UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark one)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________to ____________
Commission file number 001-38505
CLPS Incorporation
(Exact name of the Registrant as specified in its
charter)
Cayman Islands
(Jurisdiction of incorporation or organization)
c/o Unit 1000, 10th Floor, Millennium
City III
370 Kwun Tong Road, Kwun Tong, Kowloon
Hong Kong SAR
Tel: (852) 37073600
(Address of principal executive office)
Raymond Ming Hui Lin, Chief Executive Officer
c/o Unit 1000, 10th Floor, Millennium
City III
370 Kwun Tong Road, Kwun Tong, Kowloon
Hong Kong SAR
Tel: (852) 37073600
(Name, Telephone, E-mail and/or Facsimile Number
and Address of Company Contact Person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, par value $0.0001
CLPS
The NASDAQ Stock Market LLC
Securities registered or to be registered pursuant
to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act: None.
On September
24, 2024, the issuer had 27,840,669 shares outstanding.
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act
of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements
for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or an “emerging growth company.” See
definition
of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
☐ Large Accelerated filer
☐ Accelerated filer
☒ Non-accelerated filer
Emerging growth company ☐
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not
to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued
its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
☒ US GAAP
☐
International Financial Reporting Standards as issued by the International
Accounting Standards Board
☐
Other
If “Other” has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
TABLE
OF CONTENTS
PAGE
PART I
1
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3.
KEY
INFORMATION
1
ITEM 4.
INFORMATION ON THE COMPANY
41
ITEM 4A.
UNRESOLVED STAFF COMMENTS
74
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECT
74
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
96
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
105
ITEM 8.
FINANCIAL INFORMATION
109
ITEM 9.
THE OFFER AND LISTING
110
ITEM 10.
ADDITIONAL INFORMATION
110
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
117
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
117
PART II
118
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
118
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
118
ITEM 15.
CONTROLS AND PROCEDURES
118
ITEM 16.
RESERVED
118
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT.
118
ITEM 16B.
CODE OF ETHICS.
118
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
119
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
119
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
119
ITEM 16F.
CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.
119
ITEM 16G.
CORPORATE GOVERNANCE
119
ITEM 16H
MINE SAFETY DISCLOSURE
119
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
119
ITEM 16J.
INSIDER TRADING POLICIES
119
ITEM 16K.
CYBERSECURITY
120
PART III
121
ITEM 17.
FINANCIAL STATEMENTS
121
ITEM 18.
FINANCIAL STATEMENTS
121
ITEM 19.
EXHIBITS
122
i
CERTAIN INFORMATION
Unless otherwise indicated,
numerical figures included in this Annual Report on Form 20-F (the “Annual Report”) have been subject to rounding
adjustments.
Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.
For the sake of clarity, this
Annual Report follows the English naming convention of first name followed by last name, regardless of whether an
individual’s name
is Chinese or English. Certain market data and other statistical information contained in this Annual Report are based on information
from
independent industry organizations, publications, surveys and forecasts. Some market data and statistical information contained in
this Annual Report are
also based on management’s estimates and calculations, which are derived from our review and interpretation
of the independent sources listed above, our
internal research and our knowledge of the PRC information technology industry. While we
believe such information is reliable, we have not independently
verified any third-party information and our internal data has not been
verified by any independent source.
Depending on the context,
the terms “we,” “us,” “our company,” and “our” refer to CLPS Incorporation, a Cayman Islands
company, and its
subsidiary and affiliated companies. Except where the context otherwise requires and for purposes of this Annual Report
only:
●
“Arabian Jasmine” refers to Arabian
Jasmine Ltd., a British Virgin Islands company;
●
“Beijing Bozhuo” refers to Beijing Bozhuo Education Technology Co., Ltd., a PRC company;
●
“CAE” refers to College of Allied
Educators Pte. Ltd., a Singapore company;
●
“CareerWin” refers to CareerWin Executive Search Co., Ltd., a PRC company;
●
“CLPS Beijing” refers to CLPS Beijing Hengtong Co., Ltd., a PRC company;
●
“CLPS California” refers to CLPS Technology (California) Inc., a USA company;
●
“CLPS Chengdu” refers to CLPS Chengdu Co., Ltd., a PRC company;
●
“CLPS Dalian” refers to CLPS Dalian Co., Ltd., a PRC company;
●
“CLPS Investment” refers to CLPS Investment Management Ltd., a British Virgin Islands company;
●
“CLPS Guangdong Zhichuang” refers to CLPS Guangdong Zhichuang Software Technology Co., Ltd. a PRC company;
●
“CLPS Guangzhou” refers to CLPS Guangzhou Co., Ltd., a PRC company;
●
“CLPS Hainan” refers to Hainan Qincheng Software Technology Co., Ltd., a PRC company;
●
“CLPS Hangzhou” refers to CLPS Hangzhou Co. Ltd., a PRC company;
●
“CLPS Hong Kong” refers to CLPS Technology (Hong Kong) Co., Limited, a Hong Kong company;
●
“CLPS Japan” refers to CLPS Technology Japan, a Japan company;
●
“CLPS Lihong” refers to CLPS Lihong Financial Information Services Co., Ltd., formerly Lihong Financial Information Services Co., Ltd.
before the investment, a PRC company;
●
“CLPS QC (WOFE)” refers to Shanghai Qincheng Information Technology Co., Ltd., a PRC company;
●
“CLPS Philippines” refers to CLPS TECHNOLOGY (PHILIPPINES) CORP., a Philippine company;
●
“CLPS RC” refers to CLPS Ruicheng Co., Ltd., a PRC company;
ii
●
“CLPS Shanghai” refers to CLPS Shanghai Co., Ltd., formerly ChinaLink Professional Services Co., Ltd., a PRC company;
●
“CLPS SG” refers to CLPS Technology (Singapore) Pte. Ltd., a Singapore company;
●
“CLPS Shenzhen” refers to CLPS Shenzhen Co., Ltd., a PRC company;
●
“CLPS Shenzhen Robotics” refers to CLPS Shenzhen Robotics Co. Ltd., a PRC company;
●
“CLPS US” refers to CLPS Technology (US) Ltd., a USA company;
●
“CLPS Xi’an” refers to CLPS Xi’an Co., Ltd., a PRC company;
●
“EMIT” refers to Economic Modeling Information Technology Co., Ltd., a PRC company;
●
“Fuson” refers to Fuson Group Limited, a Hong Kong company;
●
“Growth Ring” refers to Growth Ring
Ltd., a British Virgin Islands company;
●
“Haikou Huaqin” refers to Haikou Huaqin Minshang Software Development Co., Ltd., a PRC company;
●
“Huanyu” refers to Tianjin Huanyu Qinshang Network Technology Co., Ltd., a PRC company;
●
“Infogain” refers to Infogain Solutions Pte. Ltd., a Singapore company;
●
“JAJI China” refers to JAJI (Shanghai) Co., Ltd., formerly Judge (Shanghai) Co., Ltd.., a PRC company;
●
“JAJI Global” refers to JAJI Global Incorporation, a Cayman Islands company;
●
“JAJI HR” refers to JAJI (Shanghai) Human Resource Co., Ltd. formerly Judge (Shanghai) Human Resource Co., Ltd., a PRC company;
●
“JAJI Singapore” refers to JAJI Singapore Pte. Ltd., a Singapore company;
●
“LinkCrypto” refers to LinkCrypto Finance Technology Limited, a Hong Kong company;
●
“LQE” refers to LQE Ltd., a British
Virgin Islands company;
●
“MNYC” refers to MNYC HOLDINGS (HK) LIMITED, a Hong Kong company;
●
“MSCT” refers to MSCT Investment Holdings Limited, a British Virgin Islands company;
●
“Noni Singapore” refers to Noni (Singapore) Pte. Ltd., a Singapore company;
●
“Purple Potato” refers to Purple Potato Finance Limited, a Hong Kong company;
●
“Qiner” refers to Qiner Co., Limited, a Hong Kong company;
iii
●
“Qinheng” refers to Qinheng Co., Limited, a Hong Kong company;
●
“Qinson” refers to Qinson Credit Card Services Limited, a Hong Kong company;
●
“Qinson Ltd.” refers to Qinson Ltd., a British Virgin Islands company;
●
“Qinson Singapore” refers to Qinson Singapore Pte. Ltd., a Singapore company;
●
“Ridik AU” refers to Ridik Technology (Australia) Pty. Ltd., formerly CLPS-Ridik Technology (Australia) Pty. Ltd., an Australia company;
●
“Ridik BVI” refers to Ridik Ltd., formerly CLPS-Beefinance Holding Limited, a British Virgin Islands company;
●
“Ridik Canada” refers to Ridik Technology Canada Limited, a Canada company;
●
“Ridik Consulting” refers to Ridik Consulting Private Limited, an India company;
●
“Ridik Dubai” refers to Ridik Technology Ltd., a United Arab Emirates company;
●
“Ridik Pte.” refers to Ridik Pte. Ltd., a Singapore company;
●
“Ridik Sdn.” refers to Ridik Sdn. Bhd., a Malaysia company;
●
“Ridik Software” refers to Ridik Software Solutions Ltd., a UK company;
●
“Ridik Software Pte.” refers to Ridik Software Solutions Pte. Ltd., a Singapore company;
●
“Ridik Tech Services” refers to Ridik Technology Services Pte. Ltd, a Singapore company;
●
“Shanghai Chenqin” refers to Shanghai Chenqin Information Technology Services Co., Ltd., a PRC company;
●
“Shell Infotech Singapore” refers to Shell Infotech Pte. Ltd., a Singapore company;
●
“Shell Infotech Malaysia” refers to Shell Infotech Consulting Sdn. Bhd., a Malaysia company;
●
“SSIT” refers to Shanghai Shier Information Technology Co., Ltd., a PRC company;
●
“Suzhou Ridik” refers to Suzhou Ridik Information Technology Co., Ltd., a PRC company;
●
“UniDev” refers to Beijing UniDev Software Co., Ltd., a PRC company;
●
“Yingjia Technology” refers to Shanghai Yingjia Technology Limited, a PRC company;
●
all references to “RMB,” “yuan” and “Renminbi” are to the legal currency of China, and all references to “USD,” and “U.S. dollars” are to the
legal currency of the United States;
●
“Shares” and “Common Shares” refer to our shares, $0.0001 par value per share; and
●
“China” and “PRC” refer to the People’s Republic of China.
Unless otherwise noted, all
currency figures in this filing are in U.S. dollars. Any discrepancies in any table between the amounts identified as total
amounts and
the sum of the amounts listed therein are due to rounding. Our reporting currency is U.S. dollar and our functional currency is Renminbi.
This
Annual Report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Other
than in accordance with
relevant accounting rules and as otherwise stated, all translations of Renminbi into U.S. dollars in this Annual
Report were made at the rate of RMB 7.2672
to USD1.00, the noon buying rate on June 30,
2024, as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. Where we make period-on-
period comparisons of operational
metrics, such calculations are based on the Renminbi amount and not the translated U.S. dollar equivalent. We make no
representation that
the Renminbi or U.S. dollar amounts referred to in this Annual Report could have been or could be converted into U.S. dollars or
Renminbi,
as the case may be, at any particular rate or at all.
iv
FORWARD-LOOKING STATEMENTS
This Annual Report contains
“forward-looking statements” that represent our beliefs, projections and predictions about future events. All statements
other
than statements of historical fact are “forward-looking statements” including any projections of earnings, revenue or other
financial items, any
statements of the plans, strategies and objectives of management for future operations, any statements concerning
proposed new projects or other
developments, any statements regarding future economic conditions or performance, any statements of management’s
beliefs, goals, strategies, intentions and
objectives, and any statements of assumptions underlying any of the foregoing. Words such as
“may”, “will”, “should”, “could”, “would”, “predicts”,
“potential”,
“continue”, “expects”, “anticipates”, “future”, “intends”, “plans”,
“believes”, “estimates” and similar expressions, as well as statements in the
future tense, identify forward-looking
statements.
These statements are necessarily
subjective and involve known and unknown risks, uncertainties and other important factors that could cause our
actual results, performance
or achievements, or industry results, to differ materially from any future results, performance or achievements described in or
implied
by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including
with respect to
correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy
and completeness of the publicly
available information with respect to the factors upon which our business strategy is based for the success
of our business.
Forward-looking statements
should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of
whether, or the
times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time
those
statements are made and management’s 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 those expressed in or suggested by the forward-looking statements.
Important factors that could cause such
differences include, but are not limited to, those factors discussed under the headings “Risk
Factors”, “Operating and Financial Review and Prospects,”
“Information on the Company” and elsewhere in
this Annual Report.
This Annual Report should
be read in conjunction with our audited financial statements and the accompanying notes thereto, which are included in
Item 18 of this
Annual Report.
v
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not required.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not required.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not required.
C.
Reasons for the Offer and Use of Proceeds
Not required.
1
D. Risk factors
You should carefully consider
the following risk factors, together with all of the other information included in this Annual Report. Investment in our
securities involves
a high degree of risk. You should carefully consider the risks described below together with all of the other information included in
this
Annual Report before making an investment decision. The risks and uncertainties described below represent our known material risks
to our business. If any
of the following risks actually occurs, our business, financial condition or results of operations could suffer.
In that case, you may lose all or part of your
investment. A summary of risk factors is provided concisely below:
Risks Related to Our
Business
●
Risks Related to Our Ability to Manage Our Business and Growth
●
Risks Related to Adverse Economic Conditions Affecting Our Clients’ Purchase
●
Risks Related to Intense Competition from Other Service Provider
●
Risks Related to Lack of Skilled Employees
●
Risks Related to Lack of
Diverse Clients
●
Risks Related to Collection of Account Receivables
●
Risks Related to Our Inability to Develop New Technology and Services
●
Risks Related to Our Inability to Continue Mergers and Acquisitions
●
Risks Related to Our Inability to Post-Merger Integration
●
Risks Related to Our Inability to Generate New Businesses
●
Risks Related to Complexity to Evaluate Our Business
●
Risks Related to Lack of Full Utilization of Resources
●
Risks Related to Underestimate of Cap on Our Service Fees
●
Risks Related to Our Exposure to Wage-Related High Costs
●
Risks Related to Pricing Pressure Due to Competition
●
Risks Related to Unauthorized Disclosure of Confidential Client Information by Us
●
Risks Related to Unauthorized Use of Our Intellectual Property by Others
●
Risks Related to Our Inability to Raise Additional Capital
●
Risks Related to Our Business Interruptions
●
Risks Related to Fluctuation of Renminbi to US Dollar Exchange Rate
●
Risks Related to Lack of Effective Internal Control in Our Company
2
Risks Related to Corporate
Structure
●
Risks Related to Our Refusal to Declare Dividends
●
Risks Related to Our Subsidiaries’ Bankruptcy
●
Risks Related to Our Subsidiaries’ Lack of Regulatory Approval by Chinese Authorities
●
Risks Related to Our Subsidiaries’ Chops Being Lost or Stolen
●
Risks Related to Our Non-Compliance with PRC Regulations
Risks Related to Doing Business in China
●
Risks Related to Adverse Economic Conditions in China
●
Risks Related to Lack of Permission to Do Business in China
●
Risks Related to Uncertainty on Compliance with Cybersecurity Law of China
●
Risks Related to Government Regulations on US-Listed Chinese Companies
●
Risks Related to US Regulator’s Inability to Conduct Investigation in China
●
Risks Related to Tax Reporting Obligations in China
●
Risks Related to PRC Regulations Governing Offshore Special Purpose Companies
●
Risks Related to PRC Regulations Governing Inter-Company Loans
●
Risks Related to Government Control on Currency Conversion
●
Risks Related to Complex M&A Rules Governing Our Acquisitions
●
Risks Related to PRC Regulations Governing Registration of Employee Stock Ownership
●
Risks Related to Our Subsidiaries’ Ability to Pay Dividends to Us
●
Risks Related to PRC Labor Law’s Restriction on Our Employment Practice
●
Risks Related to PCAOB’s Inability to Inspect Our Independent Auditors
●
Risks Related to Uncertainty as to the Cooperation Between PCAOB and CSRC of China
●
Risks Related to Our Possible Delisting Under HFCAA
●
Risks Related to Accelerated Compliance Schedule Under HFCAA
●
Risks Related to Our Exposure to Direct Scrutiny by US Regulators
●
Risks Related to Regulations by Cyberspace Administration of China
3
Risks Related to Our Business
We may be unable to
effectively manage our growth, which could place significant strain on our management personnel, systems and resources. We may
not be
able to achieve anticipated growth, which could materially and adversely affect our business and prospects.
Our revenues decreased from $152.0 million in fiscal 2022 to $150.4
million in fiscal 2023, and decreased to $142.8 million in fiscal 2024,
primarily due to the decreased demands for our IT consulting services
from banks and other financial institutions. We maintain 20 delivery and/or R&D
centers, 10 of which are located in mainland China
(Shanghai, Beijing, Dalian, Tianjin, Xi’an, Chengdu, Guangzhou, Shenzhen, Hangzhou, and Hainan) and
ten are located globally (Hong
Kong SAR, the United States of America, Japan, Singapore, Australia, Malaysia, India, the Philippines, Canada, and the
United Arab Emirates),
to serve different customers in various geographic locations. The number of our total employees was 3,824 in fiscal 2022 and 3,509
in
fiscal 2023. As of June 30, 2024 we had 3,325 full-time employees. We are actively looking for additional locations to establish new offices
and expand
our current offices and sales and delivery centers. We intend to continue our expansion in the foreseeable future to pursue
existing and potential market
opportunities. Our growth has placed and will continue to place significant demands on our management and
our administrative, operational and financial
infrastructure. Continued expansion increases the challenges we face in:
●
recruiting, training, developing and retaining sufficient IT talent and management personnel;
●
creating and capitalizing upon economies of scale;
●
managing a larger number of clients in a greater number of industries and locations;
●
maintaining effective oversight of personnel and offices;
●
coordinating work among offices and project teams and maintaining high resource utilization rates;
●
integrating new management personnel and expanded operations while preserving our culture and core values;
●
developing and improving our internal administrative infrastructure, particularly our financial, operational, human resources, communications
and other internal systems, procedures and controls; and
●
adhering to and further improving our high quality and process execution standards and maintaining high levels of client satisfaction.
Moreover, as we introduce
new services or enter into new markets, we may face new market, technological and operational risks and challenges
with which we are unfamiliar,
and it may require substantial management efforts and skills to mitigate these risks and challenges. As a result of any of these
challenges
associated with expansion, our business, results of operations and financial condition could be materially and adversely affected. Furthermore,
we
may not be able to achieve anticipated growth, which could materially and adversely affect our business and prospects.
4
Adverse changes in the economic environment,
either in China or globally, could reduce our clients’ purchases from us and increase pricing pressure,
which could materially and
adversely affect our revenues and results of operations.
The IT services industry is
particularly sensitive to the economic environment, whether in China or globally, and tends to decline during general
economic downturns.
Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to the economic
environment,
especially for regions in which we and our clients operate. During an economic downturn, our clients may cancel, reduce or delay their
IT
spending or change their IT outsourcing strategy, and reduce their purchases from us. The recent global economic slowdown and any future
economic
slowdown, and the resulting reduction in IT spending, could also lead to increased pricing pressure from our clients. The occurrence
of any of these events
could materially and adversely affect our revenues and results of operations.
We face intense competition from onshore
and offshore IT services companies, and, if we are unable to compete effectively, we may lose clients, and our
revenues may decline.
The market for IT services
is highly competitive, and we expect competition to persist and intensify. We believe that the principal competitive
factors in our markets
are industry expertise, breadth and depth of service offerings, quality of the services offered, reputation and track record, marketing
and selling skills, scalability of infrastructure and price. In addition, the trend towards offshore outsourcing, international expansion
by foreign and domestic
competitors and continuing technological changes will result in new and different competitors entering our markets.
In the IT outsourcing market, clients
tend to engage multiple outsourcing service providers instead of using an exclusive service provider,
which could reduce our revenues to the extent that
clients obtain services from other competing providers. Clients may prefer service
providers that have facilities located globally or that are based in countries
more cost-competitive than in China. Our ability to compete
also depends in part on a number of factors beyond our control, including the ability of our
competitors to recruit, train, develop and
retain highly skilled professionals, the price at which our competitors offer comparable services and our
competitors’ responsiveness
to client needs. Therefore, we cannot assure you that we will be able to retain our clients while competing against such
competitors.
Increased competition, our inability to compete successfully against competitors, pricing pressures or loss of market share could harm
our
business, financial condition and results of operations.
Due to intense competition for highly skilled
personnel, we may fail to attract and retain enough sufficiently trained personnel to support our operations;
as a result, our ability
to bid for and obtain new projects may be negatively affected and our revenues could decline.
The IT services industry relies on skilled personnel, and our success
depends to a significant extent on our ability to recruit, train, develop and retain
qualified personnel, especially experienced middle
and senior level management. The IT services industry in China has experienced significant levels of
employee attrition. Our annual voluntarily
attrition rates were 15.4% and 18% in fiscal 2022 and fiscal 2023, respectively; in fiscal 2024, this rate was
18.6%. We may encounter
higher attrition rates in the future. There is significant competition in China for skilled personnel, especially experienced middle
and
senior level management, with the skills necessary to perform the services we offer to our clients. Increased competition for these personnel,
in the IT
industry or otherwise, could have an adverse effect on us. Spearheaded by the institution that provides continuing education
to all CLPS staff and develop
new talents from partner universities to further drive the Company’s growth (“CLPS Academy”),
we have established Talent Creation Program (“TCP”) and
Talent Development Program (“TDP”) to increase our human
capital and employee loyalty, however, a significant increase in our attrition rate could decrease
our operating efficiency and productivity
and could lead to a decline in demand for our services. Additionally, failure to recruit, train, develop and retain
personnel with the
qualifications necessary to fulfill the needs of our existing and future clients or to assimilate new personnel successfully could have
a
material adverse effect on our business, financial condition and results of operations. Failure to retain our key personnel on client
projects or find suitable
replacements for key personnel upon their departure may lead to termination of some of our client contracts
or cancellation of some of our projects, which
could materially and adversely affect our business.
5
Our success depends substantially on the
continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted
if we lose their services.
Our future success heavily
depends upon the continued services of our senior executives and other key employees. In particular, we rely on the
expertise, experience,
client relationships and reputation of Xiao Feng Yang, our Chairman of the Board. We currently do not maintain key-man life
insurance
for any of the senior members of our management team or other key personnel. If one or more of our senior executives or key employees
are
unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may not be able to replace
them easily or at all. In
addition, competition for senior executives and key personnel in our industry is intense, and we may be unable
to retain our senior executives and key
personnel or attract and retain new senior executive and key personnel in the future, in which
case our business may be severely disrupted, and our financial
condition and results of operations may be materially and adversely affected.
If any of our senior executives or key personnel joins a competitor or forms a
competing company, we may lose clients, suppliers, know-how
and key professionals and staff members to them. Also, if any of our business development
managers, who generally keep a close relationship
with our clients, joins a competitor or forms a competing company, we may lose clients, and our revenues
may be materially and adversely
affected. Additionally, there could be unauthorized disclosure or use of our technical knowledge, practices or procedures by
such personnel.
Most of our executives and key personnel have entered into employment agreements with us that contain non-competition provisions, non-
solicitation
and nondisclosure covenants. However, if any dispute arises between our executive officers and key personnel and us, such non-competition,
non-solicitation and nondisclosure provisions might not provide effective protection to us, especially in China in light of the uncertainties
with China’s legal
system.
We generate a significant portion of our
revenues from a relatively small number of major clients and loss of business from these clients could reduce
our revenues and significantly
harm our business.
We believe that in the foreseeable
future we will continue to derive a significant portion of our revenues from a small number of major clients. For
the fiscal years ended
June 30, 2024, 2023, and 2022, Citibank and its affiliates accounted for 16.7%, 21.4%, and
20.6% of the Company’s total revenues,
respectively. For fiscal 2024 and 2023, substantially all the service provided by the Company
to Citibank was IT consulting services and billed through time-
and-expense contracts. The Company has not entered into any material long
term contracts with Citibank. Our ability to maintain close relationships with
these and other major clients is essential to the growth
and profitability of our business. However, the volume of work performed for a specific client is likely
to vary from year to year, especially
since we are generally not our clients’ exclusive IT services provider, and we do not have long-term commitments from
any of our
clients to purchase our services. The typical term for our service agreements is between one and three years. A major client in one year
may not
provide the same level of revenues for us in any subsequent year. The IT services we provide to our clients, and the revenues
and income from those services,
may decline or vary as the type and quantity of IT services we provide change over time. In addition,
our reliance on any individual client for a significant
portion of our revenues may give that client a certain degree of pricing leverage
against us when negotiating contracts and terms of service. In addition, a
number of factors other than our performance could cause the
loss of or reduction in business or revenues from a client, and these factors are not predictable.
These factors may include corporate
restructuring, pricing pressure, changes to its outsourcing strategy, switching to another services provider or returning
work in-house.
In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period.
The loss
of any of our major clients could adversely affect our financial condition and results of operations.
If we are unable to collect our receivables
from our clients, our results of operations and cash flows could be adversely affected.
Our business depends on our ability to successfully obtain payment
from our clients of the amounts they owe us for work performed. As of June 30,
2024 and 2023, our accounts receivable balance, net of
allowance, amounted to approximately $38.8 million and $48.5 million, respectively. As of the years
ended June 30, 2024 and 2023, Citibank
accounted for 14.5% and 32.3% of the Company’s total accounts receivable balance. Since we generally do not
require collateral or
other security from our clients, we establish an allowance for credit losses based upon estimates, historical experience and other factors
surrounding the credit risk of specific clients. However, actual losses on client receivables balance could differ from those that we
anticipate and as a result
we might need to adjust our allowance. There is no guarantee that we will accurately assess the creditworthiness
of our clients. Macroeconomic conditions,
including related turmoil in the global financial system, could also result in financial difficulties
for our clients, including limited access to the credit markets,
insolvency or bankruptcy, and as a result could cause clients to delay
payments to us, request modifications to their payment arrangements that could increase
our receivables balance, or default on their payment
obligations to us. As a result, an extended delay or default in payment relating to a significant account
will have a material and adverse
effect on the aging schedule and turnover days of our accounts receivable. If we are unable to collect our receivables from
our clients
in accordance with the contracts with our clients, our results of operations and cash flows could be adversely affected.
6
The growth and success of our business depends
on our ability to anticipate and develop new services and enhance existing services in order to keep pace
with rapid changes in technology
and in the industries we focus on.
The market for our services
is characterized by rapid technological changes, evolving industry standards, changing client preferences and new
product and service
introductions. Our future growth and success depend significantly on our ability to anticipate developments in IT services, develop and
offer new product and service lines to meet our clients’ evolving needs. We may not be successful in anticipating or responding
to these developments in a
timely manner, or if we do respond, the services or technologies we develop may not be successful in the marketplace.
