underwriting
discounts and commissions, payable by the registrant in connection with the sale of the securities being registered.
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Securities and Exchange Commission registration fee
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$
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37,350
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Nasdaq Global Market listing fee
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(1)
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Accounting fees and expenses
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(1)
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Legal fees and expenses
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(1)
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Printing and engraving
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(1)
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Fees and expenses of the transfer agent or trustee
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(1)
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Miscellaneous
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(1)
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Total
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$
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(1)
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(1)
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These
fees are calculated based on the securities offered and the number of issuances, and
accordingly cannot be estimated at this time.
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Item 15. Indemnification
of Directors and Officers
Subsection
7 of Section 78.138 of the Nevada Revised Statutes (the “Nevada Law”) provides that, subject to certain very limited
statutory exceptions, a director or officer is not individually liable to the corporation or its stockholders or creditors for
any damages as a result of any act or failure to act in his or her capacity as a director or officer, unless it is proven that
the act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and such breach of those
duties involved intentional misconduct, fraud or a knowing violation of law. The statutory standard of liability established by
Section 78.138 controls even if there is a provision in the corporation’s articles of incorporation unless a provision in
the Company’s Articles of Incorporation provides for greater individual liability.
Subsection
1 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise (any such person, a “Covered Person”),
against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Covered Person in connection with such action, suit or proceeding if the Covered Person is not liable pursuant to Section
78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceedings, had no reasonable
cause to believe the Covered Person’s conduct was unlawful.
Subsection
2 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any Covered Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that such person acted in the capacity of a Covered Person against expenses, including amounts
paid in settlement and attorneys’ fees actually and reasonably incurred by the Covered Person in connection with the defense
or settlement of such action or suit, if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the
Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best
interests of the Corporation. However, no indemnification may be made in respect of any claim, issue or matter as to which the
Covered Person shall have been adjudged by a court of competent jurisdiction (after exhaustion of all appeals) to be liable to
the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such
action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances
the Covered Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
Section
78.7502 of the Nevada Law further provides that to the extent a Covered Person has been successful on the merits or otherwise
in the defense of any action, suit or proceeding referred to in Subsection 1 or 2, as described above, or in the defense of any
claim, issue or matter therein, the corporation shall indemnify the Covered Person against expenses (including attorneys’
fees) actually and reasonably incurred by the Covered Person in connection with the defense.
Subsection
1 of Section 78.751 of the Nevada Law provides that any discretionary indemnification pursuant to Section 78.7502 of the Nevada
Law, unless ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may be made by a corporation only as authorized
in the specific case upon a determination that indemnification of the Covered Person is proper in the circumstances. Such determination
must be made (a) by the stockholders, (b) by the board of directors of the corporation by majority vote of a quorum consisting
of directors who were not parties to the action, suit or proceeding, (c) if a majority vote of a quorum of such non-party directors
so orders, by independent legal counsel in a written opinion, or (d) by independent legal counsel in a written opinion if a quorum
of such non-party directors cannot be obtained.
Subsection
2 of Section 78.751 of the Nevada Law provides that a corporation’s articles of incorporation or bylaws or an agreement
made by the corporation may require the corporation to pay as incurred and in advance of the final disposition of a criminal or
civil action, suit or proceeding, the expenses of officers and directors in defending such action, suit or proceeding upon receipt
by the corporation of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined
by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Subsection 2 of Section
78.751 further provides that its provisions do not affect any rights to advancement of expenses to which corporate personnel other
than officers and directors may be entitled under contract or otherwise by law.
Subsection
3 of Section 78.751 of the Nevada Law provides that indemnification pursuant to Section 78.7502 of the Nevada Law and advancement
of expenses authorized in or ordered by a court pursuant to Section 78.751 does not exclude any other rights to which the Covered
Person may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, for either an action in his or her official capacity or in another capacity while holding his or her office. However,
indemnification, unless ordered by a court pursuant to Section 78.7502 or for the advancement of expenses under Subsection 2 of
Section 78.751 of the Nevada Law, may not be made to or on behalf of any director or officer of the corporation if a final adjudication
establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were
material to the cause of action. Additionally, the scope of such indemnification and advancement of expenses shall continue for
a Covered Person who has ceased to be a director, officer, employee or agent of the corporation, and shall inure to the benefit
of his or her heirs, executors and administrators.