The development of some of the
services and technologies may involve significant upfront investments, and the failure of these services
and technologies may result in our being unable to
recover these investments, in part or in full. Further, services or technologies that
are developed by our competitors may render our services uncompetitive or
obsolete. In addition, new technologies may be developed that
allow our clients to more cost-effectively perform the services that we provide, thereby
reducing demand for our services. Should we fail
to adapt to the rapidly changing IT services market, or if we fail to develop suitable services to meet the
evolving and increasingly
sophisticated requirements of our clients in a timely manner, our business and results of operations could be materially and
adversely
affected.
We may be unsuccessful in entering into
strategic alliances or identifying and acquiring suitable acquisition candidates, which could impede our growth
and negatively affect
our revenues and net income.
We have pursued and may continue
to pursue strategic alliances and strategic acquisition opportunities to increase our scale and geographic
presence, expand our service
offerings and capabilities and enhance our industry and technical expertise. However, it is possible that in the future we may not
succeed
in identifying suitable alliances or acquisition candidates. Even if we identify suitable candidates, we may not be able to consummate
these
arrangements on terms commercially acceptable to us or to obtain necessary regulatory approvals in the case of acquisitions. Many
of our competitors are
likely to be seeking to enter into similar arrangements or acquire the same targets that we are looking to enter
into or acquire. Such competitors may have
substantially greater financial resources than we do and may be more attractive to our strategic
partners or be able to outbid us for the targets. In addition, we
may also be unable to timely deploy our existing cash balances to effect
a potential acquisition, as use of cash balances located onshore in China may require
specific governmental approvals or result in withholding
and other tax payments. If we are unable to enter into suitable strategic alliances or complete
suitable acquisitions, our growth strategy
may be impeded, and our revenues and net income could be negatively affected.
If we fail to integrate or manage acquired
companies efficiently, or if the acquired companies do not perform to our expectations, we may not be able to
realize the benefits envisioned
for such acquisitions, and our overall profitability and growth plans may be adversely affected.
Historically, we have expanded
our service capabilities and gained new clients through selective acquisitions. Our ability to successfully integrate an
acquired entity
and realize the benefits of any acquisition requires, among other things, successful integration of technologies, operations and personnel.
Challenges we face in the acquisition and integration process include:
●
integrating operations, services and personnel in a timely and efficient manner;
●
unforeseen or undisclosed liabilities;
●
generating sufficient revenue and net income to offset acquisition costs;
●
potential loss of, or harm to, employee or client relationships;
7
●
properly structuring our acquisition consideration and any related post-acquisition earn-outs and successfully monitoring any earn-out
calculations and payments;
●
retaining key senior management and key sales and marketing and research and development personnel;
●
potential incompatibility of solutions, services and technology or corporate cultures;
●
consolidating and rationalizing corporate, information technology and administrative infrastructures;
●
integrating and documenting processes and controls;
●
entry into unfamiliar markets; and
●
increased complexity from potentially operating additional geographically dispersed sites, particularly if we acquire a company or business with
facilities or operations outside of China.
In addition, the primary value
of many potential targets in the outsourcing industry lies in their skilled professionals and established client
relationships. Transitioning
these types of assets to our business can be particularly difficult due to different corporate cultures and values, geographic
distance
and other intangible factors. For example, some newly acquired employees may decide not to work with us or to leave shortly after their
move to our
company and some acquired clients may decide to discontinue their commercial relationships with us. These challenges could
disrupt our ongoing business,
distract our management and employees and increase our expenses, including causing us to incur significant
one-time expenses and write-offs, and make it
more difficult and complex for our management to effectively manage our operations. If we
are not able to successfully integrate an acquired entity and its
operations and to realize the benefits envisioned for such acquisition,
our overall growth and profitability plans may be adversely affected.
If we do not succeed in attracting new clients
for our services and or growing revenues from existing clients, we may not achieve our revenue growth
goals.
We plan to expand the number of clients we serve to diversify our client
base and grow our revenues. Revenues from a new client often rise quickly
over the first several years following our initial engagement
as we expand the services we provide to that client. Therefore, obtaining new clients is important
for us to achieve rapid revenue growth.
We also plan to grow revenues from our existing clients by identifying and selling additional services to them. Our
ability to attract
new clients, as well as our ability to grow revenues from existing clients, depends on a number of factors, including our ability to offer
high
quality services at competitive prices, the strength of our competitors and the capabilities of our sales and marketing teams. If
we are not able to continue to
attract new clients or to grow revenues from our existing clients in the future, we may not be able to
grow our revenues as quickly as we anticipate or at all.
As a result of our recent development, evaluating our business and
prospects may be difficult and our past results may not be indicative of our future
performance.
Our future success depends on our ability to increase revenue and maintain
profitability from our operations. Our business has grown and evolved
significantly in recent years. Our growth in recent years makes
it difficult to evaluate our historical performance and makes a period-to-period comparison of
our historical operating results less meaningful.
We may not be able to achieve a similar growth rate or maintain profitability in future periods. Therefore,
you should not rely on our
past results or our historic rate of growth as an indication of our future performance. You should consider our future prospects in
light
of the risks and challenges encountered by a company seeking to grow and expand in a competitive industry that is characterized by rapid
technological
change, evolving industry standards, changing client preferences and new product and service introductions. These risks
and challenges include, among
others:
●
the uncertainties associated with our ability to continue our growth and maintain profitability;
●
preserving our competitive position in the IT services industry in China;
●
offering consistent and high-quality services to retain and attract clients;
8
●
implementing our strategy and modifying it from time to time to respond effectively to competition and changes in client preferences;
●
managing our expanding operations and successfully expanding our solution and service offerings;
●
responding in a timely manner to technological or other changes in the IT services industry;
●
managing risks associated with intellectual property; and
●
recruiting, training, developing and retaining qualified managerial and other personnel.
If we are unsuccessful in
addressing any of these risks or challenges, our business may be materially and adversely affected.
We face risks associated with having a long
selling and implementation cycle for our services that require us to make significant resource commitments
prior to realizing revenues
for those services.
We have a long selling cycle
for our technology services, which requires significant investment of capital, human resources and time by both our
clients and us. In
our IT consulting service request, we collect service fees on monthly and quarterly basis; in our customized IT solution services segment
–
by performance obligation fulfillment. Before committing to use our services, potential clients require us to expend substantial
time and resources educating
them on the value of our services and our ability to meet their requirements. Therefore, our selling cycle
is subject to many risks and delays over which we
have little or no control, including our clients’ decision to choose alternatives
to our services (such as other providers or in-house resources) and the timing of
our clients’ budget cycles and approval processes.
Implementing our services also involves a significant commitment of resources over an extended period of
time from both our clients and
us. Our clients may experience delays in obtaining internal approvals or delays associated with technology, thereby further
delaying the
implementation process. Our current and future clients may not be willing or able to invest the time and resources necessary to implement
our
services, and we may fail to close sales with potential clients to which we have devoted significant time and resources, which could
have a material adverse
effect on our business, results of operations, financial condition and cash flows.
Our profitability will suffer if we are
not able to maintain our resource utilization levels and continue to improve our productivity levels.
Our gross margin and profitability
are significantly impacted by our utilization levels of human resources as well as other resources, such as
computers, IT infrastructure
and office space, and our ability to increase our productivity levels. We have expanded our operations significantly in recent
years through
organic growth and external acquisitions, which has resulted in a significant increase in our headcount and fixed overhead costs. We may
face
difficulties maintaining high levels of utilization, especially for our newly established or newly acquired businesses and resources.
The master service
agreements with our clients typically do not impose a minimum or maximum purchase amount and allow our clients to place
service orders from time to time
at their discretion. Client demand may fall to zero or surge to a level that we cannot cost-effectively
satisfy. Although we try to use all commercially
reasonable efforts to accurately estimate service orders and resource requirements from
our clients, we may overestimate or underestimate, which may result
in unexpected cost and strain or redundancy of our human capital and
adversely impact our utilization levels. In addition, some of our professionals are
specially trained to work for specific clients or
on specific projects, and some of our sales and delivery center facilities are dedicated to specific clients or
specific projects. Our
ability to continually increase our productivity levels depends significantly on our ability to recruit, train, develop and retain high-
performing
professionals, staff projects appropriately and optimize our mix of services and delivery methods. If we experience a slowdown or stoppage
of
work for any client or on any project for which we have dedicated professionals or facilities, we may not be able to efficiently reallocate
these professionals
and facilities to other clients and projects to keep their utilization and productivity levels high. If we are not
able to maintain high resource utilization levels
without corresponding cost reductions or price increases, our profitability will suffer.
9
A portion of our income is generated, and
will in the future continue to be generated, on a project basis with a fixed price; we may not be able to
accurately estimate costs and
determine resource requirements in relation to our projects, which would reduce our margins and profitability.
A portion of our income is
generated, and will in the future continue to be generated, from fees we receive for our projects with a fixed price. Our
projects often
involve complex technologies, entail the coordination of operations and workforces in multiple locations, utilizing workforces with different
skill sets and competencies and geographically distributed service centers, and must be completed within compressed timeframes and meet
client
requirements that are subject to change and increasingly stringent. In addition, some of our fixed-price projects are multi-year
projects that require us to
undertake significant projections and planning related to resource utilization and costs. If we fail to accurately
assess the time and resources required for
completing projects and to price our projects profitably, our business, results of operations
and financial condition could be adversely affected.
Increases in wages for professionals in
China could prevent us from sustaining our competitive advantage and could reduce our profit margins.
Our most significant costs
are the salaries and other compensation expenses for our professionals and other employees. Wage costs for professionals
in China are
lower than those in more developed countries and India. However, because of economic growth, increased productivity levels, and increased
competition for skilled employees in China, wages for highly skilled employees in China, in particular middle- and senior-level managers,
are increasing at a
faster rate than in the past. We may need to increase the levels of employee compensation more rapidly than in the
past to remain competitive in attracting
and retaining the quality and number of employees that our business requires. Increases in the
wages and other compensation we pay our employees in China
could reduce our competitive advantage unless we are able to increase the efficiency
and productivity of our professionals as well as the prices we can charge
for our services. In addition, any appreciation in the value
of the Renminbi relative to U.S. dollar and other foreign currencies will cause an increase in the
relative wage levels in China, which
could further reduce our competitive advantage and adversely impact our profit margin.
The international nature of our business
exposes us to risks that could adversely affect our financial condition and results of operations.
We conduct our business throughout
the world in multiple locations. As a result, we are exposed to risks typically associated with conducting
business internationally, many
of which are beyond our control. These risks include:
●
significant currency fluctuations between the Renminbi and the U.S. dollar and other currencies in which we transact business;
●
legal uncertainty owing to the overlap and inconsistencies of different legal regimes, problems in asserting contractual or other rights across
international borders and the burden and expense of complying with the laws and regulations of various jurisdictions;
●
potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which we operate;
●
current and future tariffs and other trade barriers, including restrictions on technology and data transfers;
●
unexpected changes in regulatory requirements; and
●
terrorist attacks and other acts of violence or war.
The occurrence of any of these
events could have a material adverse effect on our results of operations and financial condition.
10
Our net revenues and results of operations
are affected by seasonal trends.
Our business is affected by
seasonal trends. In particular, our net revenues are typically progressively higher in the second, third and fourth quarters
of each year
compared to the first quarter of each year due to seasonal trends, such as: (i) a general slowdown in business activities and a reduced
number of
working days for our professionals during the first quarter of each year as a result of the Chinese New Year holiday period,
and (ii) our customers in general
tend to spend their IT budgets in the second half of the year and in particular the fourth quarter.
Other factors that may cause our quarterly operating results to
fluctuate include, among others, changes in general economic conditions
in China and the impact of unforeseen events. We believe that our net revenues will
continue to be affected in the future by seasonal
trends. As a result, you may not be able to rely on period to period comparisons of our operating results as an
indication of our future
performance, and we believe it is more meaningful to evaluate our business on an annual basis.
We may be forced to reduce the prices of
our services due to increased competition and reduced bargaining power with our clients, which could lead to
reduced revenues and profitability.
The services outsourcing industry
in China is developing rapidly, and related technology trends are constantly evolving. This results in the frequent
introduction of new
services and significant price competition from our competitors. We may be unable to offset the effect of declining average sales prices
through increased sales volumes and/or reductions in our costs. Furthermore, we may be forced to reduce the prices of our services in
response to offerings
made by our competitors. Finally, we may not have the same level of bargaining power we have enjoyed in the past
when it comes to negotiating the prices of
our services.
If we cause disruptions to our clients’
businesses or provide inadequate service, our clients may have claims for substantial damages against us, and as a
result our profits
may be substantially reduced.
If our professionals make
errors in the course of delivering services to our clients or fail to consistently meet service requirements of a client, these
errors
or failures could disrupt the client’s business, which could result in a reduction in our net revenues or a claim for substantial
damages against us. In
addition, a failure or inability to meet a contractual requirement could seriously damage our reputation and affect
our ability to attract new business. The
services we provide are often critical to our clients’ businesses. We generally provide
customer support from three months to one year after our customized
application is delivered. Certain of our client contracts require
us to comply with security obligations including maintaining network security and back-up
data, ensuring our network is virus-free, maintaining
business continuity planning procedures, and verifying the integrity of employees that work with our
clients by conducting background
checks. Any failure in a client’s system or breach of security relating to the services we provide to the client could damage
our
reputation or result in a claim for substantial damages against us. Any significant failure of our equipment or systems, or any major
disruption to basic
infrastructure like power and telecommunications in the locations in which we operate, could impede our ability to
provide services to our clients, have a
negative impact on our reputation, cause us to lose clients, reduce our revenues and harm our
business. Under our contracts with our clients, our liability for
breach of our obligations is in some cases limited to a certain percentage
of contract price. Such limitations may be unenforceable or otherwise may not
protect us from liability for damages. In addition, certain
liabilities, such as claims of third parties for which we may be required to indemnify our clients, are
generally not limited under our
contracts. We currently do not have commercial general or public liability insurance. The successful assertion of one or more
large claims
against us could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows.
Even if such
assertions against us are unsuccessful, we may incur reputational harm and substantial legal fees.
11
We may be liable to our clients for damages
caused by unauthorized disclosure of sensitive and confidential information, whether through our employees
or otherwise.
We are typically required
to manage, utilize and store sensitive or confidential client data in connection with the services we provide. Under the
terms of our
client contracts, we are required to keep such information strictly confidential. We use network security technologies, surveillance equipment
and other methods to protect sensitive and confidential client data. We also require our employees and subcontractors to enter into confidentiality
agreements
to limit access to and distribution of our clients’ sensitive and confidential information as well as our own trade secrets.
We can give no assurance that the
steps taken by us in this regard will be adequate to protect our clients’ confidential information.
If our clients’ proprietary rights are misappropriated by our
employees or our subcontractors or their employees, in violation of
any applicable confidentiality agreements or otherwise, our clients may consider us liable
for those acts and seek damages and compensation
from us. Any such acts could cause us to lose existing and future business and damage our reputation in
the market. In addition, we currently
do not have any insurance coverage for mismanagement or misappropriation of such information by our subcontractors
or employees. Any litigation
with respect to unauthorized disclosure of sensitive and confidential information might result in substantial costs and diversion
of resources
and management attention.
We may not be able to prevent others from
unauthorized use of intellectual property of our clients, which could harm our business and competitive
position.
We rely on software licenses
from our clients with respect to certain projects. To protect proprietary information and other intellectual property of
our clients,
we require our employees, subcontractors, consultants, advisors and collaborators to enter into confidentiality agreements with us. These
agreements may not provide effective protection for trade secrets, know-how or other proprietary information in the event of any unauthorized
use,
misappropriation or disclosure of such trade secrets, know-how or other proprietary information. Implementation of intellectual property-related
laws in
China has historically been lacking, primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly,
protection of intellectual
property rights and confidentiality in China may not be as effective as that in the United States or other
developed countries. Policing unauthorized use of
proprietary technology is difficult and expensive. The steps we have taken may be inadequate
to prevent the misappropriation of proprietary technology of
our clients. Reverse engineering, unauthorized copying or other misappropriation
of proprietary technologies of our clients could enable third parties to
benefit from our or our clients’ technologies without paying
us and our clients for doing so, and our clients may hold us liable for that act and seek damages
and compensation from us, which could
harm our business and competitive position.
We may not be able to prevent others from
unauthorized use of our intellectual property, which could cause a loss of clients, reduce our revenues and
harm our competitive position.
We rely on a combination of
copyright, trademark, software registration, anti-unfair competition and trade secret laws, as well as confidentiality
agreements and
other methods to protect our intellectual property rights. To protect our trade secrets and other proprietary information, employees,
clients,
subcontractors, consultants, advisors and collaborators are required to enter into confidentiality agreements. These agreements
might not provide effective
protection for the trade secrets, know-how or other proprietary information in the event of any unauthorized
use, misappropriation or disclosure of such trade
secrets, know-how or other proprietary information. Implementation of intellectual property-related
laws in China has historically been lacking, primarily
because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly,
intellectual property rights and confidentiality protections in China may
not be as effective as those in the United States or other developed
countries, and infringement of intellectual property rights continues to pose a serious risk
of doing business in China. Policing unauthorized
use of proprietary technology is difficult and expensive. The steps we have taken may be inadequate to
prevent the misappropriation of
our proprietary technology. Reverse engineering, unauthorized copying, other misappropriation, or negligent or accidental
leakage of our
proprietary technologies could enable third parties to benefit from our technologies without obtaining our consent or paying us for doing
so,
which could harm our business and competitive position. Though we are not currently involved in any litigation with respect to intellectual
property, we may
need to enforce our intellectual property rights through litigation. Litigation relating to our intellectual property
may not prove successful and might result in
substantial costs and diversion of resources and management attention.
12
We may face intellectual property infringement
claims that could be time-consuming and costly to defend. If we fail to defend ourselves against such
claims, we may lose significant
intellectual property rights and may be unable to continue providing our existing services.
Our success largely depends
on our ability to use and develop our technology and services without infringing the intellectual property rights of third
parties, including
copyrights, trade secrets and trademarks. We may be subject to litigation involving claims of violation of other intellectual property
rights
of third parties. We typically indemnify clients who purchase our services and solutions against potential infringement of intellectual
property rights
underlying our services and solutions, which subjects us to the risk of indemnification claims. The holders of other intellectual
property rights potentially
relevant to our service offerings may make it difficult for us to acquire a license on commercially acceptable
terms. Also, we may be unaware of intellectual
property registrations or applications relating to our services that may give rise to potential
infringement claims against us. There may also be technologies
licensed to and relied on by us that are subject to infringement or other
corresponding allegations or claims by third parties which may damage our ability to
rely on such technologies. We are subject to additional
risks as a result of our recent and proposed acquisitions and the hiring of new employees who may
misappropriate intellectual property
from their former employers. Parties making infringement claims may be able to obtain an injunction to prevent us from
delivering our
services or using technology involving the allegedly infringing intellectual property. Intellectual property litigation is expensive and
time-
consuming and could divert management’s attention from our business. A successful infringement claim against us, whether with
or without merit, could,
among others things, require us to pay substantial damages, develop non-infringing technology, or re-brand our
name or enter into royalty or license
agreements that may not be available on acceptable terms, if at all, and cease making, licensing
or using products that have infringed a third party’s
intellectual property rights. Protracted litigation could also result in existing
or potential clients deferring or limiting their purchase or use of our products
until resolution of such litigation, or could require
us to indemnify our clients against infringement claims in certain instances. Any intellectual property
claim or litigation in this area,
whether we ultimately win or lose, could damage our reputation and have a material adverse effect on our business, results of
operations
or financial condition.
We may need additional capital and any failure
by us to raise additional capital on terms favorable to us, or at all, could limit our ability to grow our
business and develop or enhance
our service offerings to respond to market demand or competitive challenges.
We believe that our current
cash, cash flow from operations and the available lines of credit from financial institutions should be sufficient to meet
our anticipated
cash needs for at least the next 12 months. We may, however, require additional cash resources due to changed business conditions or other
future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy
our cash requirements,
we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity
securities could result in dilution to our
shareholders. The incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financing
covenants that would restrict our operations. Our ability to obtain additional
capital on acceptable terms is subject to a variety of uncertainties, including:
●
investors’ perception of, and demand for, securities of technology services outsourcing companies;
●
conditions of the U.S. and other capital markets in which we may seek to raise funds;
●
our future results of operations and financial condition;
●
PRC government regulation of foreign investment in China;
●
economic, political and other conditions in China; and
●
PRC government policies relating to the borrowing and remittance outside China of foreign currency.
Financing may not be available
in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us,
or at all, could
limit our ability to grow our business and develop or enhance our product and service offerings to respond to market demand or competitive
challenges.
Failure to adhere to regulations that govern
our clients’ businesses could result in breaches of contracts with our clients. Failure to adhere to the
regulations that govern
our business could result in our being unable to effectively perform our services.
Our clients’ business
operations are subject to certain rules and regulations in China or elsewhere. Our clients may contractually require that we
perform our
services in a manner that would enable them to comply with such rules and regulations. Failure to perform our services in such a manner
could
result in breaches of contract with our clients and, in some limited circumstances, civil fines and criminal penalties for us. In
addition, we are required under
various Chinese laws to obtain and maintain permits and licenses to conduct our business. If we do not
maintain our licenses or other qualifications to
provide our services, we may not be able to provide services to existing clients or be
able to attract new clients and could lose revenues, which could have a
material adverse effect on our business and results of operations.
13
We may incur losses resulting from business
interruptions resulting from occurrence of natural disasters, health epidemics and other outbreaks or
events.
Our operational facilities
may be damaged in natural disasters such as earthquakes, floods, heavy rains, and storms, tsunamis and cyclones, or other
events such
as fires. Such natural disasters or other events may lead to disruption of information systems and telephone service for sustained periods.
Damage or destruction that interrupts our provision of outsourcing services could damage our relationships with our clients and may cause
us to incur
substantial additional expenses to repair or replace damaged equipment or facilities. We may also be liable to our clients
for disruption in service resulting
from such damage or destruction. Prolonged disruption of our services as a result of natural disasters
or other events may also entitle our clients to terminate
their contracts with us. We currently do not have insurance against business
interruptions.
Fluctuation in the value of the Renminbi
and other currencies may have a material adverse effect on the value of your investment.
Our financial statements are
expressed in U.S. dollars. However, a majority of our revenues and expenses are denominated in Renminbi (RMB). Our
exposure to foreign
exchange risk primarily relates to the limited cash denominated in currencies other than the functional currencies of each entity and
limited revenue contracts dominated in Singapore dollar (SGD), Hong Kong dollar (HKD), Australian dollar (AUD), Indian rupee (INR), Malaysian
ringgit
(MYR), Japanese yen (JPY), Philippine peso (PHP), and Canadian dollar (CAD) in certain of our operating subsidiaries. We do not believe that we currently
have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative
financial
instruments. However, the value of your investment in our common shares will be affected by the foreign exchange rate between
U.S. dollars and RMB
because the primary value of our business is effectively denominated in RMB, while the common shares will be traded
in U.S. dollars. The value of the RMB
against the U.S. dollar and other currencies is affected by, among other things, changes in China’s
political and economic conditions and China’s foreign
exchange policies. The People’s Bank of China regularly intervenes in
the foreign exchange market to limit fluctuations in RMB exchange rate and achieve
certain exchange rate targets, and through such intervention
kept the U.S. dollar-RMB exchange rate relatively stable.
As we may rely on dividends
paid to us by our PRC subsidiaries, any significant revaluation of the RMB may have a material adverse effect on our
revenues and financial
condition, and the value of any dividends payable on our common shares in foreign currency terms. For example, to the extent that we
need
to convert U.S. dollars we maintain into RMB, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB
amount we
receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of making payments
for dividends on our
common shares 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. Furthermore, appreciation or depreciation in the value of the RMB relative to the U.S.
dollar would affect our financial results reported in
U.S. dollar terms without giving effect to any underlying change in our business
or results of operations. We cannot predict the impact of future exchange
rate fluctuations on our results of operations and may incur
net foreign exchange losses in the future. In addition, our foreign currency exchange losses may
be magnified by PRC exchange control
regulations that restrict our ability to convert into foreign currencies.
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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 revenues and financial condition,
and
the value of, and any dividends payable on our shares in U.S. dollar terms. Conversely, if we decide to convert our RMB into U.S.
dollar 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 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.
Legislation in certain countries in which
we have clients may restrict companies in those countries from outsourcing work to us.
Offshore outsourcing is a
politically sensitive issue in the United States. For example, many organizations and public figures in the United States
have publicly
expressed concern about a perceived association between offshore outsourcing providers and the loss of jobs in their home countries. A
number
of U.S. states have passed legislation that restricts state government entities from outsourcing certain work to offshore service
providers. Other U.S. federal
and state legislation has been proposed that, if enacted, would provide tax disincentives for offshore outsourcing
or require disclosure of jobs outsourced
abroad. Similar legislation could be enacted in other countries in which we have clients. Any
expansion of existing laws or the enactment of new legislation
restricting or discouraging offshore outsourcing by companies in the United
States, or other countries in which we have clients could adversely impact our
business operations and financial results. In addition,
from time to time there has been publicity about negative experiences associated with offshore
outsourcing, such as theft and misappropriation
of sensitive client data. As a result, current or prospective clients may elect to perform such services
themselves or may be discouraged
from transferring these services from onshore to offshore providers. Any slowdown or reversal of existing industry trends
towards offshore
outsourcing in response to political pressure or negative publicity would harm our ability to compete effectively with competitors that
operate out of onshore facilities and adversely affect our business and financial results.
Disruptions in telecommunications or significant
failure in our IT systems could harm our service model, which could result in a reduction of our
revenue.
A significant element of our
business strategy is to continue to leverage and expand our sales and delivery centers strategically located in China. We
believe that
the use of a strategically located network of sales and delivery centers will provide us with cost advantages, the ability to attract
highly skilled
personnel in various regions of the country and the world, and the ability to service clients on a regional and global
basis. Part of our service model is to
maintain active voice and data communications, financial control, accounting, customer service
and other data processing systems between our main offices
in Shanghai, our clients’ offices, and our other deliveries centers and
support facilities. Our business activities may be materially disrupted in the event of a
partial or complete failure of any of these
IT or communication systems, which could be caused by, among other things, software malfunction, computer
virus attacks, conversion errors
due to system upgrading, damage from fire, earthquake, power loss, telecommunications failure, unauthorized entry or other
events beyond
our control. Loss of all or part of the systems for a period of time could hinder our performance or our ability to complete client projects
on
time which, in turn, could lead to a reduction of our revenue or otherwise have a material adverse effect on our business and business
reputation. We may
also be liable to our clients for breach of contract for interruptions in service.
15
Our computer networks may be vulnerable
to security risks that could disrupt our services and adversely affect our results of operations.
Our computer networks may
be vulnerable to unauthorized access, computer hackers, computer viruses and other security problems caused by
unauthorized access to,
or improper use of, systems by third parties or employees. A hacker who circumvents security measures could misappropriate
proprietary
information or cause interruptions or malfunctions in our operations. Although we intend to continue to implement security measures, computer
attacks or disruptions may jeopardize the security of information stored in and transmitted through our computer systems. Actual or perceived
concerns that
our systems may be vulnerable to such attacks or disruptions may deter our clients from using our solutions or services.
As a result, we may be required to
expend significant resources to protect against the threat of these security breaches or to alleviate
problems caused by these breaches. Data networks are also
vulnerable to attacks, unauthorized access and disruptions. For example, in
a number of public networks, hackers have bypassed firewalls and
misappropriated confidential information. It is possible that, despite
existing safeguards, an employee could misappropriate our clients’ proprietary
information or data, exposing us to a risk of loss
or litigation and possible liability. Losses or liabilities that are incurred as a result of any of the foregoing
could have a material
adverse effect on our business.
If we fail to implement and maintain an
effective system of internal controls, we may be unable to accurately report our results of operations, meet our
reporting obligations
on a timely basis, or prevent fraud, and investor confidence and the market price of our shares may be materially and adversely
affected.
We are required to evaluate
the effectiveness of disclosure controls and procedures and internal control over financial reporting. As defined in
standards established
by the United States Public Company Accounting Oversight Board, or the PCAOB, a “material weakness” is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the
company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Our
independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. It is possible
that, had
our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such
firm might have identified
additional material weaknesses and deficiencies.
We
are a public company in the United States subject to the Sarbanes Oxley Act of 2002. Section 404 of the Sarbanes Oxley Act, or Section
404,
requires us to include a report from management on the effectiveness of our internal control over financial reporting in our annual
report on Form 20-F.
Although we cease to be an “emerging growth company” on June 30, 2023 as such term is defined in the
Jumpstart Our Business Startups Act (the “JOBS
Act”), we are a non-accelerated filer and are exempt from Section 404 requirement
to have auditor attestation on our internal control over financial reporting,
therefore affording investors less statutory protection.
Even if our management concludes that our internal control over financial reporting is effective in the
future, our independent registered
public accounting firm, after conducting its own independent testing, may issue an adverse opinion if it is not satisfied with
our internal
controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements
differently
from us. In addition, our reporting obligations may place a significant strain on our management, operational and financial
resources and systems for the
foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify
other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy
of our internal control over
financial reporting, as these standards are modified, supplemented or amended from time to time, we may
not be able to conclude on an ongoing basis that
we have effective internal control over financial reporting in accordance with Section
404. Moreover, our internal control over financial reporting may not
prevent or detect all errors and fraud. A control system, no matter
how well it is designed and operated, cannot provide absolute assurance that misstatements
due to error or fraud will not occur or that
all control issues and instances of fraud will be detected.
16
If we fail to achieve and
maintain an effective internal control environment, we could suffer material misstatements in our financial statements and
fail to meet
our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in
turn limit our
access to capital markets, harm our results of operations, and lead to a decline in the market price of our common shares.
Additionally, ineffective internal
control over financial reporting could expose us to increased risk of fraud or misuse of corporate
assets and subject us to potential delisting from the stock
exchange on which we list, regulatory investigations and civil or criminal
sanctions. We may also be required to restate our financial statements from prior
periods.
Our insurance coverage may be inadequate
to protect us against losses.
Although we maintain property
insurance coverage for certain of our facilities and equipment, we do not have any loss of data or business
interruption insurance coverage
for our operations. If any claims for damage are brought against us, or if we experience any business disruption, litigation or
natural
disaster, we might incur substantial costs and diversion of resources.
Risks Relating to Our Corporate Structure
We will likely not pay dividends in the foreseeable future.
Dividend policy is subject
to the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition,
capital requirements
and other factors. Although we paid a special dividend of $0.05 per share of common stock on January 10, 2023 and another special
cash
dividend of $0.10 per share on December 13, 2023, there is no assurance that our Board of Directors will continue to declare dividends
even if we are
profitable. The payment of dividends by entities organized in China is subject to limitations as described herein. Under
Cayman Islands law, we may only
pay dividends from profits of the Company, or credits standing in the Company’s share premium account,
and we must be solvent before and after the
dividend payment in the sense that we will be able to satisfy our liabilities as they become
due in the ordinary course of business; and the realizable value of
assets of our Company will not be less than the sum of our total liabilities,
other than deferred taxes as shown on our books of account, and our capital.
Pursuant to the Chinese enterprise income tax law, dividends
payable by a foreign investment entity to its foreign investors are subject to a withholding tax of
10%. Similarly, dividends payable
by a foreign investment entity to its Hong Kong investor who owns 25% or more of the equity of the foreign investment
entity is subject
to a withholding tax of 5%. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities.
Regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting
standards and
regulations in China. The transfer to this reserve must be made before distribution of any dividend to shareholders. We
may experience difficulties in
completing the administrative procedures necessary to obtain and remit foreign currency. Furthermore, if
our subsidiaries in China incur debt on their own in
the future, the instruments governing the debt may restrict their ability to pay
dividends or make other payments. If our subsidiaries in Mainland China are
unable to pay dividends or make other payments to us, we may
be unable to pay dividends on our shares.
Our business may be materially and adversely
affected if any of our Chinese subsidiaries declare bankruptcy or become subject to a dissolution or
liquidation proceeding.
The Enterprise Bankruptcy
Law of China provides that an enterprise may 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 Chinese subsidiaries hold certain assets
that are important to
our business operations. If any of our Chinese subsidiaries 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.
17
Our WOFE is required to allocate a portion
of its after-tax profits to the statutory reserve fund, and as determined by its board of directors, to the staff
welfare and bonus funds,
which may not be distributed to equity owners.
Pursuant to Company Law of
P.R. China (2024 Revision), Foreign Investment Law of the People’s Republic of China (2020) and Implementing
Regulations of the
Foreign Investment Law of the People’s Republic of China (2020), our WOFE entity is required to allocate a portion of its after-tax
profits, to the statutory reserve fund, and in its discretion, to the staff welfare and bonus funds. No lower than 10% of an enterprise’s
after tax-profits should
be allocated to the statutory reserve fund. When the statutory reserve fund account balance is equal to or greater
than 50% of the WOFE’s registered capital,
no further allocation to the statutory reserve fund account is required. WOFE determines,
in its own discretion, the amount contributed to the staff welfare
and bonus funds. These reserves represent appropriations of retained
earnings determined according to Chinese law.
Our failure to obtain prior approval of
the China Securities Regulatory Commission (“CSRC”) for the listing and trading of our common shares on a
foreign stock exchange
could have a material adverse effect upon our business, operating results, reputation and trading price of our common shares.
On August 8, 2006, six Chinese
regulatory agencies, including the Ministry of Commerce of the People’s Republic of China (“MOFCOM”), jointly
issued
the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which was amended on June 22, 2009 (the “M&A
Rule”).
The M&A Rule contains provisions that require that an offshore special purpose vehicle (“SPV”) formed for
listing purposes and controlled directly or
indirectly by Chinese companies or individuals shall obtain the approval of the CSRC prior
to the listing and trading of such SPV’s securities on an overseas
stock exchange. On September 21, 2006, the CSRC published procedures
specifying documents and materials required to be submitted to it by an SPV
seeking CSRC approval of overseas listings. However, the application
of the M&A Rule remains unclear with no consensus currently existing among leading
Chinese law firms regarding the scope and applicability
of the CSRC approval requirement. The CSRC has not issued any such definitive rule or
interpretation, and we have not chosen to voluntarily
request approval under the M&A Rule. We may face regulatory actions or other sanctions from the
CSRC or other Chinese regulatory authorities.
These authorities may impose fines and penalties upon our operations in China, limit our operating privileges
in China, delay or restrict
the repatriation of the IPO proceeds into China, or take other actions that could have a material adverse effect upon our business,
financial
condition, results of operations, reputation and prospects, as well as the trading price of our common shares.
On February 17, 2023, the
CSRC published the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies
(the “Trial Measures”).
Pursuant to the Trial Measures, a filing-based regulatory system is applied to both “direct overseas offering and listing”
and “indirect
overseas offering and listing” of PRC domestic companies. The “indirect overseas offering and listing”
of PRC domestic companies refers to such securities
offering and listing in an overseas market made in the name of an offshore entity,
but based on the underlying equity, assets, earnings or other similar rights
of a domestic company which operates its main business domestically.
If the issuer meets the following conditions, the offering and listing shall be
determined as an indirect overseas offering and listing
by a domestic company: (i) the total assets, net assets, revenues or profits of the domestic operating
entity or entities of the issuer
in the most recent accounting year account for more than 50% of the corresponding figure in the issuer’s audited consolidated
financial
statements for the same period; (ii) most of the senior managers in charge of business operation and management of the issuer are Chinese
citizens
or have domicile in China, and its main places of business are located in China or main business activities are conducted in
China. Pursuant to the Trial
Measures, we are required to file the relevant documents with the CSRC within three business days after submitting
our listing application documents to the
relevant regulator in the place of intended listing, and complete the filing procedures with
the CSRC in connection with such subsequent securities offerings
in the same overseas market where we have previously offered and listed
securities within three business days after the offering is completed. Failure to
complete the filing under the Trial Measures may subject
a PRC domestic company to a warning and a fine of RMB1 million to RMB10 million. In the event
of a serious violation of the Trial Measures,
the CSRC may impose a ban on entering into the securities market upon the relevant responsible persons. Any
such violation that constitutes
a crime shall be investigated for criminal liability according to law.
Furthermore, on February 24,
2023, the CSRC published the Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and
Listing by Domestic Companies (the “Confidentiality and Archives Management Provisions”). Pursuant to the Confidentiality
and
Archives Management Provisions, PRC domestic companies that seek to offer and list securities in overseas markets shall establish
confidentiality and
archives system. The PRC domestic companies shall obtain approval from the competent authority and file with the confidential
administration department at
the same level when providing or publicly disclosing documents and materials related to state secrets or
secrets of the governmental authorities to the
relevant individuals or entities including securities companies, securities service agencies
or the offshore regulatory authorities or providing or publicly
disclosing such documents and materials through its offshore listing entity,
and shall complete corresponding procedures when providing or publicly
disclosing documents and materials which may adversely influence
national security and the public interest to the relevant individuals or entities including
securities companies, securities service agencies
or the offshore regulatory authorities or providing or publicly disclosing such documents and materials
through its offshore listing entity.
The PRC domestic companies shall provide written statements on the implementation on the aforementioned rules to the
relevant securities
companies and securities service agencies and the PRC domestic companies that provides accounting archives or copies of accounting
archives
to any entities including securities companies, securities service providers and overseas regulators and individuals shall fulfill due
procedures in
compliance with applicable national regulations.
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As the CSRC determines that we need to complete the required filing
procedures for any such subsequent securities offerings in the same overseas
market where we have previously offered and listed securities,
or if such government authorities promulgate any interpretation or implement rules that would
require us to obtain approvals from the
CSRC or other regulatory authorities or complete required filing or other administrative procedures for any future
offshore securities
offering or other financing activities, it is uncertain whether we can or how long it will take us to obtain such approval or complete
such
filing or other administrative procedures, or obtain any waiver of aforesaid requirements if and when procedures are established
to obtain such waiver. Any
failure to obtain or delay in obtaining such approval or completing such filing or other administrative procedures
for any future offshore securities offering,
or a rescission of any such approval obtained by us, could subject us to sanctions by the
CSRC or other PRC regulatory agencies. In any such event, these
regulatory authorities may also impose fines and penalties on our operations
in China, limit our operating privileges in China, delay or restrict the repatriation
of the proceeds from any future offshore securities
offering into the PRC or take other actions that could adversely affect our business, operating results and
financial condition, as well
as our ability to complete any future offshore securities offering. The CSRC or any other PRC government authorities may also
take actions
requiring us, or making it advisable for us, to halt any future offshore securities offering. Consequently, if you engage in market trading
or other
activities in anticipation of and prior to settlement and delivery, you do so at the risk that such settlement and delivery may
not occur. Any uncertainties or
negative publicity regarding such approval requirements could materially and adversely affect the trading
price of our shares.
If the chops of our PRC companies and subsidiaries
are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the
corporate governance of these entities
could be severely and adversely compromised.
In China, a company chop or
seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature.
Each legally registered
company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In
addition to
this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our PRC
subsidiaries
are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent
those
chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance
of these entities could be
severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents
so chopped, even if they were
chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops
are misused by unauthorized persons, we could
experience disruption to our normal business operations. We may have to take corporate or
legal action, which could involve significant time and resources to
resolve while distracting management from our operations.
If we fail to maintain continuing compliance
with the PRC state regulatory rules, policies and procedures applicable to our industry, or if any policy or
measure underpinning our
preferential treatment be repealed or amended, we may risk losing certain preferential tax and other treatments which may
adversely affect
the viability of our current corporate structure, corporate governance and business operations.
According to the Catalogue
of Industries for Encouraging Foreign Investment (2022) issued by the National Development and Reform Commission
and the Ministry of Commerce,
IT services fall into the category of industries in which foreign investment is encouraged. The State Council has promulgated
several
notices since 2000 to launch favorable policies for IT services, such as preferential tax treatments and credit support. Under rules and
regulations
promulgated by various Chinese government agencies, enterprises that have met specified criteria and are recognized as software
enterprises by the relevant
government authorities in China are entitled to preferential treatment, including financing support, preferential
tax rates, export incentives, discretion and
flexibility in determining employees’ welfare benefits and remuneration. Software enterprise
qualifications are subject to annual examination. Enterprises
that fail to meet the annual examination standards will lose the favorable
enterprise income tax treatment. Enterprises exporting software or producing
software products that are registered with the relevant government
authorities are also entitled to preferential treatment including governmental financial
support, preferential import, export policies
and preferential tax rates. If and to the extent we fail to maintain compliance with such applicable rules and
regulations, our operations
and financial results may be adversely affected.
Notwithstanding the foregoing, we are aware that the State Council
has promulgated the Regulation on Fair Competition Review (the “RFCR”),
which became effective on August 1, 2024. The
RFCR prohibits any policy or measure that impacts productional and operational costs, unless authorized by
law, administrative regulations,
or approved by the State Council. Such circumstances include, but are not limited to, the granting of tax incentives, selective
or differentiated
financial rewards, or subsidies to specific entities. The RFCR further mandates that market regulators establish and improve a spot-check
mechanism for fair competition review and organize spot checks of the relevant policies or measures. In case of violation of the RFCR,
the market regulator
shall urge the drafting entity of the policy or measure in question to rectify the situation. As a result, we cannot
guarantee the continued or permanent
availability of these preferential treatments. Should any policy or measure underpinning our preferential
treatment be repealed or amended, we may lose such
advantages, potentially lead to adverse effects on our operations and financial performance.
19
Risks Related to Doing Business in China
Adverse changes in political, economic and
other policies of the Chinese government could have a material adverse effect on the overall economic
growth of China, which could materially
and adversely affect the growth of our business and our competitive position.
The majority of our business
operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects
are affected significantly
by economic, political and legal developments in China. Although the PRC economy has been transitioning from a planned
economy to a more
market-oriented economy since the late 1970s, the PRC government continues to exercise significant control over China’s economic
growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage
or restrict
investment in certain industries by foreign investors, control the exchange between the Renminbi and foreign currencies, and
regulate the growth of the
general or specific market. While the Chinese economy has experienced significant growth in the past 30 years,
growth has been uneven, both geographically
and among various sectors of the economy. Furthermore, the current global economic crisis
is adversely affecting economies throughout the world. As the
PRC economy has become increasingly linked to the global economy, China
is affected in various respects by downturns and recessions of major economies
around the world. The various economic and policy measures
enacted by the PRC government to forestall economic downturns or bolster China’s economic
growth could materially affect our business.
Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and
regulations in China could have
a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such
developments could
adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.
Substantial uncertainties exist with respect
to the interpretation and implementation of Cyber Security Law as well as any impact it may have on our
business operations.
On July 1, 2015, the Standing
Committee of the National People’s Congress issued the National Security Law, which came into effect on the same
day. The National
Security Law provides that the state shall safeguard its sovereignty, security and cybersecurity development interests, and that the
government
shall establish a national security review and supervision system to review, among other things, foreign investment, key technologies,
internet
and information technology products and services, and other important activities that are likely to impact the national security
of China.
On November 7, 2016, the Standing
Committee of the National People’s Congress issued the Cyber Security Law, which came into effect on June 1,
2017. This is the first
Chinese law that focuses exclusively on cyber security. The Cyber Security Law provides that network operators must set up internal
security
management systems that meets the requirements of a classified protection system for cybersecurity, including appointing dedicated cybersecurity
personnel, taking technical measures to prevent computer viruses, network attacks and intrusions, taking technical measures to monitor
and record network
operation status and cybersecurity incidents, and taking data security measures such as data classification, backups
and encryption. The Cyber Security Law
also imposes a relatively vague but broad obligation to provide technical support and assistance
to the public and state security authorities in connection with
criminal investigations or for reasons of national security. The Cyber
Security Law also requires network operators that provide network access or domain
name registration services, landline or mobile phone
network access, or that provide users with information publication or instant messaging services, to
require users to provide a real identity
when they sign up.
The Cyber Security Law sets
high requirements for the operational security of facilities deemed to be part of the PRC’s “critical information
infrastructure.”
These requirements include data localization, i.e., storing personal information and important business data in China, and national security
review requirements for any network products or services that may have an impact on national security. Among other factors, “critical
information
infrastructure” is defined as critical information infrastructure, that will, in the event of destruction, loss of function
or data leak, result in serious damage to
national security, the national economy and people’s livelihood, or the public interest.
Specific reference is made to key sectors such as public
communication and information services, energy, transportation, water-resources,
finance, public service and e-government.
On July 30, 2021, the State
Council of the People’s Republic of China issued the Regulations on Security Protection of Critical Information
Infrastructures,
which came into effect on September 1, 2021. The Regulations on Security Protection of Critical Information Infrastructures provides that
“critical information infrastructure” shall be identified by the “protection work departments” (the competent
departments and supervision and administration
departments of the important industries and fields, such as public communication and information
service, energy, transportation, water resources, finance,
public services, e-government affairs, science, technology and industry for
national defense as well as other important network facilities and information
system, etc. of which the destruction, loss of function
and data divulgence may seriously endanger national security, people’s livelihood and public interests).
A “protection work
department” shall, in light of the actualities of the industry or field concerned, formulate the rules for identification of “critical
information infrastructure” and submit the same to the public security department of the State Council for record-filing, and shall
take the following factors
into consideration in the rule formulating work: 1) Degree of importance of the network facilities and information
system to the critical and core business of
the industry or field concerned; 2) Extent of harm likely to be caused once the network facilities
and information system, etc. are destroyed, lose functions or
divulge data; and; 3) Correlation effect on other industries and fields.
However, no official guidelines as to the scope of “critical information infrastructure”
or identification rules of the “critical
information infrastructure” of our industry or field have been formally issued.
20
We do not believe that we
are an operator of “critical information infrastructure” as defined in the Cyber Security Law and the Regulations on
Security
Protection of Critical Information Infrastructures. However, there is no assurance that we may not be considered an operator of “critical
information
infrastructure” in the future as the definition is not precise, and there are substantial uncertainties as to the ultimate
interpretation and implementation of the
Cyber Security Law and the Regulations on Security Protection of Critical Information Infrastructures.
If we are identified as an operator of “critical
information infrastructure” accordingly, it could cause us to incur substantial
costs or require us to change our business practices in a manner materially
adverse to our business.
On November 14, 2021, CAC
published Regulations for the Administration of Network Data Security (Draft for public comment, hereinafter the
“Draft”).
Article 2 of the Draft stipulates that “these Regulations apply to data processing activities carried out through networks as well
as the supervision
and regulation of network data security within the territory of the People’s Republic of China.” We do
not believe the current business of CLPS involves any
“data processing activities”. In the foreseeable future, it is our understanding
that CLPS will not engage in “data process activities”. Therefore, we believe
that the Draft does not apply to CLPS. The Draft
has no substantial impact on the business of CLPS.
In December 2021, the CAC
promulgated the amended Measures of Cybersecurity Review which require cyberspace operators with personal
information of more than one
million users to file for cybersecurity review with the CRO, in the event such operators plan for an overseas listing. The
amended Measures
of Cybersecurity Review provide that, among others, an application for cybersecurity review must be made by an issuer that is a
“network
platform operator” as defined therein before such issuer’s securities become listed in a foreign country, if the issuer possesses
personal information
of more than one million users, and that the relevant governmental authorities in the PRC may initiate cybersecurity
review if such governmental authorities
determine an operator’s cyber products or services or data processing activities affect
or may affect China’s national security. The amended Measures of
Cybersecurity Review took effect on February 15, 2022.
On March 22, 2024, the CAC
promulgated the Regulation to Standardize and Promote Cross-border Data Flow (hereinafter the “Regulation”). The
Regulation
mainly focus on specifying those scenarios which are not required to apply for security assessment for data to be provided abroad, to
conclude a
standard contract for personal information to be provided abroad or to pass the certification for personal information protection.
It is remarkable that,
according to Article 5 of the Regulation, a data processor providing personal information abroad may be exempted
from proceeding the aforementioned
processes if it satisfies any of the following conditions: (1) Where it is really necessary to provide
personal information abroad for the purpose of concluding
or performing a contract to which an individual concerned is a party, such as
cross-border shopping, cross-border delivery, cross-border remittance, cross-
border payment, cross-border account opening, air ticket
and hotel reservation, visa handling and examination services; (2) Where it is really necessary to
provide employees’ personal information
abroad for the purpose of conducting cross-border human resources management in accordance with the
employment rules and regulations formulated
in accordance with the law and collective contracts concluded in accordance with the law; (3) Where it is really
necessary to provide
personal information abroad in an emergency to protect the life, health and property safety of a natural person; or (4) Where a data
processor
other than a critical information infrastructure operator provides abroad the personal information (excluding sensitive personal information)
of not
more than 100,000 persons accumulatively as of January 1 of the current year. And, for the purpose of the preceding paragraph,
“personal information
provided abroad” does not include critical data. However, according to Article 10 of the Regulation, to
provide personal information abroad, a data processor
shall, in accordance with laws and administrative regulations, perform obligations
such as notification, obtaining individual consent and conducting
assessment of impact of personal information protection. Also, Article
2 of the Regulation stipulates that “If the data have not been informed or publicly
announced as critical data by relevant departments
or regions, data processors are not required to declare security assessment for cross-border provision of
the data as critical data.”
according to which, the standard for identifying important data is clarified. Therefore, we understand that, as CLPS has not received
any such notification from relevant departments or regions, and the data that it processes has not been publicly announced as critical
data, CLPS shall not be
recognized as a “critical data processor”.
Currently, the cybersecurity laws and regulations have not directly
affected our business and operations. As the amended Measures of Cybersecurity
Review took effect in February 2022, we may be subject
to review when conducting data processing activities, and may face challenges in addressing its
requirements and make necessary changes
to our internal policies and practices in data processing. As of the date of this Form 20-F, we have not been
involved in any investigations
on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions
in such respect.
Based on the foregoing, we and our PRC legal counsel do not expect that, as of the date of this Form 20-F, the current applicable PRC
laws
on cybersecurity would have a material adverse impact on our business.
21
Uncertainties with respect to the PRC legal system could have
a material adverse effect on us.
The PRC legal system is based
on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the
late 1970s, the PRC
government has been building a comprehensive system of laws and regulations governing economic matters in general. The overall
effect
has been to significantly enhance the protections afforded to various forms of foreign investments in China. We conduct our business primarily
through
our subsidiaries established in China. These subsidiaries are generally subject to laws and regulations applicable to foreign
investment in China. However,
since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve,
some uncertainties may limit legal protections
available to us. In addition, we may have to resort to administrative and court proceedings
to enforce the legal protection that we enjoy either by law or
contract. However, since partial statutory and contractual terms may remain
reasonable blank or uncertainty due to the rapid evolvement, it may be difficult
to predict the outcome of administrative and court proceedings
and the level of legal protection we enjoy. We cannot predict the effect of future developments
in the PRC legal system, including the
promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof. These uncertainties
could limit the legal
protections available to us and other foreign investors, including you. In addition, any litigation in China may result in substantial
costs
and diversion of our resources and management attention.
The PRC government has recently
published new policies that significantly affected certain industries such as the education and internet industries,
and we cannot rule
out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our
business,
financial condition and results of operations. Furthermore, the PRC government has also recently indicated an intent to exert
more oversight and control over
securities offerings and other capital markets activities that are conducted overseas and foreign investment
in China-based companies like us. Any such
action, once taken by the PRC government, could significantly limit or completely hinder our
ability to offer or continue to offer securities to investors and
cause the value of such securities to significantly decline or in extreme
cases, become worthless.
We face various risks and
uncertainties relating to doing business in Mainland China and Hong Kong SAR. Our business operations are primarily
conducted in Mainland
China and Hong Kong SAR, and we are subject to complex and evolving Chinese and Hong Kong SAR laws and regulations. For
example, the Anti-Monopoly
Law of the People’s Republic of China (Revised in 2022) (“Anti-monopoly Law”) came into effect on August 1, 2022. The
“monopolistic practices” defined by the Anti-Monopoly Law include (a) the conclusion of a monopolistic agreement; (b) the
abuse of dominant market
positions; and (c) the concentration that eliminates or restricts competition or may eliminate or restrict competition.
Based on Company’s China and global
market share, the Company does not have a dominant market position that enables the Company
to restrict or eliminate the competition. China promulgated
several laws and regulations on data security and personal information protections
in the last two years, mainly the Data Security Law of the People’s
Republic of China (“Data Security Law”), which came
into effect on September 1, 2021, and the Personal Information Protection Law of the People’s
Republic of China (“PIP Law”),
which came into effect on November 1, 2021. The Company may receive general personal information or even sensitive
personal information
from its clients in the Company’s day-to-day business operations, therefore, the Data Security Law and the PIP Law may accordingly
apply to the Company’s business activities in China, as a consequence of which, the Company may have relevant obligations as required
thereby. And we
also face risks associated with regulatory approvals on offshore offerings, as well as the lack of inspection on our Auditor
by the PCAOB, which may impact
our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on
a United States or other foreign exchange. These risks
could result in a material adverse change in our operations and the value of our
shares of Common Stock, significantly limit or completely hinder our ability
to continue to offer securities to investors, or cause the
value of our Common Stock to decline.
According to Articles 12 and
24 of the Trial Measures, securities companies, securities service agencies and personnel engaged in the overseas
offering and listing
business of domestic enterprises are not allowed to express their opinions in documents produced or issued in a manner that is distorted
or
derogatory to the national laws and policies, the business environment, the judicial situation, etc., or else measures such as ordering
rectification, supervisory
conversations, issuance of warning letters, etc., may be imposed. Taking into account the aforementioned unofficial
information and regulations of the Trial
Measures, we believe that our PRC counsel may express limited opinions on China’s legal
policies, business environment and judicial situation as compared
to the opinions provided by the same previously.
22
In response to CSRC’s
reported action on July 20, 2023 described in the preceding paragraph, on August 16, 2023 the U.S. SEC issued a public
statement requiring
“meaningful disclosure” by Chinese issuers. We may fail to meet the “meaningful disclosure” standard while complying
with the CSRC’s
reported guidance to PRC counsel.
Risk of Intervention or Control by the PRC
Government.
As a China-based company listed
on NASDAQ in the United States, it is important to acknowledge the significant influence and regulatory
oversight exercised by the PRC
government over our operations. The PRC government’s involvement can have a material impact on our business and the
value of our
securities. We operate in accordance with the laws and regulations of China, which can change and be subject to interpretation by authorities.