Section
78.752 of the Nevada Law empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf
of a Covered Person for any liability asserted against such person and liabilities and expenses incurred by such person in his
or her capacity as a Covered Person or arising out of such person’s status as a Covered Person whether or not the corporation
has the authority to indemnify such person against such liability and expenses.
The
Bylaws of the Company provide for indemnification of Covered Persons substantially identical in scope to that permitted under
the Nevada Law. Such Bylaws provide that the expenses of directors and officers of the Company incurred in defending any action,
suit or proceeding, whether civil, criminal, administrative or investigative, must be paid by the Company as they are incurred
and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such
director or officer to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction that
the director or officer is not entitled to be indemnified by the Company.
Item 16. Exhibits
A
list of exhibits filed herewith is contained in the exhibit index that immediately precedes such exhibits and is incorporated
herein by reference.
Item 17. Undertakings
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(a)
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The
undersigned registrant hereby undertakes:
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(1)
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To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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(i)
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To include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933;
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(ii)
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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 SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
and
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(iii)
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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.
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Provided,
however
, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required
to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by
the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is
part of the registration statement.
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(2)
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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.
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(3)
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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.
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(4)
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That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
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(i)
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If
the registrant is relying on Rule 430B,
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(A)
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Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement
as of the date the filed prospectus was deemed part of and included in the registration statement; and
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(B)
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Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose
of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness
or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B,
for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a
new effective date of the registration statement relating to the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering
hereof.
Provided
,
however
, that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to the effective date; or
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(ii)
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If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness.
Provided, however
, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first
use.
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(5)
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That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer and sell such securities to such purchaser:
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(i)
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Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
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(ii)
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Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
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(iii)
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The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
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(iv)
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Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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(b)
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The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement 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.
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(c)
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Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding), is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
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(d)
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The undersigned
registrant hereby undertakes that:
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(1)
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For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
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(2)
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For
the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus 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.
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(e)
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The
undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee
to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations
prescribed by the SEC under Section 305(b)(2) of the Trust Indenture Act.
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POWER
OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Xiangyao Liu, as his true and
lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to file and sign any and all amendments, including post-effective amendments and any registration statement
for the same offering that is to be effective under Rule 462(b) of the Securities Act, to this registration statement, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, New York State, on April 24, 2018.
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YANGTZE RIVER PORT AND LOGISTICS
LIMITED
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By:
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/s/
Xiangyao Liu
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Xiangyao Liu
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President
and Chief Executive Officer
(Principal
Executive Officer)
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Date:
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April 24, 2018
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By:
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/s/
Tsz-Kit Chan
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Tsz-Kit Chan
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Chief
Financial Officer
(Principal
Financial and Accounting Officer)
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Date:
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April
24, 2018
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Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
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Name
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Title
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Date
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/s/
Xiangyao Liu
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President, Chief
Executive Officer and Director
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April 24, 2018
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Xiangyao Liu
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(Principal Executive
Officer)
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Chief Financial Officer
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/s/
Tsz-Kit Chan
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(Principal Financial
and Accounting Officer)
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April 24, 2018
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Tsz-Kit Chan
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/s/
James Stuart Coleman
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Director
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April 24, 2018
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James Stuart Coleman
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/s/
Zhanhuai Cheng
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Director
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April 24, 2018
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Zhanhuai Cheng
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/s/
Yanliang Wu
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Director
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April 24, 2018
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Yanliang Wu
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/s/
Yu Zong
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Director
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April 24, 2018
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Yu Zong
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/s/
Harvey Leibowitz
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Independent Director
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April 24, 2018
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Harvey Leibowitz
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/s/
Zhixue Liu
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Independent Director
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April 24, 2018
|
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Zhixue Liu
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/s/Tongmin
Wang
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Independent Director
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April 24, 2018
|
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Tongmin Wang
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/s/
Adam Goldberg
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Independent Director
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April 24, 2018
|
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Adam Goldberg
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/s/
Daniel W. Heffernan
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Independent Director
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April 24, 2018
|
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Daniel W. Heffernan
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/s/
Zhihong Su
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Independent Director
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April 24, 2018
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Zhihong Su
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EXHIBIT
INDEX
Item
16. Exhibits.
Except
as otherwise indicated below, the following exhibits are filed herewith or incorporated by reference herein:
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*
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To
be filed by amendment, as an exhibit to a Current Report on Form 8-K or by other
applicable filing with the SEC to be incorporated by reference herein.
|
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**
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To
be filed pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939.
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†
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Previously filed.
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