The PRC government may have authority over various aspects of our business, including regulatory approvals, licensing, and permits. Changes
in
government policies, geopolitical factors, or other external influences may result in regulatory decisions that could affect our ability
to operate effectively or
access capital markets. It is essential for investors to recognize the potential uncertainties associated with
the PRC government’s involvement, which may
lead to increased volatility in the trading of our securities and could impact their
market value. We encourage investors to consider these unique challenges
when evaluating our company as an investment opportunity.
U.S. regulators’ ability to conduct
investigations or enforce rules in China is limited.
The majority of our operations
are conducted outside of the U.S. As a result, it may not be possible for the U.S. regulators to conduct investigations
or inspections,
or to effect service of process within the U.S. or elsewhere outside China on us, our subsidiaries, officers, directors and shareholders,
and
others, including with respect to matters arising under U.S. federal or state securities laws. China does not have treaties providing
for reciprocal recognition
and enforcement of judgments of courts with the U.S. and many other countries. Furthermore, according to Article
177 of the PRC Securities Law, or Article
177, which became effective in March 2020, no overseas securities regulator is allowed to directly
conduct investigation or evidence collection activities
within the territory of the PRC. While detailed interpretation of or implementation
rules under Article 177 have yet to be promulgated, the inability for an
overseas securities regulator to directly conduct investigation
or evidence collection activities within China may further increase difficulties faced by you in
protecting your interests. As a result,
recognition and enforcement in China of these judgments in relation to any matter, including U.S. securities laws and
the laws of the
Cayman Islands, may be difficult or impossible.
We face uncertainty regarding the PRC tax
reporting obligations and consequences for certain indirect transfers of the stock of our operating company.
Pursuant to the Announcement
of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property
Transfer by Non-Resident
Enterprises, which became effective in February 2015, or Circular 7, Announcement of the State Administration of Taxation on
Issues Concerning
the Withholding of Non-resident Enterprise Income Tax at Source, which became effective in December 2017, or Circular 37, Law of the
People’s
Republic of China on Enterprise Income Tax on December 29, 2018 and Regulations on the Implementation of Enterprise Income Tax Law on
April
23, 2019, where a non-resident enterprise indirectly transfers properties such as equity in Chinese resident enterprises without
any justifiable business
purposes with the aim of avoiding to pay enterprise income tax, such indirect transfer shall be reclassified
as a direct transfer of equity in Chinese resident
enterprise in accordance with Article 47 of the Enterprise Income Tax Law. The PRC
tax authority will examine the true nature of such transfer, and the gains
derived from such transfer may be subject to PRC withholding
tax at the rate of up to 10%. In addition, the PRC resident enterprise is supposed to provide
necessary assistance to support the enforcement
of the Laws and Circulars. The PRC tax authorities may make claims against our PRC subsidiary as being
indirectly liable for unpaid taxes,
if any, arising from Indirect Transfers by shareholders who did not obtain their shares in the public offering of our shares.
23
PRC regulations relating to the establishment
of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to
personal liability and limit our ability
to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to
distribute profits
to us, or otherwise materially and adversely affect us.
The PRC State Administration
of Foreign Exchange, or SAFE, issued a public notice in 2014 known as Circular 37 that requires PRC residents,
including both legal persons
and natural persons, to register with an appropriate local SAFE branch before establishing or controlling any company outside of
China,
referred to as an offshore special purpose company, for the purpose of acquiring any assets of or equity interest in PRC companies and
raising funds
from overseas. When a PRC resident contributes the assets or equity interests it holds in a PRC company into the offshore
special purpose company, or
engages in overseas financing after contributing such assets or equity interests into the offshore special
purpose company, such PRC resident must modify its
SAFE registration in light of its interest in the offshore special purpose company
and any change thereof. Moreover, failure to comply with the above SAFE
registration requirements could result in liabilities under PRC
laws for evasion of foreign exchange restrictions.
We are committed to complying
with the Circular 37 requirements and to ensuring that our shareholders who are PRC citizens or residents comply
with them. We believe
that all of our current PRC citizen or resident shareholders and beneficial owners have completed their required registrations with
SAFE.
However, we may not at all times be fully aware or informed of the identities of all our beneficial owners who are PRC citizens or residents,
and we
may not always be able to compel our beneficial owners to comply with the Circular 37 requirements. As a result, we cannot assure
you that all of our
shareholders or beneficial owners who are PRC citizens or residents will at all times comply with, or in the future
make or obtain any applicable registrations
or approvals required by, Circular 37 or other related regulations. Failure by any such shareholders
or beneficial owners to comply with Circular 37 could
subject us to fines or legal sanctions, restrict our overseas or cross-border investment
activities, limit our PRC subsidiaries’ ability to make distributions or
pay dividends or affect our ownership structure, which
could adversely affect our business and prospects.
In addition, the PRC National
Development and Reform Commission promulgated a rule in 2017 requiring its approval for overseas investment
projects made by PRC entities.
However, there exist extensive uncertainties as to the interpretation of this rule with respect to its application to a PRC
individual’s
overseas investment and, in practice, we are not aware of any precedents that a PRC individual’s overseas investment has been either
approved
by the National Development and Reform Commission or challenged by the National Development and Reform Commission based on the
absence of its
approval. Our current beneficial owners who are PRC individuals did not apply for the approval of the National Development
and Reform Commission for
their investment in us. We cannot predict how and to what extent this will affect our business operations or
future strategy.
24
PRC regulation of loans and direct investment
by offshore holding companies to PRC entities may delay or prevent us from making loans or additional
capital contributions to our PRC
subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We may make loans to our PRC
subsidiaries and controlled PRC affiliate, or we may make additional capital contributions to our PRC subsidiaries.
Any loans to our PRC
subsidiaries or controlled PRC affiliate are subject to PRC regulations and approvals. For example, loans by us to our PRC subsidiaries
in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered
with SAFE or its
local counterpart.
We may also decide to finance
our PRC subsidiaries through capital contributions. These capital contributions must be approved by the Ministry of
Commerce in China
or its local counterpart. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely
basis, if at all, with respect to future loans by us to our PRC subsidiaries or controlled PRC affiliate or capital contributions by us
to our subsidiaries or any of
their respective subsidiaries. If we fail to receive such registrations or approvals, our ability to capitalize
our PRC operations may be negatively affected,
which could adversely and materially affect our liquidity and our ability to fund and expand
our business.
In 2015, SAFE promulgated
Circular 19, a notice regulating the conversion by a foreign-invested enterprise of foreign currency into Renminbi by
restricting how
the converted Renminbi may be used. Circular 19 requires that Renminbi converted from the foreign currency-denominated capital of a
foreign-invested
enterprise shall be truthfully used for the enterprise’s own operational purposes within the scope of business and only the foreign-invested
enterprise whose main business is investment (including a foreign-invested investment company, foreign-invested venture capital enterprise
or foreign-
invested equity investment enterprise) is allowed to directly settle its foreign exchange capital or transfer the RMB funds
under its Account for Foreign
Exchange Settlement Pending Payment to the account of an invested enterprise according to the actual amount
of investment, provided that the relevant
domestic investment project is real and compliant.
We cannot assure you that
we will be able to complete the necessary government registrations or obtain the necessary government approvals on a
timely basis, if
at all, with respect to future loans by us to our PRC subsidiaries or controlled PRC affiliate or with respect to future capital contributions
by
us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise
fund our PRC operations
may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund
and expand our business.
Governmental control of currency conversion
may limit our ability to use our revenues effectively and the ability of our PRC subsidiaries to obtain
financing.
The PRC government imposes
control on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out
of China. We receive
a majority of our revenues in Renminbi, which currently is not a freely convertible currency. Restrictions on currency conversion
imposed
by the PRC government may limit our ability to use revenues generated in Renminbi to fund our expenditures denominated in foreign currencies
or
our business activities outside China. Under China’s existing foreign exchange regulations, Renminbi may be freely converted
into foreign currency for
payments relating to current account transactions, which include among other things dividend payments and payments
for the import of goods and services,
by complying with certain procedural requirements. Our PRC subsidiaries are able to pay dividends
in foreign currencies to us without prior approval from
SAFE, by complying with certain procedural requirements. Our PRC subsidiaries
may also retain foreign currency in their respective current account bank
accounts for use in payment of international current account
transactions. However, we cannot assure you that the PRC government will not take measures in
the future to restrict access to foreign
currencies for current account transactions. Conversion of Renminbi into foreign currencies, and of foreign currencies
into Renminbi,
for payments relating to capital account transactions, which principally includes investments and loans, generally requires the approval
of
SAFE and other relevant PRC governmental authorities. Restrictions on the convertibility of the Renminbi for capital account transactions
could affect the
ability of our PRC subsidiaries to make investments overseas or to obtain foreign currency through debt or equity financing,
including by means of loans or
capital contributions from us. We cannot assure you that the registration process will not delay or prevent
our conversion of Renminbi for use outside of
China.
25
We may be classified as a “resident
enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences
to us and our
non-PRC shareholders.
The Enterprise Income Tax
Law provides that enterprises established outside of China whose “de facto management bodies” are located in China
are considered
PRC tax resident enterprises and will generally be subject to the uniform 25% PRC enterprise income tax rate on their global income. In
addition, a tax circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain
Chinese-invested
enterprises established outside of China as resident enterprises clarified that dividends and other income paid by such
resident enterprises will be considered
to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized
by non-PRC enterprise shareholders. This recent
circular also subjects such resident enterprises to various reporting requirements with
the PRC tax authorities. Under the implementation rules to the
Enterprise Income Tax Law, a de facto management body is defined as a body
that has material and overall management and control over the manufacturing
and business operations, personnel and human resources, finances
and other assets of an enterprise. In addition, the tax circular mentioned above details that
certain Chinese-invested enterprises will
be classified as resident enterprises if the following are located or resident in China: senior management personnel
and departments that
are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties,
accounting
books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors
having
voting rights.
Currently, there are no detailed
rules or precedents governing the procedures and specific criteria for determining de facto management bodies
which are applicable to
our company or our overseas subsidiary. If our company or any of our overseas subsidiaries is considered a PRC tax resident
enterprise
for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, our company or our overseas
subsidiary will be subject to the uniform 25% enterprise income tax rate as to our global income as well as PRC enterprise income tax
reporting obligations.
Second, although under the Enterprise Income Tax Law and its implementing rules dividends paid to us from our PRC
subsidiaries would qualify as tax-
exempted income, we cannot assure you that such dividends will not be subject to a 10% withholding tax,
as the PRC foreign exchange control authorities,
which enforce 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 PRC enterprise income tax purposes. Finally, dividends
payable by us to our investors and gain on the sale of our shares may become subject
to PRC withholding tax. It is possible that future
guidance issued with respect to the new resident enterprise classification could result in a situation in which
a withholding tax of 10%
for our non-PRC enterprise investors or a potential withholding tax of 20% for individual investors is imposed on dividends we pay
to
them and with respect to gains derived by such investors from transferring our shares. In addition to the uncertainty in how the new resident
enterprise
classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect.
If we are required under the Enterprise
Income Tax law to withhold PRC income tax on our dividends payable to our foreign shareholders,
or if you are required to pay PRC income tax on the
transfer of our shares under the circumstances mentioned above, the value of your
investment in our shares or ADSs may be materially and adversely
affected. It is unclear whether, if we are considered a PRC resident
enterprise, holders of our shares would be able to claim the benefit of income tax treaties
or agreements entered into between China and
other countries or areas.
The M&A Rules and certain other PRC
regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,
which could make it more difficult
for us to pursue growth through acquisitions in China.
The Regulations on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory
agencies in August 2006
and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC
domestic companies
and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC,
prior
to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC
published a notice
on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle
seeking CSRC approval of its overseas
listings. The application of the M&A Rules remains unclear. These M&A Rules and some other
regulations and rules concerning mergers and acquisitions
established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time consuming and
complex, including requirements in some instances that the MOC be
notified in advance of any change-of-control transaction in which a foreign investor
takes control of a PRC domestic enterprise. Moreover,
the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of
undertaking if certain thresholds are
triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that
mergers and
acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through
which foreign
investors may acquire de facto control over domestic enterprises that raise “national security” concerns are
subject to strict review by the MOC, and the rules
prohibit any activities attempting to bypass a security review, including by structuring
the transaction through a proxy or contractual control arrangement. In
the future, we may grow our business by acquiring complementary
businesses. Complying with the requirements of the above-mentioned regulations and
other relevant rules to complete such transactions
could be time consuming, and any required approval processes, including obtaining approval from the
MOC or its local counterparts may
delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or
maintain our market
share.
26
Any failure to comply with PRC regulations
regarding the registration requirements for employee stock incentive plans may subject the PRC plan
participants or us to fines and other
legal or administrative sanctions.
In February 2012, SAFE promulgated
the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals
Participating in Stock Incentive Plans of
Overseas Publicly-Listed Companies, replacing earlier rules promulgated in March 2007. Pursuant to these rules,
PRC citizens and non-PRC
citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an
overseas
publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could
be the
PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution
must be retained to
handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests.
We and our executive officers and
other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less
than one year and who are granted options or other
awards under the equity incentive plan will be subject to these regulations as an overseas
listed company. Failure to complete the SAFE registrations may
subject them to fines and legal sanctions and may also limit our ability
to contribute additional capital into our PRC subsidiary and limit our PRC subsidiary’
ability to distribute dividends to us. We
also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors,
executive officers
and employees under PRC law.
Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the
future.
The PRC tax authorities have
enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity
interests in
a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59, Announcement of the State
Administration
of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, which
became
effective in February 2015, or Circular 7 and Announcement of the State Administration of Taxation on Issues Concerning the Withholding
of Non-
resident Enterprise Income Tax at Source, which became effective in December 2017, or Circular 37.
Under the Enterprise Income
Tax Law, Regulations on the Implementation of Enterprise Income Tax Law, Circular 7 and Circular 37, where a non-
resident enterprise indirectly
transfers properties such as equity in Chinese resident enterprises without any justifiable business purposes with the aim of
avoiding
to pay enterprise income tax, such indirect transfer shall be reclassified as a direct transfer of equity in Chinese resident enterprise
in accordance
with Article 47 of the Enterprise Income Tax Law. The non-resident enterprise, being the transferor, may be subject to PRC
enterprise income tax, if the
indirect transfer is considered to be an abusive use of company structure without reasonable commercial
purposes. As a result, gains derived from such
indirect transfer may be subject to PRC tax at a rate of up to 10%.
In February 2015, the SAT
issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax
regime that
is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth
under Circular
698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate
holding company. In addition,
Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and
has introduced safe harbors for internal group
restructurings and the purchase and sale of equity through a public securities market.
Circular 7 also brings challenges to both the foreign transferor and
transferee (or other person who is obligated to pay for the transfer)
of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by
transferring the taxable assets
indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor,
or the
transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer.
Using a “substance
over form” principle, the PRC tax authority may disregard the existence of the overseas holding company
if it lacks a reasonable commercial purpose and
was established for the purpose of reducing, avoiding or deferring PRC tax. As a result,
gains derived from such indirect transfer may be subject to PRC
enterprise income tax, and the transferee or other person who is obligated
to pay for the transfer is obligated to withhold the applicable taxes, currently at a
rate of 10% for the transfer of equity interests
in a PRC resident enterprise.
27
We face uncertainties on the
reporting and consequences on future private equity financing transactions, share exchange or other transactions
involving the transfer
of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident
enterprises
with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the
filing. As a
result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or
being taxed, under Circular 59 and
Circular 7, and may be required to expend valuable resources to comply with Circular 59 and Circular
7 or to establish that we and our non-resident
enterprises should not be taxed under these circulars, which may have a material adverse
effect on our financial condition and results of operations.
The PRC tax authorities have
the discretion under SAT Circular 59, and Circular 7 to make adjustments to the taxable capital gains based on the
difference between
the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions
in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are
considered a non-
resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable
income of the transactions
under SAT Circular 59 or Circular 7, our income tax costs associated with such potential acquisitions will
be increased, which may have an adverse effect on
our financial condition and results of operations.
We may rely on dividends paid by our subsidiaries
for our cash needs, and any limitation on the ability of our subsidiaries to make payments to us could
have a material adverse effect
on our ability to conduct our business.
As a holding company, we conduct
substantially all of our business through our consolidated subsidiaries incorporated in Mainland China, Hong
Kong SAR, and Singapore.
We may rely on dividends paid by these PRC subsidiaries for our cash needs, including the funds necessary to pay any dividends
and other
cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by
entities
established in China is subject to limitations. Regulations in China currently permit payment of dividends only out of accumulated
profits as determined in
accordance with accounting standards and regulations in China. Each of our PRC subsidiaries is required to set
aside at least 10% of its after-tax profit based
on PRC accounting standards each year to its general reserves or statutory capital reserve
fund until the aggregate amount of such reserves reaches 50% of its
respective registered capital. As a result, our PRC subsidiaries are
restricted in their ability to transfer a portion of their net assets to us in the form of
dividends. In addition, if any of our PRC subsidiaries
incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to
pay dividends or make other
distributions to us. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely
limit
our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct
our
business.
Our current employment practices may be
restricted under the PRC Labor Contract Law and our labor costs may increase as a result.
The PRC Labor Contract Law
and its implementing rules impose requirements concerning contracts entered into between an employer and its
employees and establishes
time limits for probationary periods and for how long an employee can be placed in a fixed-term labor contract. Because the Labor
Contract
Law and its implementing rules have not been in effect very long and because there is lack of clarity with respect to their implementation
and
potential penalties and fines, it is uncertain how it will impact our current employment policies and practices. We cannot assure
you that our employment
policies and practices do not, or will not, violate the Labor Contract Law or its implementing rules and that
we will not be subject to related penalties, fines
or legal fees. If we are subject to large penalties or fees related to the Labor Contract
Law or its implementing rules, our business, financial condition and
results of operations may be materially and adversely affected. In
addition, according to the Labor Contract Law and its implementing rules, if we intend to
enforce the non-compete provision with an employee
in a labor contract or non-competition agreement, we have to compensate the employee on a monthly
basis during the term of the restriction
period after the termination or ending of the labor contract, which may cause extra expenses to us. Furthermore, the
Labor Contract Law
and its implementation rules require certain terminations to be based upon seniority rather than merit, which significantly affects the
cost
of reducing workforce for employers. In the event we decide to significantly change or decrease our workforce in the PRC, the Labor
Contract Law could
adversely affect our ability to enact such changes in a manner that is most advantageous to our circumstances or in
a timely and cost effective manner, thus
our results of operations could be adversely affected.
28
There are uncertainties
with respect to regulatory cooperation between PCAOB and Chinese regulators under the Statement of Protocol signed by the
PCAOB and the
CSRC of the People’s Republic of China on August 26, 2022.
On
August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance
of
the People’s Republic of China, taking the first step toward opening access for the PCAOB to inspect and investigate registered
public accounting firms
headquartered in Mainland China and Hong Kong. Having made the determinations in 2021 that the positions taken
by PRC authorities prevented the
PCAOB from inspecting and investigating in Mainland China and Hong Kong completely, the PCAOB determined
that it had access to inspect or investigate
the registered public accounting firms in mainland China and Hong Kong, and therefore, on
December 15, 2022, the PCAOB removed Chinese Mainland and
Hong Kong from the list of jurisdictions where it is unable to inspect or investigate
completely registered public accounting firms. For this reason, we were
not identified as an SEC-identified issuer under the HFCA Act
in 2023. However, there are uncertainties with respect to regulatory cooperation between the
PCAOB and the Chinese regulators.
Our auditor, the independent
registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of
companies that
are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which
the
PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. The auditor is located in
Mainland China, a
jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely before 2022.
As a result, we and investors in the
common shares were deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China in the
past has made it more difficult to evaluate the effectiveness of our independent registered
public accounting firm’s audit procedures or quality control
procedures as compared to auditors outside of China that are subject
to the PCAOB inspections. On December 15, 2022, the PCAOB issued a report that
vacated its December 16, 2021 determination and removed
Mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or
investigate completely registered public
accounting firms. However, if the PCAOB determines in the future that it no longer has full access to inspect and
investigate completely
accounting firms in Mainland China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to
issue an
audit report on our financial statements filed with the SEC, the SEC may subsequently impose on a ban on trading of our Common Stock.
A ban on
trading of our Common Stock would substantially impair investors’ ability to sell or purchase our Common Stock, and the
risk and uncertainty associated
with the ban would have a negative impact on the price of shares of our Common Stock.
The Holding Foreign
Companies Accountable Act could result in delisting of our common stock from Nasdaq Capital Market and lack of a readily
available market
for our common stock.
On December 18, 2020, the
Holding Foreign Companies Accountable Act (“HFCAA”) became law. Among other things, the HFCAA requires the
SEC to identify
public companies that have retained a registered public accounting firm to issue an audit report where that firm has a branch or office
that:
(1) is located in a foreign jurisdiction, and (2) the Public Company Accounting Oversight Board (“PCAOB”) has determined
that it is unable to inspect or
investigate completely because of a position taken by an authority in the foreign jurisdiction. PCAOB
has identified several public accounting firms in
Mainland China and Hong Kong SAR that PCAOB cannot inspect or investigate completely
because of a position taken by that foreign government. The
PCAOB has oversight authority over public accounting firms that audit financial
results of companies subject to the Securities Exchange Act of 1934 (the
“Exchange Act”). On December 16, 2021, PCAOB issued
the HFCAA Determination Report, which includes a list of those public accounting firms located
outside the U.S. that PCAOB is unable to
inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction (each a
“Listed Auditor”).
Our auditor, Ernst & Yong Hua Ming LLP (the “Auditor”), for our 2022 fiscal year audit and currently our public auditor
was a Listed
Auditor subject to the determinations announced by the PCAOB on December 16, 2021. Our Auditor is located in China.
29
The HFCAA states if the SEC
determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to
inspection by PCAOB
for three consecutive years beginning in 2021, being a Listed Auditor, the SEC shall prohibit our shares from being traded on a
national
securities exchange or in the over-the counter trading market in the U.S. On December 2, 2021, the SEC adopted final amendments to its
rules
implementing the HFCAA (the “Final Amendments”). The Final Amendments include requirements to disclose information,
including the auditor name and
location, the percentage of shares of the issuer owned by governmental entities, whether governmental entities
in the applicable foreign jurisdiction with
respect to the auditor has a controlling financial interest with respect to the issuer, the
name of each official of the Chinese Communist Party who is a
member of the board of the issuer, and whether the articles of incorporation
of the issuer contains any charter of the Chinese Communist Party, including the
text of any such charter.
The SEC publishes a list of
Exchange Act reporting companies that retain a Listed Auditor that has issued an audit report for a fiscal year (each
company listed is
a “Commission Identified Issuer” for purposes of HFCAA). If a Commission Identified Issuer has a Listed Auditor issue audit
reports for
three consecutive fiscal years, then the SEC will impose an initial trading ban on the publicly traded securities of the Commission
Identified Issuer, which
trading ban can be lifted if Commission Identified Issuer retains a public auditor that is not a Listed Auditor
and that public auditor issues an audit report for
a fiscal year for the Commission Identified Issuer. The SEC’s role at this stage
of the process is solely to identify issuers that have used Listed Auditors to
audit their financial statements.
Our Auditor is the independent
registered public accounting firm that issues the audit report included elsewhere in our Form 20-F and conducts the
audit of our annual
financial results. As an auditor of a company that has its stock traded publicly in the United States, our Auditor is registered with
and
supervised by the PCAOB and is subject to laws in the United States. Under those laws, the PCAOB conducts regular inspections or
audits to assess public
accounting firms acting as auditors, including our Auditor, compliance with the applicable PCAOB rules and professional
standards. Since our Auditor is
located in China, a jurisdiction where the PCAOB has been unable to conduct audits and inspections completely
without the approval of the Chinese
authorities, our Auditor was not currently audited or inspected completely by the PCAOB and was consequently
a Listed Auditor.
On December 15, 2022, the
PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public
accounting firms headquartered
in Mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 determinations that the PCAOB was
unable to inspect or investigate
completely registered public accounting firms headquartered in Mainland China and Hong Kong. For this reason, we do not
expect to be
identified as a Commission-Identified Issuer following the filing of this annual report. However, it is uncertain whether the PCAOB will
continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in Mainland China
and Hong Kong in
the future, which ability depends on a number of factors beyond our, and our auditor’s, control, including the
uncertainties surrounding the relationship
between China and the United States. If in the future the PCAOB finds that it is unable to
completely inspect and investigate registered public accounting
firms headquartered in Mainland China or Hong Kong, the PCAOB may act
immediately to consider the need to issue new determinations consistent with the
HFCAA, and we may be identified as a Commission-Identified
Issuer again. In accordance with the HFCAA as amended by the Consolidated Appropriations
Act, 2023, if the PCAOB is unable to continue
to inspect or investigate completely registered public accounting firms headquartered in Mainland China or
Hong Kong, including our independent
registered public accounting firm, for two consecutive years, our securities would be delisted from Nasdaq and will
be prohibited from
trading on other U.S. stock exchanges and “over-the-counter” in the U.S. This potential lack of full audit and inspection
could deprive
investors in our Common Stock of the benefits of PCAOB oversight and inspections. The potential inability of the PCAOB
to conduct inspections of auditors
in Mainland China and Hong Kong SAR could make it more difficult to evaluate the effectiveness of
our Auditor’s audit procedures or quality control
procedures as compared to auditors outside of Mainland China and Hong Kong SAR
that are subject to complete audit and investigation by the PCAOB. This
potential limitation on PCAOB audit and inspection could cause
investors and potential investors in our Common Stock to lose confidence in our audit
procedures and reported financial information and
the quality of our financial statements. This potential lack or loss of confidence could also not only cause
investors to avoid trading
our Common Stock or sell positions in our Common Stock, but could also undermine efforts of the Company to secure equity or
debt financing,
hinder any efforts to up-list the Common Stock to a national securities exchange, adversely influence the decision of third parties to
conduct
business with our company, or have other adverse business or financial consequences. Trading in our securities may be prohibited
under the HFCAA if
PCAOB should determine that it cannot inspect or investigate completely our Auditor, and that as a result, Nasdaq
may determine to delist our securities.
30
Under
the current version of HFCAA, an SEC ban on trading shares of Common Stock in the U.S. could take place if we have a Listed Auditor (a
public
auditor that cannot be completely audited and investigated by the PCAOB for two consecutive fiscal years). If this happens, there
is no certainty that we
will be able to list or otherwise trade our shares on a non-U.S. exchange or that a market for our shares of Common
Stock will develop outside of the
U.S. The ban on trading of our shares in, or the threat of their being banned from trading in, the U.S.
may materially and adversely affect the value of
our Shareholders’ investment.
If the Company is subject
to a trading ban in the United States, it may be unable to list its Common Stock on a non-U.S. public stock market, or
even if listed
on a non-U.S. public stock market, that the Common Stock would enjoy any liquidity or investor support. As such, the Common Stock may
be
difficult to establish or be unable to be established on a foreign public stock market or quotation system. The absence of a public
market for the Common
Stock could render the shares of Common Stock an illiquid, potentially worthless investment.
The HFCAA or other efforts
to increase U.S. regulatory access to audit information could cause investor uncertainty for affected issuers, like our
company, and
the market price of the shares could be adversely affected. In addition, while the PCAOB announced in December 2022 that it secured
complete
access to inspect and investigate registered public accounting firms headquartered in China, we cannot assure you that the PCAOB will
continue to
have such access in the future. If the PCAOB is not able to inspect and investigate completely auditors in China for any
reason, such as any change in the
position of the governmental authorities in China in the future, the SEC may subsequently impose on
a ban on trading of our Common Stock. A ban on
trading of our Common Stock would substantially impair your ability to sell or purchase
our shares when you wish to do so, and the risk and uncertainty
associated with the ban would have a negative impact on the price of
our shares of Common Stock. The ban on trading would also significantly affect our
ability to raise capital on terms acceptable to us,
or at all, which would have a material adverse impact on our business, financial condition, and prospects. If
our shares are prohibited
from trading in the U.S., there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will
develop outside of the U.S.
Efforts to increase
U.S. Regulatory access to information about companies in Mainland China or Hong Kong SAR in order to enhance transparency for
investors
in U.S. corporations traded on U.S. stock markets but with substantial operations in Mainland China or Hong Kong SAR, like the Company,
and Chinese opposition and reaction to those U.S. efforts could foster additional measures to restrict access to U.S. capital markets
by such corporations
or expedite delisting of securities of such corporations from U.S. stock markets and quotation systems. The enactment
of the Accelerating Holding
Foreign Companies Accountable Act has decreased the number of non-inspection years from three to two years
under HFCAA, thus reducing the time
period before our shares of Common Stock may be banned from being traded in the U.S.
The Accelerating Holding
Foreign Companies Accountable Act was passed by the US House of Representatives as part of the Omnibus Spending
Bill on December 23,
2022 and was signed into law by Pres. Biden soon thereafter, thus shortening the time for the SEC to delist a non-compliant company
from
three years to two years if the PCAOB determines that it is unable to inspect or investigate a public company’s independent auditors
in a foreign
jurisdiction. If the PCAOB is not able to inspect and investigate completely our auditors in China for any reason, the SEC
will subsequently prohibit our
Common Stock to be listed on any of the U.S. securities exchanges or be traded over-the-counter two years
after the PCAOB determination instead of three
years under HFCAA.
31
If the Company
becomes directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese/Hong Kong SAR
companies,
we may have to expend significant resources to investigate and resolve the matters. Any unfavorable results from the investigations could
harm our business operations and our reputation.
In 2021 and onwards, U.S.
public companies with operations based in China have been subjects of intense scrutiny, criticism and negative publicity
by investors,
financial commentators and regulatory agencies, such as the SEC and certain members of Congress. Much of the scrutiny, criticism and
negative publicity has centered on alleged financial and accounting irregularities, lack of effective internal control over financial
reporting, inadequate
corporate governance and ineffective implementation thereof and, in many cases, allegations of fraud. As a result
of enhanced scrutiny, criticism and negative
publicity, the publicly traded stocks of many U.S.-listed Chinese companies have decreased
in value and, in some cases, have become virtually worthless or
illiquid. Shareholder lawsuits and SEC investigations and enforcement
actions can be fostered by intense, negative public focus on Chinese or Hong Kong
SAR based companies. The Company does not believe that
it is subject to any of these allegations, investigations or enforcement actions as of the date of this
annual report. If the Company
becomes a subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, the Company will
have to
expend significant resources to investigate such allegations and defend the Company. If such allegations were not proven to be baseless,
the
Company would be severely hampered and the price of the stock of the Company could decline substantially. If such allegations were
proven to be
groundless, the investigation might have significantly distracted the attention of the Company’s management. The mere
commencement of an investigation
by a regulator, like the SEC, even without evidence of any misconduct or violation of laws, can undermine
investor confidence in the Company as an
investment and do so even if the investigation finds no misconduct or violations of laws or
regulations. Regulator investigations can take months or longer to
resolve and can require considerable resources of a company to adequately
respond to such. investigations.
The recent government
regulation of business activities of U.S.-listed Chinese companies may negatively impact our operations.
Chinese regulatory authorities
issued Opinions on Strictly Cracking Down on Illegal Securities Activities, which were available to the public on July
6, 2021, which
further emphasized their goal to strengthen the cross-border regulatory collaboration, to improve relevant laws and regulations on data
security, cross-border data transmission, and confidential information management, and provided that efforts will be made to revise the
regulations on
strengthening the confidentiality and file management relating to the offering and listing of securities overseas, to
implement the responsibility on
information security of overseas listed companies, and to strengthen the standardized management of cross-border
information provision mechanisms and
procedures. These opinions are issued in mid-2021, and there were no known further explanations
or detailed rules or regulations with respect to such
opinions, and there are still uncertainties regarding the interpretation and implementation
of these opinions. China intends to improve regulation of cross-
border data flows and security, crack down on illegal activity in the
securities market and punish fraudulent securities issuance, market manipulation and
insider trading. China will also check sources of
funding for securities investment and control leverage ratios. If the Chinese government’s regulatory
involvement expands and we
become subject to that expanded involvement, our operations may be negatively impacted, although, as of the date of this
annual report,
there is no known regulatory involvement of the nature described in this paragraph and there is no discernible immediate impact on our
company under the recent regulatory developments described in this paragraph.
32
We face various risks and
uncertainties relating to doing business in Mainland China and Hong Kong SAR. Our business operations are primarily
conducted in Mainland
China and Hong Kong SAR, and we are subject to complex and evolving Chinese and Hong Kong SAR laws and regulations. For
example, the
Anti-Monopoly Law of the People’s Republic of China (Revised in 2022) (“Anti-monopoly Law”) came into effect on August
1, 2022. The
“monopolistic practices” defined by the Anti-Monopoly Law include (a) the conclusion of a monopolistic agreement;
(b) the abuse of dominant market
positions; and (c) the concentration that eliminates or restricts competition or may eliminate or restrict
competition. Based on Company’s China and global
market share, the Company does not have a dominant market position that enables
the Company to restrict or eliminate the competition. China promulgated
several laws and regulations on data security and personal information
protections in the last two years, mainly the Data Security Law of the People’s
Republic of China (“Data Security Law”),
which came into effect on September 1, 2021, and the Personal Information Protection Law of the People’s
Republic of China (“PIP
Law”), which came into effect on November 1, 2021. In the Company’s day-to-day business operations, sensitive customer data
and
personal information will not be received from the Company’s clients. The legal consequence of this fact is that neither the
Data Security Law or the PIP Law
applies to the Company’s business activities in China. And we also face risks associated with
regulatory approvals on offshore offerings, as well as the lack
of inspection on our Auditor by the PCAOB, which may impact our ability
to conduct certain businesses, accept foreign investments, or list and conduct
offerings on a United States or other foreign exchange.
These risks could result in a material adverse change in our operations and the value of our shares of
Common Stock, significantly limit
or completely hinder our ability to continue to offer securities to investors, or cause the value of our Common Stock to
decline.
Uncertainties with respect to the PRC legal
system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in
policies, laws and regulations
in China, could adversely affect us.
The PRC legal system is based
on written statutes and court decisions that have limited precedential value. The PRC legal system is evolving
rapidly, and therefore
the interpretations and enforcement of many laws, regulations and rules may contain reasonable uncertainties.
From time to time, we may
have to resort to administrative and court proceedings to enforce our legal rights. However, since partial statutory and
contractual
terms may remain reasonable blank or uncertainty due to the rapid evolvement, it may be difficult to predict the outcome of a judicial
or
administrative proceeding.
The PRC government has recently
published new policies that significantly affected certain industries such as the education and internet industries,
and we cannot rule
out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our
business,
financial condition and results of operations. Furthermore, the PRC government has also indicated an intent to exert more oversight
and control over
securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based
companies like us. Any such
action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer
or continue to offer securities to investors and
cause the value of such securities to significantly decline or in extreme cases, become
worthless.
Permissions Required from the PRC Authorities
for Our Operations
We conduct our business primarily
through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. As of the
date of this annual report,
our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for
the business
operations of our subsidiaries in China, including, Business license, the Human Resource Services License. Given the uncertainties of
interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we
may be required to
obtain additional licenses, permits, filings or approvals for the services in the future.
33
Furthermore, in connection
with our issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the
date of this
annual report, we, our PRC subsidiaries, (i) are not required to obtain permissions from the China Securities Regulatory Commission,
or the
CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii)
have not been asked to
obtain such permissions by any PRC authority.
However, the PRC government
has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or
foreign investment
in China-based issuers.
If any of our Company, our
subsidiaries do not receive or maintain the requisite permissions or approvals for our operations, or inadvertently
conclude that such
permissions or approvals are not required, the relevant PRC regulatory authorities would have broad discretion in dealing with such
violations
or failures, including imposing fines, confiscating our incomes and products that are deemed to have been obtained through illegal operations,
and
discontinuing or restricting our operations. It could result in substantial additional costs, adversely affect our ability to conduct
our business, compete with
other companies, our financial performance and negatively affect investors’ confidence in our financial
performance and business prospects. Even if such
permissions or approvals are ultimately granted, we may not successfully maintain or
renew them and they may be withdrawn. Since applicable laws,
regulations, or interpretations for the permissions or approvals may change
and we may be required to obtain additional permissions or approvals in the
future, we cannot assure you that we may obtain such permissions
or approvals in a timely manner, or at all. It could result in a material change in our
operations and we may be required to recall some
of our current or future products, or even to partially suspend or totally shut down our production. In
addition, regulatory changes
may relax certain requirements that could benefit our competitors or lower market entry barriers and increase competition.
Furthermore,
it could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value
of our
securities to significantly decline or become worthless.
The filing, approval or other administrative
requirements of the CSRC or other PRC government authorities may be required to maintain our listing
status or conduct future offshore
securities or debt offerings.
The PRC government authorities
may strengthen oversight over offerings that are conducted overseas and/or foreign investment in overseas-listed
China-based issuers
like us from time to time. Such actions taken by the PRC government authorities may intervene our operations at any time, which are
beyond
our control. For instance, the relevant PRC governments promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities,
among
which, it is mentioned that the administration and supervision of overseas-listed China-based companies will be strengthened, and
the special provisions of
the State Council on overseas issuance and listing of shares by such companies will be revised, clarifying
the responsibilities of domestic industry competent
authorities and regulatory authorities. However, due to lack of further interpretations
or applications from the competent authorities on such opinions, there
are still uncertainties regarding the interpretation and implementation
of these opinions, and any new rules or regulations promulgated in the future may
impose additional requirements on us.
On February 17, 2023, the
CSRC published the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies
(the “Trial
Measures”). Pursuant to the Trial Measures, a filing-based regulatory system is applied to both “direct overseas offering
and listing” and “indirect
overseas offering and listing” of PRC domestic companies. The “indirect overseas offering
and listing” of PRC domestic companies refers to such securities
offering and listing in an overseas market made in the name of
an offshore entity, but based on the underlying equity, assets, earnings or other similar rights
of a domestic company which operates
its main business domestically. If the issuer meets the following conditions, the offering and listing shall be
determined as an indirect
overseas offering and listing by a domestic company: (i) the total assets, net assets, revenues or profits of the domestic operating
entity or entities of the issuer in the most recent accounting year account for more than 50% of the corresponding figure in the issuer’s
audited consolidated
financial statements for the same period; (ii) most of the senior managers in charge of business operation and management
of the issuer are Chinese citizens
or have domicile in China, and its main places of business are located in China or main business activities
are conducted in China. Pursuant to the Trial
Measures, we are required to file the relevant documents with the CSRC within three business
days after submitting our listing application documents to the
relevant regulator in the place of intended listing, and complete the
filing procedures with the CSRC in connection with such subsequent securities offerings
in the same overseas market where we have previously
offered and listed securities within three business days after the offering is completed. Failure to
complete the filing under the Trial
Measures may subject a PRC domestic company to a warning and a fine of RMB1 million to RMB10 million. In the event
of a serious violation
of the Trial Measures, the CSRC may impose a ban on entering into the securities market upon the relevant responsible persons. Any
such
violation that constitutes a crime shall be investigated for criminal liability according to law.
34
Furthermore, on February
24, 2023, the CSRC published the Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering
and Listing by Domestic Companies (the “Confidentiality and Archives Management Provisions”). Pursuant to the Confidentiality
and
Archives Management Provisions, PRC domestic companies that seek to offer and list securities in overseas markets shall establish
confidentiality and
archives system. The PRC domestic companies shall obtain approval from the competent authority and file with the
confidential administration department at
the same level when providing or publicly disclosing documents and materials related to state
secrets or secrets of the governmental authorities to the
relevant individuals or entities including securities companies, securities
service agencies or the offshore regulatory authorities or providing or publicly
disclosing such documents and materials through its
offshore listing entity, and shall complete corresponding procedures when providing or publicly
disclosing documents and materials which
may adversely influence national security and the public interest to the relevant individuals or entities including
securities companies,
securities service agencies or the offshore regulatory authorities or providing or publicly disclosing such documents and materials
through
its offshore listing entity. The PRC domestic companies shall provide written statements on the implementation on the aforementioned
rules to the
relevant securities companies and securities service agencies and the PRC domestic companies that provides accounting archives
or copies of accounting
archives to any entities including securities companies, securities service providers and overseas regulators
and individuals shall fulfill due procedures in
compliance with applicable national regulations.
As the CSRC determines that we need to complete the required filing
procedures for any such subsequent securities offerings in the same overseas
market where we have previously offered and listed securities,
or if such government authorities promulgate any interpretation or implement rules that would
require us to obtain approvals from the
CSRC or other regulatory authorities or complete required filing or other administrative procedures for any future
offshore securities
offering or other financing activities, it is uncertain whether we can or how long it will take us to obtain such approval or complete
such
filing or other administrative procedures, or obtain any waiver of aforesaid requirements if and when procedures are established
to obtain such waiver. Any
failure to obtain or delay in obtaining such approval or completing such filing or other administrative procedures
for any future offshore securities offering,
or a rescission of any such approval obtained by us, could subject us to sanctions by the
CSRC or other PRC regulatory agencies. In any such event, these
regulatory authorities may also impose fines and penalties on our operations
in China, limit our operating privileges in China, delay or restrict the repatriation
of the proceeds from any future offshore securities
offering into the PRC or take other actions that could adversely affect our business, operating results and
financial condition, as well
as our ability to complete any future offshore securities offering. The CSRC or any other PRC government authorities may also
take actions
requiring us, or making it advisable for us, to halt any future offshore securities offering. Consequently, if you engage in market trading
or other
activities in anticipation of and prior to settlement and delivery, you do so at the risk that such settlement and delivery may
not occur. Any uncertainties or
negative publicity regarding such approval requirements could materially and adversely affect the trading
price of our shares.
Our subsidiaries in Mainland China are
subject to restrictions on paying dividends and making other payments to our holding company.
CLPS Incorporation is our
holding company incorporated in the Cayman Islands and has no operation of its own. As a result of the holding
company structure, it
currently relies on dividend payments from our subsidiaries in Mainland China. However, PRC regulations currently permit payment of
dividends
only out of accumulated profits, as determined in accordance with PRC accounting standards and regulations. Our subsidiaries in Mainland
China
are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations
to fund certain reserve funds. The PRC
government also imposes controls on the conversion of RMB into foreign currencies and the remittance
of foreign currencies out of Mainland China. We
may experience difficulties in completing the administrative procedures necessary to
obtain and remit foreign currency. The Company does not believe that
any recent new regulations on foreign exchange controls will cause
CLPS entities within Mainland China to encounter restrictions or obstacles in distributing
profits to foreign shareholders. Furthermore,
if our subsidiaries in Mainland China incur debt on their own in the future, the instruments governing the debt
may restrict their ability
to pay dividends or make other payments. If our subsidiaries in Mainland China are unable to pay dividends or make other payments
to
us, we may be unable to pay dividends on our shares.
35
The Company provides cash
support to its subsidiaries according its business development plan. For fiscal year 2022, 2023, and 2024, the Company
provided cash
support to its subsidiaries in Mainland China, Singapore and Hong Kong SAR. The amounts were offset when the Company’s consolidated
financial statements were prepared. The balances due from subsidiaries to the Company were US$22.8, US$24.7 million, and US$36.2 million
as of June 30
for fiscal 2022, 2023, and 2024, respectively. The subsidiaries provide cash support to the Company according its business
development plan. The balances
due to subsidiaries from the Company were US$7.1 million, US$7.6 million, and US$24.8 million as of June
30 for fiscal 2022, 2023, and 2024,
respectively. The balances were reflected in the section “PARENT COMPANY ONLY CONDENSED FINANCIAL
INFORMATION” in our financial
statements for fiscal 2022, 2023, and 2024, respectively.
Recent regulatory developments in China
may subject us to additional regulatory review and disclosure requirements, expose us to government
interference, or otherwise restrict
or completely hinder our ability to offer securities and raise capitals outside China, all of which could materially and
adversely affect
our business, and cause the value of our securities to significantly decline or become worthless.
In December 2021, the CAC
promulgated the amended Measures of Cybersecurity Review which require cyberspace operators with personal
information of more than one
million users to file for cybersecurity review with the CRO, in the event such operators plan for an overseas listing. The
amended Measures
of Cybersecurity Review provide that, among others, an application for cybersecurity review must be made by an issuer that is a
“network
platform operator” as defined therein before such issuer’s securities become listed in a foreign country, if the issuer possesses
personal information
of more than one million users, and that the relevant governmental authorities in the PRC may initiate cybersecurity
review if such governmental authorities
determine an operator’s cyber products or services or data processing activities affect
or may affect China’s national security. The amended Measures of
Cybersecurity Review took effect on February 15, 2022.
Under the current PRC cybersecurity
laws in China, critical information infrastructure operators that intend to purchase internet products and
services that may affect national
security must be subject to the cybersecurity review. On July 30, 2021, the State Council of the PRC promulgated the
Regulations on the
Protection of the Security of Critical Information Infrastructure, which took effect on September 1, 2021. The regulations require, among
others, that certain competent authorities shall identify critical information infrastructures. If any critical information infrastructure
is identified, they shall
promptly notify the relevant operators and the Ministry of Public Security.
Currently, the cybersecurity laws and regulations have not directly
affected our business and operations. As the amended Measures of Cybersecurity
Review took effect in February 2022, we may be subject
to review when conducting data processing activities, and may face challenges in addressing its
requirements and make necessary changes
to our internal policies and practices in data processing. As of the date of this annual report, we have not been
involved in any investigations
on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions
in such respect.
Based on the foregoing, we and our PRC legal counsel do not expect that, as of the date of this annual report, the current applicable
PRC
laws on cybersecurity would have a material adverse impact on our business.
We may not meet regulatory requirements to prepare sufficiently
for cybersecurity incident.
On July 26, 2023, the SEC
promulgated final rules requiring public companies to have sufficient measures against cybersecurity incidents, including
certain corporate
governance and reporting requirements. If we are not able to implement relevant measures to comply with the SEC rules by December 31,
2023, we may be assessed a regulatory penalty due to non-compliance of the SEC rules. See Item 16K for Cybersecurity disclosure discussion.
We may not meet continued listing standards on the NASDAQ Global
Market.
If our shares are delisted
from the NASDAQ Global Market at some later date, our shareholders could find it difficult to sell our shares. In addition,
if our common
shares are delisted from the NASDAQ Global Market at some later date, we may apply to have our common shares quoted in the OTC
Markets,
otherwise they would automatically begin Quotation or in the “pink sheets” maintained by the National Quotation Bureau, Inc.
The OTC Markets
and the “pink sheets” are less efficient markets than the NASDAQ Global Market. In addition, if our common
shares are delisted at some later date, our
common shares may be subject to the “penny stock” regulations. These rules impose
additional sales practice requirements on broker-dealers that sell low-
priced securities to persons other than established customers
and institutional accredited investors and require the delivery of a disclosure schedule explaining
the nature and risks of the penny
stock market. As a result, the ability or willingness of broker-dealers to sell or make a market in our common shares might
decline.
If our common shares are delisted from the NASDAQ Global Market at some later date or become subject to the penny stock regulations,
it is likely
that the price of our shares would decline and that our shareholders would find it difficult to sell their shares.
We received a written notice from Nasdaq dated June 10, 2024, indicating
that the closing bid price for our Common Shares fell below $1.00 per
share for 30 consecutive trading days, which was not in compliance
with Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rule 5810(c)(3)
(A), the Company had been granted a 180-calendar day
compliance period, until December 9, 2024, to regain compliance with the minimum bid price
requirement. We received a notification from
Nasdaq dated September 6, 2024, indicating that the closing bid price for our Common Shares has been at
$1.00 per share or greater for
the last 10 consecutive business days, which is in compliance with Nasdaq Listing Rule 5450(a)(1), and therefore, this case was
closed.
However, we cannot assure you that we can continue to meet the Nasdaq continued listing requirements in the future.
36
The market price for our shares may be volatile.
The trading prices of our
common shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen
because of broad
market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial
results of internet or other companies based in China that have listed their securities in the United States in recent years. The securities
of some of these
companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial
decline in their trading prices. The
trading performances of other Chinese companies’ securities after their offerings may affect
the attitudes of investors toward Chinese companies listed in the
United States, which consequently may impact the trading performance
of our common shares, regardless of our actual operating performance. In addition,
any negative news or perceptions about inadequate
corporate governance practices or fraudulent accounting, corporate structure or other matters of other
Chinese companies may also negatively
affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have
conducted any inappropriate
activities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not
related
to our operating performance, which may have a material adverse effect on the market price of our shares. In addition to the above factors,
the price
and trading volume of our common shares may be highly volatile due to multiple factors, including the following:
●
regulatory
developments affecting us, our users, or our industry;
●
regulatory uncertainties
with regard to our variable interest entity arrangements;
●
announcements of studies
and reports relating to our service offerings or those of our competitors;
●
actual or anticipated fluctuations
in our quarterly results of operations and changes or revisions of our expected results;
●
changes in financial estimates
by securities research analysts;
●
announcements by us or
our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital
commitments;
●
additions to or departures
of our senior management;
●
detrimental negative publicity
about us, our management or our industry;
●
fluctuations of exchange
rates between the RMB and the U.S. dollar;
●
release or expiry of lock-up
or other transfer restrictions on our outstanding common shares; and
●
sales or perceived potential
sales of additional common shares.
We are a “foreign private issuer,”
and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide
you the same information
as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for
you to evaluate
our performance and prospects.
We are a foreign private
issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we
will be subject
to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For
example,
we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual
executive compensation
information. Furthermore, our directors and executive officers will not be required to report equity holdings
under Section 16 of the Exchange Act and will
not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign
private issuer, we will also be exempt from the requirements of
Regulation FD (Fair Disclosure) which, generally, are meant to ensure
that select groups of investors are not privy to specific information about an issuer
before other investors. However, we will still
be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange
Act. Since many of the disclosure
obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you
should not
expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.
37
We are a Cayman Islands company and, because
judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than
under U.S. law, you may have less
protection for your shareholder rights than you would under U.S. law.
Our corporate affairs are
governed by our Memorandum and Articles of Association, the Cayman Islands Companies Law (Revised) (the
“Companies Law”)
and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority
shareholders
and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of
the
Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman
Islands as well as
that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The
rights of our shareholders and the
fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established
as they would be under statutes or judicial precedent in
some jurisdictions in the United States. In particular, the Cayman Islands has
a different body of securities laws than the United States. In addition, some U.S.
states, such as Delaware, have more fully developed
and judicially interpreted bodies of corporate law than the Cayman Islands. There is no statutory
recognition in the Cayman Islands of
judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances
recognize and enforce
a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. As a result of all of the above, public
shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board
of directors or
controlling shareholders than they would as shareholders of a U.S. public company.
Judgments obtained against us by our shareholders
may not be enforceable.
We are a Cayman Islands company
and all of our assets are located outside of the United States. Our current operations are based in China. In
addition, our current directors
and executive officers are nationals and residents of countries other than the United States. Substantially all of the assets of
these
persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or
against these
individuals in the United States in the event that you believe that your rights have been infringed under the United States
federal securities laws or otherwise.
Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and
of China may render you unable to enforce a judgment
against our assets or the assets of our directors and officers.
We are a foreign private issuer and, as
a result, will not be subject to U.S. proxy rules and will be subject to more lenient and less frequent Exchange Act
reporting obligations
than a U.S. issuer.
We report under the Securities
Exchange Act as a foreign private issuer. Because we qualify as a foreign private issuer under the Exchange Act, we
will be exempt from
certain provisions of the Exchange Act that are applicable to U.S. public companies, including:
●
the sections of the Exchange
Act that regulate the solicitation of proxies, consents or authorizations in respect of a security registered under the
Exchange
Act;
●
the sections of the Exchange
Act that require insiders to file public reports of their stock ownership and trading activities and impose liability on
insiders
who profit from trades made in a short period of time; and
●
the rules under the Exchange
Act that require the filing of quarterly reports on Form 10-Q containing unaudited financial and other specified
information and
current reports on Form 8-K upon the occurrence of specified significant events.
38
In addition, foreign private
issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while
U.S. domestic
issuers that are not large accelerated filers or accelerated filers are required to file their annual report on Form 10-K within 90 days
after the
end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, aimed at preventing issuers from making
selective disclosures of
material information. There is no formal requirement under the Company’s memorandum and articles of association
mandating that we hold an annual
meeting of our shareholders. However, notwithstanding the foregoing, we intend to hold such meetings
on our annual meeting to, among other things, elect
our directors. As a result, you may not have the same protections afforded to stockholders
of companies that are not foreign private issuers.
We may lose our foreign private issuer
status in the future, which could result in significant additional costs and expenses.
The determination of our
status as a foreign private issuer is made annually on the last business day of our most recently completed second fiscal
quarter and,
accordingly, the next determination will be made with respect to us on or after December 31, 2024. We would lose our foreign private
issuer
status if (1) a majority of our outstanding voting securities are directly or indirectly held of record by U.S. residents, and
(2) a majority of our shareholders or
a majority of our directors or management are U.S. citizens or residents, a majority of our assets
are located in the United States, or our business is
administered principally in the United States. If we were to lose our foreign private
issuer status, the regulatory and compliance costs to us under U.S.
securities laws as a U.S. domestic issuer may be significantly higher.
We may also be required to modify certain of our policies to comply with corporate
governance practices associated with U.S. domestic
issuers, which would involve additional costs.
We may be exposed to risks relating to
evaluations of controls required by Sarbanes-Oxley Act of 2002.
Pursuant to Sarbanes-Oxley
Act of 2002, our management is required to report on, and our independent registered public accounting firm may in the
future be required
to attest to, the effectiveness of our internal control over financial reporting. Our internal accounting controls may not meet all standards
applicable to companies with publicly traded securities. If we fail to implement any required improvements to our disclosure controls
and procedures, we
may be obligated to report control deficiencies and, if required, our independent registered public accounting firm
may not be able to certify the effectiveness
of our internal controls over financial reporting. In either case, we could become subject
to regulatory sanction or investigation. Further, these outcomes
could damage investor confidence in the accuracy and reliability of
our financial statements.
We continue to reply on exemption from
auditor attestation requirements as a non-accelerated filer.
Although we cease to be an
“emerging growth company” on June 30, 2023 as such term is defined in the JOBS Act, we are a non-accelerated filer
and are
exempt from Section 404 requirement to have auditor attestation on our internal control over financial reporting, therefore affording
investors less
statutory protection. We cannot predict if investors will find our common shares less attractive because we may rely on
these exemptions. If some investors
find our common shares less attractive as a result, there may be a less active trading market for
our common shares and the trading price of our common
shares may be more volatile. In addition, our costs of operating as a public company
may increase when we cease to be an emerging growth company.
We may be classified as a passive foreign
investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our
common shares.
Based on the historical market
price of our common shares since the IPO, and the composition of our income, assets and operations, we do not
expect to be treated as
a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the current taxable year or in the
foreseeable
future. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you
the U.S. Internal Revenue Service
will not take a contrary position. Furthermore, this is a factual determination that must be made annually
after the close of each taxable year. If we are a PFIC
for any taxable year during which a U.S. holder holds our common shares, certain
adverse U.S. federal income tax consequences could apply to such U.S.
Holder.
39
If securities or industry analysts do not
publish research or publish inaccurate or unfavorable research about our business, the market price for our
common shares and trading
volume could decline.
The trading market for our
common shares will depend in part on the research and reports that securities or industry analysts publish about us or our
business.
If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade
our
common shares or publish inaccurate or unfavorable research about our business, the market price for our common shares would likely
decline. If one or
more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility
in the financial markets, which, in
turn, could cause the market price or trading volume for our common shares to decline.
Our corporate structure, together with
applicable law, may impede shareholders from asserting claims against us and our principals.
All of our operations and
records, and all of our senior management are located in the PRC. Shareholders of companies such as ours have limited
ability to assert
and collect on claims in litigation against such companies and their principals. In addition, China has very restrictive secrecy laws
that
prohibit the delivery of many of the financial records maintained by a business located in China to third parties absent Chinese
government approval. Since
discovery is an important part of proving a claim in litigation, and since most if not all of our records
are in China, Chinese secrecy laws could frustrate
efforts to prove a claim against us or our management. In addition, in order to commence
litigation in the United States against an individual such as an
officer or director, that individual must be served. Generally, service
requires the cooperation of the country in which a defendant resides. China has a history
of failing to cooperate in efforts to affect
such service upon Chinese citizens in China.
If we become directly subject to the recent
scrutiny involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate
and or defend the matter,
which could harm our business operations, stock price and reputation and could result in a complete loss of your investment in
us.
Recently, U.S. public companies
that have substantially all of their operations in China have been the subject of intense scrutiny by investors,
financial commentators
and regulatory agencies. Much of the scrutiny has centered around financial and accounting irregularities and mistakes, a lack of
effective
internal controls over financial reporting and, in many cases, allegations of fraud. As a result of the scrutiny, the publicly traded
stock of many U.S.
listed China-based companies that have been the subject of such scrutiny has sharply decreased in value. Many of these
companies are now subject to
shareholder lawsuits and or SEC enforcement actions that are conducting internal and or external investigations
into the allegations. If we become the subject
of any such scrutiny, whether any allegations are true or not, we may have to expend significant
resources to investigate such allegations and or defend our
company. Such investigations or allegations will be costly and time-consuming
and distract our management from our business plan and could result in our
reputation being harmed and our stock price could decline
as a result of such allegations, regardless of the truthfulness of the allegations.
Changes in general economic conditions,
geopolitical conditions, U.S.-China trade relations and other factors beyond the Company’s control may
adversely impact our business
and operating results.
The Company’s operations
and performance depend significantly on global and regional economic and geopolitical conditions. Changes in U.S.-
China trade policies,
and a number of other economic and geopolitical factors both in China and abroad could have a material adverse effect on the
Company’s
business, financial condition, results of operations or cash flows. Such factors may include, without limitation:
●
instability in political
or economic conditions, including but not limited to inflation, recession, foreign currency exchange restrictions and
devaluations,
restrictive governmental controls on the movement and repatriation of earnings and capital, and actual or anticipated military or
political conflicts, particularly in emerging markets;
●
intergovernmental conflicts
or actions, including but not limited to armed conflict, trade wars, retaliatory tariffs, and acts of terrorism or war;
and
●
interruptions to the Company’s
business with its largest customers, distributors and suppliers resulting from but not limited to, strikes, financial
instabilities,
computer malfunctions or cybersecurity incidents, inventory excesses, natural disasters or other disasters such as fires, floods,
earthquakes, hurricanes or explosions.
Any of the foregoing or similar
factors could result in reduced demand for our services which, in turn, could have material adverse effects on our
business and results
of operations.
40
ITEM 4. INFORMATION ON THE COMPANY
A.
History and Development
of the Company
We are a global information
technology (“IT”), consulting and solutions service provider focused on delivering services primarily to global
institutions,
including banking, wealth management, ecommerce, and automotive areas both in China and globally. For more than 15 years as an IT services
provider for a growing network of clients within the fintech and financial services industry, CLPS has expanded its business beyond core
IT services,
venturing into the loan, e-commerce, academic education, and tourism sectors. Through its diversified offerings, CLPS is
committed to providing
comprehensive services and solutions for its clients. We have created and developed a particular market niche by
providing turn-key financial solutions.
Since our inception, we have
aimed to build one of the largest sales and service delivery platforms for IT services and solutions in China. The nature
of our services
is such that we provide a majority of services to our banking and credit card clients in order to build new or modify existing clients’
own
proprietary systems. We are fully committed of delivering digital transformation services with a focus on the fintech within the
areas of banking, wealth
management, e-commerce, and automotive, among others, through the utilization of innovative technology to achieve
our client’s goals. We maintain 20
delivery and/or R&D centers, of which 10 are strategically located in Mainland China (Shanghai,
Beijing, Dalian, Tianjin, Xi’an, Chengdu, Guangzhou,
Shenzhen, Hangzhou, and Hainan) and 10 are located globally (Hong Kong SAR,
the United States of America, Japan, Singapore, Australia, Malaysia, India,
the Philippines, Canada, and the United Arab Emirates). Our
extensive network enables us to serve different clients across various geographic locations. By
combining onsite or onshore support and
consulting with scalable and high-efficiency offsite or offshore services and processing, we are able to meet client
demands in a cost-effective
manner while retaining significant operational flexibility. By serving both Chinese and global clients on a common platform, we
are able
to leverage the shared resources, management proficiency, industry expertise and technological know-how to attract new business and remain
cost
competitive. We believe that maintaining our Company as a proven and reliable partner to our clients both in China and globally
positions us well to capture
greater opportunities in the rapidly evolving global market for IT consulting and solutions.
Corporate History and Background
CLPS Incorporation was incorporated
under the laws of the Cayman Islands on May 11, 2017. Our share capital is US$10,000, which is divided into
100,000,000 common shares
authorized, or US$0.0001 par value per share. On December 7, 2017, the Board of Directors approved a nominal issuance of the
following
shares to the existing shareholders: 5,000,000 shares to Qinrui Ltd., 5,000,000 shares to Qinhui Ltd., 430,823 shares to Qinlian Ltd.,
430,804
shares to Qinmeng Ltd. and 428,373 shares to Qinyao Ltd. All of the five shareholders are incorporated in the British Virgin
Islands.
The Company owns all of the
outstanding capital stock of both Qinheng (incorporated on June 9, 2017) and Qiner (incorporated on April 21, 2017).
Qinheng owns all
of the outstanding capital stock of CLPS QC (WOFE) (incorporated on August 4, 2017). CLPS QC (WOFE) and Qiner respectively own
55.30%
and 44.70% of the outstanding capital stock of CLPS Shanghai, the Company’s operating subsidiary based in Pudong New District,
Shanghai, China,
originally incorporated on August 30, 2005.
On August 30, 2005, CLPS
Shanghai was established by Jingsu Pan and Xiaochun Deng as a PRC limited liability company. Jingsu Pan and
Xiaochun Deng each actually
paid RMB250,000 (approximately US$30,881) in cash for 50% of equity interest in CLPS Shanghai, and the total registered
capital of CLPS
Shanghai was RMB500,000 (approximately US$61,763).
On December 23, 2005, CLPS
Shanghai increased its registered capital to RMB1,000,000 (approximately US$123,671). Jingsu Pan and Xiaochun
Deng respectively made
full payment for their subscribed capital to RMB500,000 (approximately US$61,835) on December 21, 2005.
On March 29, 2010, Yan Pan
entered into a Share Purchase Agreement with Jingsu Pan to purchase all of Jingsu Pan’s shares in CLPS Shanghai.
Pursuant
to the Share Purchase Agreement, Yan Pan paid RMB500,000 (approximately US$61,835) for 50% shares of CLPS Shanghai. After this
share
transfer, Yan Pan and Xiaochun Deng respectively held 50% shares of CLPS Shanghai.
On October 19, 2010, Raymond
Ming Hui Lin entered into a Share Purchase Agreement with Xiaochun Deng to purchase all of Xiaochun Deng’s
shares in CLPS
Shanghai. Pursuant to the Share Purchase Agreement, Raymond Ming Hui Lin paid RMB500,000 (approximately US$61,835) for 50%
shares
of CLPS Shanghai. After this share transfer, Yan Pan and Raymond Ming Hui Lin respectively held 50% shares of CLPS Shanghai. Since Raymond
Ming Hui Lin is a Hong Kong resident, CLPS Shanghai changed its form in a Sino-foreign equity joint venture.
On October 31, 2012, CLPS
Shanghai increased its registered capital to RMB5,000,000 (approximately US$799,987). Yan Pan and Raymond Ming
Hui Lin each increased
their subscribed capital to RMB2,500,000 (approximately US$399,993). Yan Pan actually paid RMB1,000,000 (approximately
US$159,997) and
Raymond Ming Hui Lin actually paid RMB1,008,120 (approximately US$161,296) for the capital contributions on October 18, 2012.
On October 30, 2013, Xiao
Feng Yang entered into a Share Purchase Agreement with Yan Pan to purchase all of Yan Pan’s shares in CLPS
Shanghai. Pursuant
to the Share Purchase Agreement, Xiao Feng Yang paid RMB2,500,000 (approximately US$399,993) for 50% shares of CLPS Shanghai.
After this share transfer, Xiao Feng Yang and Raymond Ming Hui Lin respectively held 50% shares of CLPS Shanghai.
41
On June 24, 2014, CLPS Shanghai
increased its registered capital to RMB30,000,000 (approximately US$4,759,004). Xiao Feng Yang and
Raymond Ming Hui Lin respectively
increased their subscribed capital to RMB15,000,000 (approximately US$2,379,502).
On April 23, 2015, Raymond
Ming Hui Lin paid RMB6,163,560 (approximately US$994,523) for the capital contribution that he has made.
On May 27, 2015, Raymond
Ming Hui Lin paid RMB3,391,883 (approximately US$546,980) for the capital contribution that he has made.
On May 29, 2015, Xiao Feng
Yang paid RMB4,400,000 (approximately US$709,906), plus with his cash dividends for the capital contribution that
he has made.
On August 5, 2015, Raymond
Ming Hui Lin paid RMB3,894,060 (approximately US$627,103) for the capital contribution that he has made.
On August 27, 2015, Raymond
Ming Hui Lin paid RMB42,377 (approximately US$6,615) for the capital contribution that he has made.
On July 21, 2015, Xiao Feng
Yang paid RMB1,100,000 (approximately US$177,147) for the capital contribution that he has made.
On August 14, 2015, Xiao
Feng Yang paid RMB8,000,000 (approximately US$1,251,799), plus with his cash dividends for the capital contribution
that he has made.
On December 15, 2015, CLPS
Shanghai changed its form into a PRC joint stock limited company. The share capital of CLPS Shanghai was
RMB30,000,000, which was divided
into 30,000,000 shares of RMB1.00 per share.
On May 26, 2016, three limited
partnerships subscribed new shares issued by CLPS Shanghai and became shareholders of CLPS Shanghai. These
three limited partnerships
were: Shanghai Qinyao Investment Partnership (LLP), Shanghai Qinzhi Investment Partnership (LLP) and Shanghai Qinshang
Software Technology
Counsel Partnership (LLP). After the above-mentioned subscription, the shareholding structure of CLPS Shanghai was as follows:
INVESTORS
PLACE OF
REGISTRATION
SHARES
Xiao Feng Yang
PRC
15,000,000
Raymond Ming Hui Lin
Hong Kong
15,000,000
Shanghai Qinyao Investment Partnership (LLP)
PRC
1,700,000
Shanghai Qinzhi Investment Partnership (LLP)
PRC
1,270,000
Shanghai Qinshang Software Technology Counsel Partnership (LLP)
PRC
900,000
Total:
33,870,000
On June 5, 2017, Qinheng
was established by CLPS Incorporation in Hong Kong. The total amount of share capital of Qinheng to be subscribed by
CLPS Incorporation
was HKD 10,000.00 and CLPS Incorporation held 100% of equity interest in Qinheng.
In July 2017, three of the
abovementioned limited partnerships transferred all of their equity interest in CLPS Shanghai to their individual partners
according
to the proportion of each partner’s capital contribution. A total of 47 individuals became shareholders of CLPS Shanghai.
In August 2017, Qiner entered
into three Share Purchase Agreements with three non-Chinese individual shareholders of CLPS Shanghai. The three
non-Chinese individual
shareholders are Raymond Ming Hui Lin (Hong Kong), Limpiada Zosimo (Philippines) and Lin James De-Mou (Taiwan). Including,
Raymond Ming
Hui Lin sold 15,000,000 shares, Limpiada Zosimo sold 71,229 shares and Lin James De-Mou sold 67,510 shares. The aforementioned share
transfer was part of reorganization of the group.
42
On August 4, 2017, CLPS QC
(WOFE) received a business license from China (Shanghai) Pilot Free Trade Zone Administration for Industry and
Commerce and was established
by Qinheng as a PRC limited liability company. Qinheng subscribed USD 200,000 and held 100% of equity interest in CLPS
QC (WOFE).
On October 31, 2017, CLPS
Incorporation entered into a SOLD NOTE with Raymond Lin Ming Hui to purchase all of Raymond Lin Ming Hui’s
shares in Qiner.
After this transfer, CLPS Incorporation held 100% shares of Qiner. Qiner has become CLPS Incorporation’s wholly-owned subsidiary.
In October 2017, all Chinese
individual shareholders of CLPS Shanghai completed the procedures for foreign exchange registration of overseas
investments in accordance
with the Circular of the State Administration of Foreign Exchange on Issues concerning Foreign Exchange Administration over
the Overseas
Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles (SAFE 2014 No. 37). After these
registrations, CLPS QC (WOFE) entered into 46 Share Purchase Agreements with all 46 Chinese individual shareholders of which the
46 Chinese individual
shareholders in total held 18,731,261 shares of CLPS Shanghai. The aforementioned share transfer was part of a
reorganization of the group.
On November 2, 2017, the
transfer between the 46 Chinese individual shareholders and CLPS QC (WOFE) has completed the record-filing of
changes of Foreign-invested
Company and got the record receipt.
On September 15, 2020, Shanghai
Qincheng Information Technology Co., Ltd. and Qiner Co., Limited subscribed new shares issued by CLPS
Shanghai. After the above-mentioned
subscription, the shareholding structure of CLPS Shanghai was as follows:
INVESTORS
PLACE OF
REGISTRATION
SHARES
Shanghai Qincheng Information Technology Co., Ltd.
PRC
27,651,699
Qiner Co., Limited
Hong Kong
22,348,301
Total:
50,000,000
As of the date of this Annual
Report, CLPS Shanghai has seven wholly-owned subsidiaries: CLPS Chengdu, CLPS Shenzhen, CLPS Xi’an, CLPS
Hangzhou, CLPS Dalian,
CLPS Guangzhou, and CLPS Beijing. Besides the seven wholly-owned subsidiaries, CLPS Shanghai participated in the following
investments:
●
SSIT — CLPS
Shanghai holds 35% of equity interest in SSIT, a PRC limited liability company.
●
UniDev — CLPS
Shanghai holds 15% of equity interest in UniDev, a PRC limited liability company.
IT consulting services primarily
includes application development services for banks and institutions in the financial industry and which are billed
for on a time-and-expense
basis. Customized IT solutions services primarily includes customized solution development and maintenance service for general
enterprises
and which are billed for on a fixed-price basis. The following entities provide either consulting or solution services or both, depending
on where
our clients are based. The entities are currently servicing one of the services might expand to both services if our clients’
needs arise:
●
CLPS Dalian provides both IT consulting and solution services. CLPS Dalian services clients in China’s north east region, including Dalian.
●
CLPS Beijing primarily provides IT consulting services. CLPS Beijing services clients in China’s central east region, including Beijing and
Tianjin.
●
CLPS SG currently only provides IT consulting services. CLPS SG services clients in South East Asia region, including Singapore.
●
JAJI China was a joint venture with the Judge Group in the US. JAJI China continues to service The Judge Group’s clients in China providing
both IT consulting and solution services. JAJI China focuses on expanding its client bases with collaboration efforts with The Judge Group. On
April 2, 2021, as part of business strategy, the Company changed the English entity name of its majority-owned subsidiary, Judge (Shanghai)
Co., Ltd. and its wholly-owned subsidiary Judge (Shanghai) Human Resource Co., Ltd., to JAJI (Shanghai) Co., Ltd. (“JAJI China”) and JAJI
(Shanghai) Human Resource Co., Ltd. (“JAJI HR”), respectively.
43
●
CLPS Hong Kong provides both IT consulting and solution services. CLPS Hong Kong services clients in East Asia region, including Hong
Kong.
●
CLPS Shenzhen provides both IT consulting and solution services. CLPS Shenzhen services clients in Shenzhen.
●
CLPS Guangzhou primarily provides IT consulting services. CLPS Guangzhou services clients in Guangzhou.
●
Ridik Pte. provides IT consulting services. Ridik Pte. services clients in South East Asia region, including Singapore.
●
Ridik Software Pte. currently only provides IT consulting services. Ridik Software Pte. services in South East Asia region, including Singapore.
●
Ridik Sdn. primarily provides IT consulting services. Ridik Sdn. services in South East Asia region, including Malaysia.
●
CLPS California provides IT consulting services. CLPS California services clients in North America, including the United States of America.
●
CLPS Japan currently only provides IT consulting services. CLPS Japan services clients in Japan.
●
CLPS Philippines currently only provides IT consulting services. CLPS Philippines services clients in Philippines.
●
Shell Infotech Singapore currently only provides IT consulting services. Shell Infotech Singapore services clients in Singapore.
●
CLPS Shanghai, CLPS
Dalian, CLPS Guangzhou, CLPS Beijing, JAJI China, Ridik Pte., CLPS Hong Kong, CLPS California, and Shell
Infotech Singapore all
contribute material amounts of the Company’s total revenues.
Academic education services generate revenue through
fixed tuition fees for formal educational services. Tuition fees received from students are
generally paid in advance prior to the beginning
of each course. These services are provided by CAE, a Singapore-based learning institution that CLPS
acquired in fiscal year 2024. Building
on CAE’s current programs, CLPS has expanded the curriculum to include IT-related courses such as DevOps,
ChatGPT, Python, SAFe
Scrum Master, and more.
Corporate Information
Our principal executive office
is located at Unit 1000, 10th Floor, Millennium City III, 370 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong
SAR. Our telephone number
is (852)3707-3600. Our website is as follows www.clpsglobal.com. The information on our website is not part of this Annual
Report.
The following diagram illustrates
our corporate structure:
44
The Initial Public Offering
On May 24, 2018, the Company
completed its initial public offering of 2,000,000 common shares, $0.0001 par value per share. The common shares
were sold at an offering
price of $5.25 per share, generating gross proceeds of approximately $10.5 million, and net proceeds of approximately $9.5 million.
The
registration statement relating to this IPO also covered the underwriters’ common stock purchase warrants and the common shares
issuable upon the
exercise thereof in the total amount of 83,162 common shares. Each five-year warrant entitles the warrant holder to
purchase the Company’s shares at the
exercise price of $6.30 per share and is not be transferable for a period of 180 days from
May 23, 2018. On June 8, 2018, the Company closed on the exercise
in full of the over-allotment option to purchase an additional 300,000
common shares of the Company by The Benchmark Company, LLC, the representative
of the underwriters in connection with and the book running
manager of the Company’s IPO, at the IPO price of $5.25 per share. As a result, the Company
raised gross proceeds of approximately
$1.58 million, in addition to the IPO gross proceeds of approximately $10.5 million, or combined gross IPO proceeds
of approximately
$12.08 million, before underwriting discounts and commissions and offering expenses. Our common shares began trading on the NASDAQ
Capital
Market on May 24, 2018 under the ticker symbol “CLPS”.
We have earmarked and have
been using the proceeds of the initial public offering as follows: approximately $4.41 million for global expansion,
i.e., to expand
our existing locations to develop new clients by hiring more qualified personnel, system integration and marketing effort; approximately
$3.31
million for working capital and general corporate purposes; approximately $2.21 million for R&D; and approximately $1.09 million
for talent development.
B.
Business Overview
Overview
We are a global information
technology (“IT”), consulting and solutions service provider focused on delivering services primarily to global
institutions,
including banking, wealth management, ecommerce, and automotive areas both in China and globally. For more than 15 years as an IT services
provider for a growing network of clients within the fintech and financial services industry, CLPS has expanded its business beyond core
IT services,
venturing into the loan, e-commerce, academic education, and tourism sectors. Through its diversified offerings, CLPS is
committed to providing
comprehensive services and solutions for its clients. We have created and developed a particular market niche by
providing turn-key financial solutions.
Since our inception, we have
aimed to build one of the largest sales and service delivery platforms for IT services and solutions in China. The nature
of our services
is such that we provide a majority of services to our banking and credit card clients in order to build new or modify existing clients’
own
proprietary systems. We are fully committed of delivering digital transformation services with a focus on the fintech within the
areas of banking, wealth
management, e-commerce, and automotive, among others, through the utilization of innovative technology to achieve
our client’s goals. We maintain 20
delivery and/or R&D centers, of which 10 are strategically located in Mainland China (Shanghai,
Beijing, Dalian, Tianjin, Xi’an, Chengdu, Guangzhou,
Shenzhen, Hangzhou, and Hainan) and 10 are located globally (Hong Kong SAR,
the United States of America, Japan, Singapore, Australia, Malaysia, India,
the Philippines, Canada, and the United Arab Emirates). Our
extensive network enables us to serve different clients across various geographic locations. By
combining onsite or onshore support and
consulting with scalable and high-efficiency offsite or offshore services and processing, we are able to meet client
demands in a cost-effective
manner while retaining significant operational flexibility. By serving both Chinese and global clients on a common platform, we
are able
to leverage the shared resources, management proficiency, industry expertise and technological know-how to attract new business and remain
cost
competitive. We believe that maintaining our Company as a proven and reliable partner to our clients both in China and globally
positions us well to capture
greater opportunities in the rapidly evolving global market for IT consulting and solutions.
Industry and Market Background
China’s Banking Industry
According to the 2023 annual
report of China Banking and Insurance Regulatory Commission (CBIRC), China’s banking financial institutions had
total assets of
RMB 417.3 trillion (USD 58.8 trillion) at the end of 2023, a year-on-year increase of RMB 37.9 trillion (USD 5.3 trillion), or 9.9%.
Total
liabilities equalled to RMB 383.1 trillion (USD 54.0 trillion), a year-on-year increase of RMB 35.1 trillion (USD 4.9 trillion),
or 10.1%. The total assets of
banking financial institutions were RMB 94.3 trillion (USD 13.3 trillion) in 2010. Over the past 10 years,
total assets of China’s banking financial institutions
grew at a compound annual growth rate of more than 10%. However, the banking
industry is facing many challenges, such as the competition with private
capital, the participation of technological enterprises, changes
in the financial market, the tightening of regulatory policies, and more diversified deposit
substitute products, among others. Following
the 2006 repeal of geographical and customer restrictions on foreign banks, the CBIRC continued the policies
to open China’s banking
industry for entry by foreign competitors to promote healthy competition in the industry. Since 2018, the CBIRC has announced
three rounds
of 34 new measures to further open up China to the outside world, such as abolishing or relaxing restrictions on foreign ownership, relaxing
access conditions for foreign institutions and businesses, expanding the business scope of foreign institutions, optimizing regulatory
rules for foreign
institutions and simplifying administrative licensing procedures. By the end of 2023, foreign banks had set up 52 foreign
legal entities, 116 branches of
foreign banks and 132 representative offices in China, with a total of 888 business institutions.
45
Software and Information Technology Service
Industry in China
According to the 2023 Economic
Performance of the Software Industry report by the Ministry of Industry and Information Technology (MIIT),
China’s software and
information technology service industry steadily improved. The revenue of the software business grew rapidly, profitability remained
stable, and the software business export slightly declined slightly.
China’s software and
information technology services industry has developed and grown rapidly in recent years. The MIIT data showed that the
industry’s
revenue reached RMB 12.3 trillion (USD 1.7 trillion) in 2023, an increase of 13.4% compared to 2022. Profitability remained stable. In
2023, the
industry achieved a total profit of RMB 1.50 trillion (USD 211.3 billion), representing an increase of 13.6% compared to the
previous year, with the growth
rate 7.9 percentage points higher than the same period last year. Software exports fell slightly, with
the software business exporting USD 51.4 billion in 2023,
a decrease of 3.6% from the previous year. Among them, the export of software
outsourcing services increased by 5.4% over the previous year.
Data Source: The Ministry of Industry and Information
Technology, National Bureau of Statistics of China.
The development of China’s
software and IT service industry is generally characterized by:
●
Software products
— In 2023, the industry’s revenue from software products reached RMB 2.90 trillion (USD 408.5 billion), an increase of
11.1% over the previous year, accounting for 23.6% of the industry’s revenue. Among them, the revenues from industrial software
products are
RMB 282.4 billion (USD 39.8 billion), an increase of 12.3%.
●
Information technology
services — In 2023, the industry’s revenue from information technology services reached RMB 8.1 trillion (USD 1.1
trillion), an increase of 14.7% over the previous year, 1.3 percentage points higher than the level of the whole industry, accounting
for 65.9% of
the industry’s revenue. Among them, the aggregate revenues from cloud services and big data services were RMB
1.2 trillion (USD 169.0
billion), up by 15.4% year-on-year, accounting for 15.4% of the information technology services revenue.
Integrated circuit design services
revenues reached RMB 306.9 billion (USD 43.2 billion), an increase of 6.4% over the previous year.
E-commerce platform technical services
revenues reached RMB 1.2 trillion (USD 169.0 billion), an increase of 9.6% over the previous
year.
●
Information security
products and services — In 2023, the revenue of information security products and services reached RMB 223.2 billion
(USD
31.4 billion), an increase of 12.4% over the previous year.
●
Embedded system software
— In 2023, the revenue of embedded system software reached RMB 1.1 trillion (USD 154.9 billion), an increase of
10.6% over the previous
year.
●
Development on regional
level — The eastern region maintained rapid growth, and the central and western regions showed remarkable growth.
In 2023,
revenue from software business completed in eastern, central, western and northeastern regions were RMB 10.1 trillion (USD 1.4
trillion),
RMB 696.5 billion (USD 98.1 billion), RMB 1.3 trillion (USD 183.1 billion) and RMB 288.4 billion (USD 40.6 billion), respectively,
with growth rates of 13.8%, 17.4%, 8.7% and 13.9% year-on-year, respectively, accounting for 81.8%,5.7%, 10.2% and 2.3% of the national
software industry, respectively. Among them, the eastern, central and northeastern regions exceeded the national average growth rate
by 0.4, 4.0
and 0.5 percentage points, respectively.
46
Financial institutions/banking
IT solutions refer to the software or IT related services provided by professional IT service providers who use their
own experience
and technology to meet each bank’s needs in business development, strategic development, and management efficiency. The market
shares of
China’s Banking IT Solution Industry from 2010 are shown as below:
Data Source: IDC
According to IDC’s
2023 China Banking IT Solution Market Share report, China’s banking sector further accelerated its digital transformation, with
commercial
banks introducing new IT solutions to optimize business processes, enhance customer experience, reduce operational costs, and strengthen
risk
control capabilities. However, due to the downward pressure of the macroeconomic environment and adjustments in banks’ IT
investment budget priorities,
the incremental demand for IT solutions in the banking industry has slowed down.
In 2023, the overall market
size of China’s banking IT solution market reached RMB 69.3 billion (USD 9.8 billion), an increase of 6.8% over 2022.
IDC predicts
that by 2028, the IT solution market for China’s banking industry will reach RMB 102.17 billion (USD 14.4 billion), with a compound
growth
rate of 8.1% from 2023 to 2028. Key areas of IT solution investment in China’s banking industry will continue to include the distributed
transformation of
the core business systems, integrated credit business systems, data intelligence solutions focused on storage, management,
and utilization of data, and the
ongoing enhancement of comprehensive risk management capabilities.
IDC research found that the
overall banking IT solution market presents the following characteristics:
●
Over
the next 3 to 5 years, banking financial institutions will continue to prioritize serving
the real economy, with a focus on small and micro
enterprises, green development, technological
innovation and other key areas. In this context, bank credit management— including
the
construction and upgrading of credit operating systems and the development of digital
credit services— and transaction banking, covering areas
such as industrial finance
and small and microfinance, among others. have become focal points in the market.
●
Banking
financial institutions will continue to focus on asset optimization, liability control, risk
prevention, and capital supplementation as key
areas of development. Accordingly, the demand
for risk management, business management, regulatory reporting, compliance, and audit
solutions
is expected to remain robust, with the market size projected to grow over the next 2 to3
years.
●
Intelligent
solutions in areas such as marketing, customer service, risk control, and operations are
also key focus for commercial banks. In
particular, digital channel management, digital marketing
services, and comprehensive experience improvement are becoming central priorities
for many
banks.
47
●
In
the future, commercial banks will place greater emphasis on data-driven comprehensive management
capabilities. Fundamental data
intelligence capabilities— such as data warehouse construction,
data governance, the acquisition and utilization of multidimensional data, and
data analysis
based on cloud and AI— are the essential for commercial banks to achieve digital intelligence
development.
●
The
market for in demand products and solutions, such as wealth planning, wealth trusts (including
and insurance trust), money
management/fund portfolios, and commercial pension product consignment,
has also welcomed new development opportunities.
●
AI
large models will have greater application potential in the financial industry. With the
enhancement of financial institutions’ capabilities in
data management, model integration,
and agent application, these models will demonstrate increased commercial value in various
aspects,
including business processes, risk management, customer service, and decision-making.
Our primary focus is in the following
key operational areas:
Banking
CLPS offers a competitive
advantage in the banking industry by providing professional IT consulting and solutions. We’ve established strategic
partnerships with
global financial institutions to deliver comprehensive banking IT services, including system implementation, testing, and enhancement
for
various functions like loans, savings, deposits, general ledger, account management, anti-money-laundering, risk control, and credit
cards.
Whether you’re focused on
traditional or online banking, CLPS offers a wide range of business modules and advanced fintech solutions. With over
15 years of experience
and partnerships with leading banks, we provide a complete service package encompassing planning, development, optimization,
software
quality assurance, and IT staffing. This ensures banks achieve the optimal balance between cost and development for their IT needs.
Our deep understanding of
the banking industry enables us to deliver best-in-class fintech solutions. These include expertise in core banking, credit
cards, loans,
centralized system operations and maintenance, and enterprise quality management. Leveraging our global delivery experience, we offer
integrated development, mainframe and open platform integration, mobile apps, quality management, cloud, and big data solutions.
CLPS continues to innovate
and has developed its own IP-protected products for key banking areas. Our industry-leading core products, such as the
CAKU credit card
system, loan management system, digital currency payment platform, e-commerce points mall, decision engine, and unified operations
platform,
integrate our extensive project experience and internal resources to enhance our clients’ efficiency and competitiveness.
CLPS drives fintech innovation, helping its clients excel in a competitive
market and achieve sustainable growth.”
Revenues from our banking
area were approximately $57.2 million, $61.5 million, and $67.7 million for the years ended June 30, 2024, 2023, and
2022, respectively.
Revenues from our banking area accounted for 40.0%, 40.9%, and 44.5% of our total revenues in fiscal years 2024, 2023, and 2022,
respectively.
Significant portion of our
services caters the banking clients.
Credit Card Area
Many global credit card issuers
maintain branches and supporting technical infrastructure in China. The development, testing, support, and
maintenance of these platforms
require a deep understanding and knowledge of the underlying business processes. Due to a shortage of qualified personnel
and resources,
there is a significant demand for IT consulting services among large-scale credit card platforms. CLPS offers over a decade of experience
in IT
consulting services for key credit card business areas, including credit card applications, account setup, authorization and activation,
settlement, collection,
promotion, point systems, anti-fraud, statement, reporting, and risk management. In recent years, we have successfully
helped China and global clients
manage their credit card IT systems, such as VisionPLUS. Our expertise extends to customizing these credit
card tools and platforms to suit various business
models.
Our highly experienced team possesses the requisite expertise to provide
credit card-related services. Our IT consulting professionals are based in
Shanghai, Dalian, and Hong Kong, offering services in various
currencies across different geographical regions, including China, Singapore, the UK, the
Philippines, Indonesia, and Latin America. To
better meet our clients’ needs, we have developed a series of credit card solutions. These solutions leverage
our deep understanding of
the industry and our proven track record of success.”
Revenues from our credit
card area were approximately $2.5 million, $4.3 million, and $6.6 million for the years ended June 30, 2024, 2023, and
2022, respectively.
Revenues from our credit card area accounted for 4.4%, 7.0%, and 9.7% of our banking revenues in fiscal years 2024, 2023, and 2022,
respectively.
48
Core Banking Area
We are one of
China’s largest core banking system services providers for global banks. As many global banks establish IT development centers
and
expand their operations in China, there is a growing demand for comprehensive core banking IT services.
With over a decade of experience,
we offer the support and expertise needed to implement core banking systems, including business analysis,
system design, development,
testing, maintenance, and global operation support. Our services cover multiple functions such as loans, deposits, general
ledger, wealth
management, debit cards, anti-money-laundering, statement and reporting, and risk management.
We also provide architecture
consulting services for core banking systems, online banking, and mobile banking. We successfully transformed the
centralized core banking
system of a US-based client into a service-oriented architecture, integrating it into a global unified version to meet its diverse market
needs.
Moreover, we leverage cloud-native solutions with microservices architecture
for core banking systems. This approach can serve both Chinese and
global banks by offering high flexibility, scalability, reliability,
and multichannel connectivity to address the evolving market demands.
Revenues from our core banking
area were approximately $54.6 million, $57.2 million, and $61.1 million for the years ended June 30, 2024, 2023,
and 2022, respectively.
Wealth Management
This report defines ’wealth
management’ as encompassing financial industry segments beyond banking, including investment banking, funds,
insurance, securities, futures,
clearing, consumer financing, online financing, and supply chain financing. CLPS has been a prominent player in the wealth
management
sector for nearly two decades, offering solutions that span system construction consulting, system development, and testing management
for
clients in securities, funds, insurance, and trust industries.
Drawing on its extensive project
experience and service expertise, CLPS provides comprehensive solutions covering core business, customer
management and outreach, channel
construction, overall system operation and maintenance, and internal company management within the financial
management field.
CLPS has successfully developed
and implemented multiple management systems in specialized areas, including risk management, decision
engines, quantitative investment,
mobile cloud testing, unified operation and maintenance platforms, and enterprise digital management. In 2024, CLPS
forged a strategic
partnership with a leading Hong Kong insurance technology company.
Furthermore, CLPS continues to supply a global talent pool for its
clients. The company currently boasts a team of over 1,000 professionals in the
wealth management field, encompassing R&D, testing,
operation and maintenance, and senior business experts. This team is strategically distributed across
key cities in China, Southeast Asia,
and North America.
Revenues from our wealth
management area were approximately $35.6 million, $37.4 million, and $32.1 million for the years ended June 30, 2024,
2023, and
2022, respectively. Revenues from our wealth management area accounted for 24.9%, 24.9%, and 21.1% of our total revenues in fiscal
years 2024,
2023, and 2022, respectively.
E-Commerce
At the forefront of technological
innovation and business modeling, CLPS drives continuous innovation in the e-commerce landscape. CLPS’s e-
commerce system comprehensively
supports a diverse range of business models, including online marketplaces, cross-border e-commerce, live streaming,
social media, and
more. Characterized by its broad scope and adaptability, the system efficiently accommodates evolving business needs, offering flexible
implementation solutions such as “0-1” system construction, optimization of existing systems, business operations, and marketing
planning.
With a holistic e-commerce
service approach encompassing ’system construction + business operations + marketing planning,’ CLPS empowers
clients to
rapidly establish their systems, streamline operations, and enhance marketing campaign conversions.
●
E-commerce system construction: CLPS provides
a comprehensive e-commerce platform tailored to various modes, including traditional e-
commerce, cross-border e-commerce, live streaming,
and social media. Key features encompass transaction settlement, operational
management, marketing activities, account systems, and membership
systems.
49
●
E-commerce business operations: CLPS offers a
refined e-commerce operational system, providing planning, design, development, and
customer service through digital marketing platforms.
Leveraging strategic partnerships, CLPS offers unique resource advantages and
promotion channels to optimize clients’ marketing effectiveness.
●
Digital RMB (Points) Mall: As a pioneer in digital RMB application
services, CLPS provides a comprehensive solution for digital RMB
(points) malls, encompassing exchange rules, account design, risk control,
membership system construction, and multi-level online
marketplace development.
Revenues from our e-Commerce
area were approximately $21.2 million, $25.5 million, and $29.4 million for the years ended June 30, 2024, 2023,
and 2022, respectively.
Revenues from our e-Commerce area accounted for 14.8%, 17.0%, and 19.4% of our total revenues in fiscal years 2024, 2023, and
2022, respectively.
Automotive
CLPS’s deep involvement in
automotive encompasses a wide range of areas, including big data governance, data analysis, intelligent cockpits, in-
car experience interaction,
and in-car marketplaces. For instance, we employ multiple in-vehicle sensors to monitor human health indicators, deliver
personalized
in-car system applications to users through vehicle cloud data, and create cloud-based competition rankings by integrating in-car data
with
racing venues for interactive experiences.
Leveraging big data and artificial intelligence technology, we analyze
vehicle performance data, driving behavior, and other information to provide
valuable insights and optimization solutions for automotive
manufacturers and service providers. CLPS has cultivated extensive research and development
capabilities in various subfields of intelligent
automobiles and has demonstrated the value of its products in automotive company implementations. Key areas
of expertise include self-parking
assistance, vehicle-cloud interaction experiences, vehicle safety technology, data-driven intelligent analysis, vehicle-to-
vehicle communication,
and safety monitoring and surveillance.
Revenues from our automotive
area were approximately $14.2 million, $14.2 million, and $10.4 million for the years ended June 30, 2024, 2023,
and 2022, respectively.
Revenues from our automotive area accounted for 10.0%, 9.4%, and 6.8% of our total revenues in fiscal 2024, 2023, and 2022,
respectively.
Our business scope in terms
of services:
IT Consulting Services
Revenues from IT
consulting services are recognized from time-and-expense basis contracts as the related services are rendered assuming all other
basic revenue recognition criteria are met. Under time-and-expense basis contracts, the Company is reimbursed for actual hours
incurred at pre-agreed
negotiated hourly billing rates. Clients may terminate the contracts at any time before the work is completed
but are obligated to pay the actual service hours
incurred through the termination date at the contract billing rate.
We provide IT consulting
services to our clients in the banking, wealth management, e-commerce, and automotive industries, among others.
Revenues from our IT consulting
services were approximately $136.8 million, $144.3 million, and $144.1 million, respectively. Revenues from our
IT consulting services accounted
for 95.8%, 96.0%, and 94.8% of our total revenues in fiscal years 2024, 2023, and 2022, respectively.
Customized IT Solution Services
Revenues from
fixed-price customized IT solution contracts require the Company to perform services for systems design, planning and integrating
based on customers’ specific needs which requires significant production and customization. The required customization work
period is generally less than
one year. Upon delivery of the services, customer acceptance is generally required. In the same
contract, the Company is generally required to provide post-
contract customer support (“PCS’) for a period from three
months to one year (“PCS period”) after the customized application is delivered. The type of
service for PCS clause is
generally not specified in the contract or stand-ready service on when-and-if-available basis.
CLPS provides customized
IT solution services to our clients in the banking, wealth management, e-commerce, and automotive industries, among
others.
We will continue to develop
our new IT solutions to meet the evolving needs of our Chinese and global financial institutional clientele drawing upon
the forward-looking
research of our R&D center.
Revenues from our customized
IT solution services were approximately $3.1 million, $4.6 million, and $6.7 million, respectively. Revenues from
our customized IT solution
services accounted for 2.2%, 3.0%, and 4.4% of our total revenues in fiscal years 2024, 2023, and 2022, respectively.
50
Academic Education Services
Academic education services, provided by CAE, generates revenue through
fixed tuition fees for formal educational services. Building on CAE’s
current programs, CLPS has expanded the curriculum to include
IT-related courses such as DevOps, ChatGPT, Python, SAFe® Scrum Master, and more.
CAE has been actively working to bridge the gap
between academic education and business practice. A diverse faculty of over 100 members, including
seasoned professors, industry experts,
and associates, is dedicated to achieving this goal. Furthermore, significant investments are being made to develop a
state-of-the-art
urban campus in Singapore’s financial business district. Moving forward, CAE plans to establish applied skills facilities and a
business
mentorship program to provide students with internship opportunities, project collaborations, and career guidance. This strategic
initiative will equip students
with in-demand skills, knowledge, and valuable internship and job opportunities to facilitate their transition
into the workforce.
CLPS completely acquired CAE on January 3, 2024.
Revenue generated from academic education was $1.0 million for fiscal year 2024. Revenue
from academic education services accounted for
0.7% of our total revenues in fiscal years 2024.
Other Services
CLPS Virtual Banking Platform
(CLB)
CLB is a unique and successful
training platform for IT talents owned by CLPS. For more than ten years, we have been focusing on recruiting,
training, developing and
retaining human capital and talents. We have been developing and continuously upgrading our CLB to train specialized financial IT
personnel
in order to differentiate ourselves from general IT developers. CLB is one of the crucial components of our TCP. It contains a full set
of banking
application modules covering areas such as core banking, credit cards, and wealth management, incorporated with cutting-edge
technologies, such as JAVA,
Android & iOS, HTML, blockchain, cloud computing and big data.
Recruitment and Headhunting
As per client’s request,
we are capable of providing the most suitable person for a position. The Company maintains more than 100 talent acquisition
staff with
rich industry background and knowledge. Our recruitment centers are well equipped of advanced technology, such as cloud platforms, big
data, and
robotic process automation (RPA), to accelerate the talent acquisition process. As a result, CLPS obtains qualified talent,
reduce talent acquisition costs, meet
the growing demands of talent from its existing and potential clients, and achieve meaningful growth.
Fee-For-Service Training
Under the fee-for-service
training, we incur charges for clients based on their training needs. Generally, it includes domain knowledge, technology
skills, data
security and management compliance training, soft skills for personnel; and English language skills including verbal and business correspondence
for all level, especially for those who need to communicate with global customers directly on a daily basis. However, the training content
and approach can
be customized based on the client’s training needs.
Software Sales
Software sales segment focuses
on delivering comprehensive software solutions to our clients. We offer a range of services, including software
implementation and ongoing
management. Our team of experts works closely with clients to identify their specific needs and recommend suitable software
solutions.
Our Strategies
We have developed and intend
to implement the following strategies to expand and grow the revenue, the number of employees, and the number of
service locations of
our Company:
●
Grow revenue with existing and new clients
— We intend to pursue additional revenue opportunities from existing Chinese and global clients,
which include many of
the leading companies in our financial industry. We will focus on continuing to deliver high quality services and
solutions and identifying
additional opportunities with existing clients as they will continue to constitute a significant portion of our revenues
and medium-term
growth. We will also continue to target certain new Chinese and global clients, using our comprehensive service and solution
offerings,
combined with increasingly deep domain expertise in finance industry. Furthermore, we will continue to invest in a delivery platform
that benefits both Chinese and global clients, capturing synergies between the China and global markets to benefit both groups of
clients.
For the fiscal year 2024, revenues from existing
and new clients accounted for 95.96% and 4.04% of the total revenue, respectively.
●
Continue to invest in research and development,
deepen domain expertise and develop specific solutions for target industry verticals — We will
continue to enhance our
domain knowledge in the financial industry and relevant business-specific processes. As we grow our industry and
service area expertise,
we intend to leverage the domain knowledge accumulated in our work with our Chinese and global clients to more
effectively address
their business-specific needs. In addition, we plan to continue investing in R&D, focusing on developing solutions that
leverage
our industry experience and R&D capabilities, to combine proprietary applications with our services to best address client needs.
Big data empowers businesses to tailor services
precisely to client needs. By extracting valuable insights from vast datasets, organizations can
optimize product design, enhance user
experience, and identify emerging market trends. CLPS offers comprehensive data services and IT
solutions to help organizations unlock
the full potential of big data across various industries.
Our expertise extends to cloud-based and on-premises
system management, virtualization, and major cloud platforms. We specialize in building
custom ‘private clouds’ for clients and offer
comprehensive cloud services including migration, monitoring, operation, training, and tailored
solutions. Our focus is on transforming
financial institutions through cloud migration, cloud-native application development, data management,
and multi-cloud integration.
51
CLPS also provides a unified platform for rapid development of custom Large Language Model (LLM) agents. Our platform offers a
conversational interface, rich human-computer interaction, flexible agent management and triggering, customizable integration, pre-built skill
templates, a visual workflow builder, a tool marketplace, and an LLMOps experimentation environment.
Furthermore, CLPS leverages blockchain technology to revolutionize the banking and financial services industry. By partnering with clients, we
explore innovative blockchain applications to transform traditional banking models and deliver cutting-edge financial services.
●
Continue to invest in training and development of our world-class human capital base — We place a high priority on attracting, training,
developing and retaining our human capital base to be increasingly competitive. Spearheaded by the CLPS Academy, we will continue to build
our professional talent pool through our TCP and TDP to ensure the sustainable supply of financial IT talent resources. These programs are the
result of our collaboration with universities and utilization of a technical curriculum and professional certifications developed and maintained
by our Company. We will continue to develop our scalable human capital platform by implementing resource planning and staffing systems and
by attracting, training and developing high-quality professionals to form CLPS’s large talent pool in order to meet ever-changing clients’ needs.
We will build on and leverage existing training programs and leverage the CLPS Academy, which we intend to expand to other key cities and
other industries to tap deeper into CLPS’s talent pool. In addition to our dedicated training centers, we expect to open additional training centers
overseas as we anticipate increasing demand for our services and solutions. We will continue to strengthen our collaboration with leading
domestic universities to improve our on-campus recruiting results and help to better prepare graduates for work in our industry. Spearheaded by
the CLPS Academy, the strength of our TCP/TDP program adds to our recognition in the industry by competitors and customers alike.
For the fiscal year 2024, we trained more than 335 interns.
CLPS’s acquisition of College of Allied Educators Pte. Ltd. (CAE) marks a strategic expansion into the academic education sector. CAE, a
Singapore-based learning institution, complements CLPS’s existing business by providing a platform for vertical integration. In addition to
CAE’s current course offerings, we have introduced IT-related programs, creating valuable internship and job opportunities for graduates.
●
Drive efficiencies through
ongoing improvements in operational excellence — We strive to gain significant operating efficiencies by leveraging
historical
and ongoing investments in infrastructure, research and development and human capital. We operate our business on a single,
integrated
platform, with centralized functions which provide significant economies of scale across our business both domestically and globally,
as well as cross service offerings. We also expect to continue investing in our own IT infrastructure and more advanced technologies,
such as
cloud computing, to allow us to enhance our scalability and continue to grow in a more cost-effective fashion. As part of
expanding our scale,
we intend to continue building up training centers tailored to our human capital needs to deploy human capital
more efficiently, thereby
improving overall resource utilization and productivity.
●
Capture new growth opportunities
through strategic alliances and acquisitions — We will continue to pursue selective alliances and
acquisitions in order
to enhance our industry-specific technology and service delivery capabilities by building on our track record of
successfully acquiring
and integrating targeted companies. We will continue to identify and assess opportunities to enhance our abilities to serve
our clients.
We will focus on enhancing our technology capabilities, deepening our penetration into key clients, expanding our portfolio of
service
offerings and expanding our operations geographically.
CLPS has expanded its credit card business in Hong Kong through the
acquisition of Purple Potato Finance Limited. Purple Potato’s money
lending license allows CLPS to provide credit card services in the
Hong Kong market. CLPS plans to leverage Purple Potato’s qualifications
and QCC’s credit card product strengths to capitalize on the recovery
of the Hong Kong tourism industry, offering innovative credit card
services for consumers.
CLPS has strategically expanded into the academic
education sector by acquiring College of Allied Educators Pte. Ltd. (CAE), a Singapore-
based learning institution. CAE complements CLPS’s
existing business, providing a platform for vertical integration. In addition to CAE’s
current course offerings, we have introduced IT-related
programs, creating valuable internship and job opportunities for graduates.
52
CLPS has acquired Shell Infotech Pte. Ltd.
and its wholly-owned subsidiary Shell Infotech Consulting Sdn. Bhd., expanding its client base and
market share in Southeast Asia. Shell
Infotech, a leading IT consulting and managed services provider in Singapore and Malaysia, offers a wide
range of IT services, including
software development, SAP solutions, enterprise applications, and managed services, with a focus on the
banking and insurance sectors.
This acquisition strengthens CLPS’s core IT competencies and service offerings.
CLPS has entered into a strategic cooperation agreement with AIA Digital+
China to leverage their combined strengths and resources to drive
mutual business growth and innovation. The collaboration aims to expand
overseas markets, explore new business opportunities, and promote
product and service innovation in the insurance and financial sectors.
●
Continue to implement our global expansion
strategy — We remain focused on investing in our long-term sustainable growth and delivering on
our dual-engine strategy
of horizontal and vertical expansion. We will continue to pursue growth in our global footprint and market share as
well as in technological
and talent development. By delivering on our strategy, we expect to drive shareholder value.
The aforementioned acquisitions have been instrumental
in driving CLPS’s global expansion strategy. In addition, CLPS has expanded its
presence in the Canadian market by establishing a new
subsidiary in Ottawa and partnering with Invest Ottawa. This collaboration aims to
augment CLPS’s international influence and provide
enhanced products and services to Canadian-based clients. CLPS believes that Canada’s
economic stability, innovation, and diverse business
landscape offer extensive development opportunities for its expansion.
CLPS has been actively participating in industry events to boost its
international presence. CLPS was a speaker at the Silicon Valley AI/Data
Science Meetups, showcasing its expertise in AI and data science.
CLPS has also participated in other events such as the Singapore FinTech
Festival and the BUSSINESS GOVirtual Technology Expo and Conference
in Hong Kong, where it showcased its innovative fintech solutions
and engaged in discussions about digital transformation. These events
provide opportunities for CLPS to network with industry experts,
showcase its competitive advantages, and expand its international footprint.
●
Capitalizing on growth opportunities through strategic diversification into emerging sectors — CLPS is strategically diversifying its portfolio
by expanding into the loan, e-commerce, academic education, and tourism sectors. While maintaining its focus on IT services, the company is
broadening its reach into these industries, applying its expertise to drive innovation and capture emerging market opportunities. This approach
allows CLPS to enhance service delivery, explore new revenue streams, and strengthen its competitive position across multiple sectors.
Our Competitive Strengths
We believe that the principal
competitive factors in our markets are industry expertise, breadth and depth of service offerings, quality of the services
offered, strategic
engagement with blue-chip clients, reputation and track record, marketing and selling skills, scalability of infrastructure and price.
We believe that there are
several key strengths that differentiate us from our competitors and will continue to contribute to our growth and success.
1. Breadth and depth of digital transformation
service offerings
CLPS provides staffing-based
consulting services, turn-key financial solutions, and implementation of advanced technologies, enabling clients to
build new or enhance
their existing systems. We are fully committed of providing digital transformation services with focused on financial and technology
in
the banking, wealth management, e-commerce, and automotive industries, among others, through the utilization of innovative technology
to achieve our
client’s goals.
We are dedicated to providing
a full range of services and solutions across technology needs in finance. We are able to provide both development
and implementation
of core banking, credit card, online and e-commerce systems, as well as expertise across technology stacks. More recently, we have
tested
and piloted leading edge technologies including cloud transitions, robotic process automation, big data and blockchain. We are also exploring
applications in artificial intelligence.
2. Talent Creation Program, Talent Development
Program, and Academic Education
Spearheaded
by the CLPS Academy, we have established employee loyalty through the core engine of TCP and TDP programs both are integral
parts of
our supply chain which supports our service lines. Since 2008, our talent training services have offered training courses in five areas,
including
domain knowledge, technology skills, data security and management compliance training, soft skills for personnel; and English
language skills including
verbal and business correspondence for all level, especially for those who need to communicate with global
customers directly on a daily basis. We believe
that the depth and comprehensive nature of our talent training services are key features
that distinguish us from our competitions. For more than 15 years, the
Company has been recruiting, training, developing and retaining
human capital and talents. We have been developing and upgrading our CLPS Virtual
Banking Platform (CLB) to train specialized financial
IT professionals. CLB is one of the crucial components which enables our Talent Creation Program. It
contains a full set of banking application
modules covering areas such as core banking, credit cards and wealth management incorporated with cutting-edge
technologies, such as
JAVA, Android & iOS, HTML and big data. We select qualified students each year to participate in our training program. During their
junior and senior years, the students learn to implement the concepts covered by our TCP platform along with their other computer science
theory and
coursework. Thereafter, the students join us as interns to continue improving their software development skills and will eventually
become part of our
development teams. As a result, graduates have an equivalent of nine months’ worth of “on the job”
training and experience. For the fiscal year 2024, we
trained 335 interns. In addition, CLPS has entered into a strategic cooperation agreement
with Dongbei University of Finance and Economics to foster
collaboration in practical research, enterprise case studies, and academic
ecosystem development. This partnership aims to enhance the employability of
university students and equip them with the skills necessary
for the fintech industry. CLPS has also signed a memorandum of understanding with
International Business College and the Cross-Border
Education Center of Dongbei University of Finance and Economics to establish a training base
dedicated to nurturing fintech talents. Additionally,
CLPS has been recognized with the “Best Employer Award” from the University of Adelaide for its
commitment to providing employment
opportunities and a conducive environment for students’ professional development.
53
Our TDP program is a continuous
internal training program for our skilled-professionals in order to serve our clients better. The TDP program
increases our professionals’
skillsets and business knowledge in their respective domain and technical fields. Since 2005, through our TCP and TDP
programs, we have
trained and retained a large pool of specialized personnel skilled in serving financial-related industry clients.
As a result of our employee
loyalty programs, we have established an ecosystem of loyal client relationships. Employee satisfaction and enhanced
career development
have resulted in better service to our clients. Client satisfaction in return motivates our employees to continue to provide excellent
service
to our clients. In addition to the above-mentioned benefits, our Company’s strengths include the following:
●
core competency particularly
in banking and insurance industry;
●
deep domain knowledge and
solutions in financial industry verticals;
●
strategic engagements with
financial blue-chip clients most of whom have been with us since our inception;
●
comprehensive service offerings
including financial IT solutions & consulting as well as other services;
●
experienced senior management
team with proven track record of success.
CLPS has strategically expanded
into the academic education sector by acquiring CAE, a Singapore-based learning institution. CAE complements
CLPS’s existing business
by providing a platform for vertical integration. In addition to CAE’s current course offerings, we have introduced IT-related
programs,
creating valuable internship and job opportunities for graduates.
3. Leading provider of human capital in the financial
and technology industry
CLPS is a leading provider
of IT professionals in the financial and technology industry, such in banking, wealth management, e-commerce,
automotive, and others.
We create, develop, and maintain a large pool of qualified and rich experienced talents, with bilingual or multilingual capability so
support the client’s communication need, which is vital for a business’ success.
As of fiscal year 2024, CLPS
maintained more than 3,325 employees, of which, more than 2,885 IT talents serve our customers. Among them, more
than 99% work full-time
for customers and the rest of the 1% work on project-based such as IT engineers, project managers, business analysts, among others,
or
are involved in research of innovative projects.
Our greatest edge in terms
of human capital is our employees’ English communication skills capability and are familiar with international financial
business
environment. In terms of our overall IT skills, we maintain even distribution and relatively adequate resources of talent pool with capabilities
in
Java, Cobol, quality control, and other cutting-edge technology such as data analysis.
Customers
Our clients include large
corporations headquartered in China and globally which include, among others:
●
Banking
or their China-based IT centers — Citibank, HSBC, Standard Chartered Bank (China) Ltd., The Bank of East Asia, Limited, Bank
of
China (Hong Kong) Limited, ANZ Bank, and Bank of Communications.
●
Wealth
Management — AIA, CUP Data, First Data, and Orient Securities.
●
E-Commerce
— eBay, PayPal, Greendot Shanghai, Stubhub, and Gumtree.
●
Automotive
and Technology — SAIC Motors, Rising Auto, Sony, Cisco, AGFA Healthcare, Neusoft, and Kodak.
By serving both Chinese and
global clients on a common platform, we are able to leverage the shared resources, management, industry expertise and
technology know-how
to attract new business and remain cost competitive.
Sales and Marketing
We have invested in building
a broad sales force and marketing team. As of June 30, 2024, our business development teams consisted of 62 full-
time sales and marketing
personnel, including 37 sales managers, each of whom is responsible for a designated sales region or client account. We plan to
enhance
our sales efforts by recruiting more sales personnel both domestically and overseas.
54
Competition
The market for IT services
is highly competitive and we expect competition to intensify. We believe that the principal competitive factors in our
markets are industry
expertise, breadth and depth of service offerings, quality of the services offered, reputation and track record, marketing skills and
price.
Domestically, we face competition from the following major competitors: Shenzhen Forms Syntron Information Co., Ltd., Sunline
Tech, Amarsoft and CSII.
These competitors are all domestic listed companies and possess a considerable market share in IT services industry.
Shenzhen Forms Syntron Information
Co., Ltd. is committed to provide professional IT service outsourcing and consulting for large domestic
commercial banks. Sunline Tech, Amarsoft and CSII
have the similar business model who are engaged in providing IT solutions and services
mainly for domestic banks and other financial institutions. While
compared with above competitors, as an IT solution and consulting services
provider, we’ve been specializing in industry demands analysis and focusing on
delivering services to global institutions in banking,
insurance and financial sectors, both in China and globally. As one of the earliest companies engaging in
Banking IT services in China,
we have accumulated rich industrial experience and successful cases during more than 10 years of business development and
our market
share is gradually increased. With the interest marketization and rise of Internet Finance, banking industry market grows more competitive.
Since
Core Banking Business is occupying a key position in the overall banking IT services market, we will enhance our core market competence
by taking
advantage of our current technology; internationally, our competitors include Wipro, TCS Consultancy, and Infosys Limited.
To date, we do not typically
compete directly with the larger global consulting and outsourcing firms, such as Accenture, Capgemini,
Hewlett-Packard and IBM, who are typically
engaged in conjunction with large global projects. However, we may compete with these firms
if they seek smaller engagements, particularly in conjunction
with a strategy to enter the domestic Chinese market. In addition, the
trend towards offshore outsourcing, international expansion by foreign and domestic
competitors and continuing technological innovation
will result in new and different competitors entering our markets. We believe that our delivery
capabilities are competitive with companies
such as these, and that our domestic China market experience and know-how provides us with a competitive
advantage in serving our clients.
Research and Development
Officially named the CLPS
Innovation Lab (“CLPS i-Lab)”, our R&D is an integral part of our continued growth. In order to serve our Chinese and
global clients’ needs better, we are fully committed on researching and developing cutting-edge technology including distributed
application systems, cloud
computing, micro services, open API, robotic process automation (RPA), blockchain, artificial intelligence,
and big data, among other technologies, with a
focus on continuous scientific and technological innovation to provide clients with more
comprehensive and efficient IT services.
Big data offers businesses
a powerful tool to understand customer behavior and tailor their offerings accordingly. By analyzing vast datasets,
organizations can
gain insights into customer preferences, optimize product design, and predict future trends. CLPS research provides comprehensive data
services and IT solutions to help businesses harness the potential of big data, including data engineering, data science, data governance,
data innovation, and
data product development. CLPS also offers data platform, data warehouse, data governance, and data science capabilities
to support organizations in their
big data initiatives.
CLPS offers extensive experience
in cloud computing, specializing in virtualization and major cloud platforms. Our expertise extends beyond
product development to building
custom private clouds and providing comprehensive cloud services. CLPS focuses on transforming financial institutions
through cloud migration,
cloud-native application development, data management, and multi-cloud integration. They aim to empower financial institutions
with flexible,
scalable, and innovative digital solutions. Key technologies include distributed storage, microservices, cloud migration, cloud monitoring
and
operations, virtualization technologies, containerization technologies, automated management, cloud security, multi-cloud management,
and unified logging.
Cloud computing offers enhanced data processing efficiency and reduced IT costs, promoting sustainable business practices.
CLPS offers a platform for
developing custom LLM agents, including conversational interface, agent management, and pre-built templates. The
platform also provides
model management, data management, and enterprise knowledge integration. CLPS focuses on developing advanced algorithms for
intelligent
content generation, applying natural language processing, computer vision, and neural networks. Its aim is to transform AIGC technology
into
practical business applications, such as intelligent customer service and AI scoring. CLPS is committed to fostering an AIGC ecosystem
through
collaboration with diverse partners, aiming to create an open environment that accelerates AIGC adoption. Its collaboration with
industry leaders, academia,
and associations helps establish AIGC standards and promote technology adoption. CLPS is a leading force in
AIGC technology, focusing on research,
application development, and ecosystem building. Its dedication to pioneering AIGC advancements
through innovative algorithms and models drives the
delivery of tailored AIGC solutions across industries, empowering businesses to drive
digital transformation.
CLPS specializes in blockchain
technology, revolutionizing the banking and financial services industry. Its decentralized, immutable, and traceable
nature ensures fair
and transparent transactions. CLPS partners with clients to explore innovative blockchain applications, transforming traditional banking
models and delivering cutting-edge financial services. CLPS is dedicated to researching and developing innovative blockchain applications
across various
industries, delivering fast, efficient blockchain solutions that build trust, drive digital transformation, and accelerate
enterprises towards an intelligent future.
CLPS creates secure, efficient, and transparent blockchain ecosystems that help businesses
thrive in competitive markets.
CLPS has been committed to
promoting digital transformation integrated with secure, smooth, and efficient IT systems. The growing demand for
customized and innovative
marketing model has pushed CLPS to further enhance its digital marketing solution to achieve client’s business goals prompted
by
improved marketing performance metrics.
55
CLPS i-Lab adheres to our
strategy of promoting our products and solutions based on new technology and new research, application innovations,
and our leading talent
pool, while improving our technological innovation capability and market competitiveness. As the center of our research and
development
efforts, it will continue to be one of the most important drivers of CLPS’s growth.
Employees
We believe resource management
and planning is critically important to supporting our growth, and we are committed to effectively recruiting,
training, developing and
retaining our human capital. Our total number of employees was 3,325 employees as of June 30, 2024 from 3,509 employees in
June 30, 2023.
Approximately 60% of our personnel are dedicated to serving our foreign financial institution clients. Such personnel maintain up to date
financial domain knowledge, technical development and testing skills in Java, .Net, C, C++, testing tools, android or iOS app, blockchain,
big data, cloud
computing, and mainframe COBOL. None of our employees are represented by a labor union or collective bargaining agreements.
We consider our employee
relations to be good. We believe that attracting and retaining highly experienced associates and sales and marketing
personnel is a key to our success. In
addition, we believe that we maintain a good working relationship with our employees and we have
not experienced any significant labor disputes or any
difficulty in recruiting staff for our operations.
Intellectual Property Rights
The PRC has domestic laws
for the protection of rights in copyrights, trademarks and trade secrets. The PRC is also a signatory to all of the world’s
major
intellectual property conventions, including:
●
Convention establishing
the World Intellectual Property Organization (June 3, 1980);
●
Paris Convention for the
Protection of Industrial Property (March 19, 1985);
●
Patent Cooperation Treaty
(January 1, 1994); and
●
Agreement on Trade-Related
Aspects of Intellectual Property Rights (November 11, 2001).
The PRC Trademark Law, adopted
in 1982 and revised in 2019, protects registered trademark. The Trademark Office of the State Administration of
Industry and Commerce
of the PRC, handles trademark registrations and grants trademark registrations for a term of ten years.
Our intellectual property
rights are important to our business. We rely on a combination of trade secrets, confidentiality procedures and contractual
provisions
to protect our intellectual property. We also rely on and protect unpatented proprietary expertise, recipes and formulations, continuing
innovation
and other trade secrets to develop and maintain our competitive position. We enter into confidentiality agreements with most
of our employees and
consultants, and control access to and distribution of our documentation and other licensed information. Despite
these precautions, it may be possible for a
third party to copy or otherwise obtain and use our technology without authorization, or
to develop similar technology independently. Since the Chinese legal
system in general, and the intellectual property regime in particular,
is relatively weak, it is often difficult to enforce intellectual property rights in China.
Policing unauthorized use of our technology
is difficult and the steps we take may not prevent misappropriation or infringement of our proprietary
technology. In addition, litigation
may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the
validity
and scope of the proprietary rights of others, which could result in substantial costs and diversion of our resources and could have
a material adverse
effect on our business, results of operations and financial condition. We require our employees to enter into non-disclosure
agreements to limit access to and
distribution of our proprietary and confidential information. These agreements generally provide that
any confidential or proprietary information developed
by us or on our behalf must be kept confidential. These agreements also provide
that any confidential or proprietary information disclosed to third parties in
the course of our business must be kept confidential by
such third parties. In the event of trademark infringement, the State Administration for Industry and
Commerce has the authority to fine
the infringer and to confiscate or destroy the infringing products.
Our primary trademark portfolio
consists of five trademarks. Our trademarks are valuable assets that reinforce the brand and our consumers’
favorable perception
of our products. The current registrations of these trademarks are effective for varying periods of time and may be renewed periodically,
provided that we, as the registered owner, comply with all applicable renewal requirements including, where necessary, the continued
use of the trademarks
in connection with similar goods. In addition to trademark protection, we own 3 URL designations and domain names,
including clps.com.cn,
clpsglobal.com, and clpsgroup.com.cn.
56
We have registered for the
following trademarks:
Mark
Country
of
Registration
Application
Number
Class/Description
Current
Owner
Status
China
19288958
Class 9: Recorded computer programs (programs);
Recorded
computer operating programs Computer
peripherals; Computer software (recorded); Connector
(data processing equipment); Monitor program
(computer
program); Electronic publications (downloadable);
Computer program (downloadable software);
Downloadable computer application
software; Computer
hardware
CLPS Shanghai Co.,
Ltd.
Registered
China
19289112
Class 38: Information transmission; Computer terminal
communication; Computer-aided information and image
transmission; Information transmission equipment rental;
Provide telecommunications
link services to connect with
the global computer network; Telecommunications
routing and junction services; Provide access service
for
global computer network users; Provide database access
service; Digital file transfer Teleconference call service
CLPS Shanghai Co.,
Ltd.
Registered
China
19289503
Class 9: Recorded computer programs (programs);
Recorded
computer operating programs; Computer
peripherals; Computer software (recorded); Connector
(data processing equipment); Monitor program
(computer
program); Electronic publications (downloadable);
Computer program (downloadable software);
Downloadable computer application
software; Computer
hardware
CLPS Shanghai Co.,
Ltd.
Registered
China
19289341
Class 42: Technical research; Research or develop new
products for others; Computer programming; Computer
software design; Computer hardware design and
development consulting; Computer
software rental;
Computer software maintenance; Computer system
analysis; Computer software installation; Computer
software consulting
CLPS Shanghai Co.,
Ltd.
Registered
China
19289214
Class 41: Teaching; Education; Training; Practical
training (demonstration); Employment guidance
(education or training consultants); Arrange and organize
academic seminars; Arrange
and organize meetings;
Arrange and organize general meeting; Arrange and
organize symposium; Arrange and organize training
classes
CLPS Shanghai Co.,
Ltd.
Registered
57
Mark
Country
of
Registration
Application
Number
Class/Description
Current
Owner
Status
Hong Kong,
China
47628610
Class 36: Financial management; Financial consulting;
Credit card payment processing; Debit card payment
processing; Credit card issuing; Online banking service;
Credit card related investigations;
Electronic credit card
transaction processing; Credit card issuance; Credit card
verification; Credit card transaction processing
service;
Banking services
CLPS Technology
(HONG KONG) Co.,
Ltd.
Registered
Hong Kong,
China
47629542
Class 41: Teaching; Education; Training; Arrange and
organize academic seminars; Arrange and organize
meetings; Arrange and organize training courses; Arrange
and organize on-site education
forums; Written
publication (excluding advertising text); Book
publication; Online publication of e-books and
magazines; Provide
non-downloadable online electronic
publications
CLPS Technology
(HONG KONG) Co.,
Ltd.
Registered
China
54531262
Class 42: Technical research; Research and develop
new
products for other parties; Information technology
consulting services; Industrial product design; Computer
software update;
Computer software design and
development ; Computer software maintenance;
Computer hardware design and development consulting;
Cloud
computing; computer programming
JAJI (Shanghai) Co.,
Ltd.
Registered
58
The following is a list of the Company’s
copyrights:
Software Name
Country
of
Registration
Registration
Number
Current
Owner
Approval
Date
Status
CLPS HR Management Platform Software V1.0
China
2009SR015975
CLPS
Shanghai Co.,
Ltd.
29th
April 2009
Registered
CLPS Food and Beverage Report Analysis and
Management
Platform Software V1.0
China
2009SR060110
CLPS
Shanghai Co.,
Ltd.
28th
December 2009
Registered
CLPS Apparel Industry POS Management Platform
Software
V1.0
China
2009SR060102
CLPS
Shanghai Co.,
Ltd.
28th
December 2009
Registered
CLPS Express Information Interactive Platform Software
V1.0
China
2009SR060112
CLPS
Shanghai Co.,
Ltd.
28th
December 2009
Registered
CLPS Chain Store Information Interactive Platform
Software
V1.0
China
2009SR060108
CLPS
Shanghai Co.,
Ltd.
28th
December 2009
Registered
CLPS Project Analysis and Management Platform
Software
V1.0
China
2009SR060169
CLPS
Shanghai Co.,
Ltd.
28th
December 2009
Registered
CLPS Payroll Accounting System Platform Software
V1.0
China
2010SR043564
CLPS
Shanghai Co.,
Ltd.
25th
August 2010
Registered
CLPS Fast Moving Consumer Goods Frontline Staff
Management
Platform Software V1.0
China
2010SR043561
CLPS
Shanghai Co.,
Ltd.
25th
August 2010
Registered
CLPS Staff Management Platform Software V1.0
China
2010SR043562
CLPS
Shanghai Co.,
Ltd.
25th
August 2010
Registered
CLPS Coal Mining Enterprise Information System
Management
Platform Software V1.0
China
2010SR045449
CLPS
Shanghai Co.,
Ltd.
1st
September 2010
Registered
CLPS Campus Expense Card Web Service System
Platform
Software V1.0
China
2010SR045441
CLPS
Shanghai Co.,
Ltd.
1st
September 2010
Registered
CLPS Campus Expense Card Bathroom Management
Service
Software V1.0
China
2010SR045444
CLPS
Shanghai Co.,
Ltd.
1st
September 2010
Registered
CLPS Machinery Industry ERP Management Platform
Software
V1.0
China
2010SR045802
CLPS
Shanghai Co.,
Ltd.
2nd
September 2010
Registered
CLPS Assignment and Task Management Platform
Software
(short name: Assignment and Task
Management System) V1.0
China
2011SR076863
CLPS
Shanghai Co.,
Ltd.
25th
October 2011
Registered
CLPS Marketing Assistant System Platform Software
V1.0
China
2012SR096727
CLPS
Shanghai Co.,
Ltd.
15th
October 2012
Registered
CLPS Outsourcing Service Staff Management System
Platform
Software V1.0
China
2012SR096666
CLPS
Shanghai Co.,
Ltd.
15th
October 2012
Registered
59
Software Name
Country
of
Registration
Registration
Number
Current
Owner
Approval
Date
Status
CLPS Outsourcing Service Staff System Background
Management
Software V1.0
China
2012SR096731
CLPS
Shanghai Co.,
Ltd.
15th
October 2012
Registered
CLPS Logistics Terminal Distribution Platform Software
V1.0
China
2012SR096668
CLPS
Shanghai Co.,
Ltd.
19th
October 2012
Registered
CLPS HR Background Support Management System
V1.0
China
2012SR098440
CLPS
Shanghai Co.,
Ltd.
19th
October 2012
Registered
CLPS HR Management System Platform Software (short
name: HR Management System) V1.0
China
2012SR098429
CLPS
Shanghai Co.,
Ltd.
19th
October 2012
Registered
CLPS Outsourcing Service Staff Resume Entry System
Platform Software V1.0
China
2012SR098687
CLPS
Shanghai Co.,
Ltd.
19th
October 2012
Registered
CLPS Bank Document Business Management Software
(short
name: Document Management) V1.0
China
2013SR054800
CLPS
Shanghai Co.,
Ltd.
5th
June 2013
Registered
CLPS Bank Monetary Transaction Management Software
(short name: Monetary Transaction Management) V1.0
China
2013SR054796
CLPS
Shanghai Co.,
Ltd.
5th
June 2013
Registered
CLPS Bank Expense Management Software V1.0
China
2014SR168125
CLPS
Shanghai Co.,
Ltd.
4th
November 2014
Registered
CLPS Bank Repayment Process Software V1.0
China
2014SR168130
CLPS
Shanghai Co.,
Ltd.
4th
November 2014
Registered
CLPS Bank Point Accumulative Management Software
V1.0
China
2014SR168132
CLPS
Shanghai Co.,
Ltd.
4th
November 2014
Registered
CLPS Bank Interest Process Software V1.0
China
2014SR168136
CLPS
Shanghai Co.,
Ltd.
4th
November 2014
Registered
CLPS Bank Credit Application Software V1.0
China
2014SR168138
CLPS
Shanghai Co.,
Ltd.
4th
November 2014
Registered
CLPS Mortgage Loan Plan Spreadsheet Tool Software
(short
name: Loan Spreadsheet) V1.0
China
2015SR198772
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
60
Software Name
Country
of
Registration
Registration
Number
Current
Owner
Approval
Date
Status
CLPS Bank Product Management Software V1.0
China
2015SR198610
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Deposit and Withdrawal Services
Management
Software V1.0
China
2015SR198176
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Loan Application Management Software
V1.0
China
2015SR198654
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Repayment Management Software V1.0
China
2015SR198649
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Exchange Rate Management Software V1.0
China
2015SR198774
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Interest Settlement Software V1.0
China
2015SR198246
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Foreign Exchange Transaction Software V1.0
China
2015SR198240
CLPS
Shanghai Co.,
Ltd.
16th
October 2015
Registered
CLPS Bank Investment Management Securities Business
Software V1.0
China
2016SR376924
CLPS
Shanghai Co.,
Ltd.
16th
December 2016
Registered
CLPS Bank Big Data Decision-making Platform
Customer
Portrayal Software V1.0
China
2016SR382920
CLPS
Shanghai Co.,
Ltd.
20th
December 2016
Registered
CLPS Internet Financial Cloud Mobile Banking Software
V2.0
China
2016SR398821
CLPS
Shanghai Co.,
Ltd.
27th
December 2016
Registered
CLPS Wantong Calculus Mall Software V2.0
China
2017SR118507
CLPS Beijing
Hengtong Co.,
Ltd.
17th
April 2017
Registered
CLPS RC Rules Engine Software
China
2017SR169307
CLPS
Ruicheng Co.,
Ltd.
9th
May 2017
Registered
CLPS Internet Financing Collection Management
Software
V2.0
China
2017SR119266
CLPS
Ruicheng Co.,
Ltd.
17th
April 2017
Registered
CLPS Points Management Platform Software
China
2017SR119078
CLPS
Ruicheng Co.,
Ltd.
17th
April 2017
Registered
CLPS Full-web Order Receiving Unified Platform
Management
Software V2.0
China
2017SR202535
CLPS
Ruicheng Co.,
Ltd.
24th
May 2017
Registered
CLPS Quanxi Intelligent Marketing Platform Clients
Growth Center Software V2.0
China
2017SR565576
CLPS
Shanghai Co.,
Ltd.
13th
October 2017
Registered
CLPS Enterprise Recruitment Intelligent Cooperation
Platform Software V2.0
China
2017SR646712
CLPS
Shanghai Co.,
Ltd.
24th
November 2017
Registered
CLPS Intelligent Online Training Test Instructional
Management Software V1.0
China
2017SR646507
CLPS
Shanghai Co.,
Ltd.
24th
November 2017
Registered
61
Software Name
Country
of
Registration
Registration
Number
Current
Owner
Approval
Date
Status
CLPS Enterprise Internet Qinqin Loan Background
Management
Software V1.0
China
2017SR647634
CLPS
Shanghai Co.,
Ltd.
24th
November 2017
Registered
CLPS Blockchain Based Virtual Credits Background
Management
Software V2.0
China
2017SR645676
CLPS
Shanghai Co.,
Ltd.
24th
November 2017
Registered
CLPS Enterprise Talent Information Intelligent
Management
Software V2.0
China
2017SR645650
CLPS
Shanghai Co.,
Ltd.
24th
November 2017
Registered
CLPS Enterprise Recruitment Intelligent Cooperation
Platform Software V2.0
China
2017SR647190
CLPS
Shanghai Co.,
Ltd.
24th
November 2017
Registered
CLPS General Points Platform and Business Center
Software
V1.0
China
2019SR0004653
CLPS
Shanghai Co.,
Ltd.
2nd
January 2019
Registered
CLPS Online Financial Microloan Software V1.0
China
2019SR0004669
CLPS
Shanghai Co.,
Ltd.
2nd
January 2019
Registered
CLPS Bank Customer Management Software V1.0
China
2019SR0004663
CLPS
Shanghai Co.,
Ltd.
2nd
January 2019
Registered
CLPS Online Financial Management Software V1.0
China
2019SR0140935
CLPS
Shanghai Co.,
Ltd.
14th
February 2019
Registered
CLPS Talent Training One-Stop Platform Software V1.0
China
2020SR0094641
CLPS
Shanghai Co.,
Ltd.
19th
January 2020
Registered
CLPS Project Management Software [PMS]V2.0
China
2020SR0095716
CLPS
Shanghai Co.,
Ltd.
19th
January 2020
Registered
CLPS Online Financial Management Software V2.0
China
2020SR0095716
CLPS
Shanghai Co.,
Ltd.
19th
January 2020
Registered
CLPS Online Financial Microloan Software V3.0
China
2020SR0094745
CLPS
Shanghai Co.,
Ltd.
19th
January 2020
Registered
CLPS Bank Customer Management Software V3.0
China
2020SR0095318
CLPS
Shanghai Co.,
Ltd.
19th
January 2020
Registered
CLPS Online Financial Accounting Management
Software
V1.0
China
2020SR0095725
CLPS
Shanghai Co.,
Ltd.
19th
January 2020
Registered
62
Software Name
Country
of
Registration
Registration
Number
Current
Owner
Approval
Date
Status
CLPS Blockchain Based Virtual
Credits Background
Management Software V3.0
China
2020SR0224622
CLPS
Guangzhou
Co., Ltd.
9th March
2020
Registered
CLPS Enterprise Recruitment Intelligent Cooperation
Platform Software V3.0
China
2020SR0224616
CLPS
Guangzhou
Co., Ltd.
9th March
2020
Registered
CLPS Enterprise Talent Information Intelligent
Management
Software (“ERP System”) V3.0
China
2020SR0224243
CLPS
Guangzhou
Co., Ltd.
9th March
2020
Registered
CLPS Ruicheng ERP-TRMS Software (“ERP-TRMS”)
V1.0
China
2020SR1691822
CLPS
Ruicheng Co.,
Ltd.
30th November
2020 Registered
CLPS Ruicheng BPM Organizational Structure and
Process
Approval Software (“BPM”) V1.0
China
2020SR1691823
CLPS
Ruicheng Co.,
Ltd.
30th November
2020 Registered
CLPS Ruicheng Timesheet CLPS Management
Software(“Timesheet”)
V2.0
China
2020SR1691884
CLPS
Ruicheng Co.,
Ltd.
30th November
2020 Registered
CLPS Ruicheng WeChat Based Timesheet Management
Software
(“Timesheet”) V1.0
China
2020SR1691802
CLPS
Ruicheng Co.,
Ltd.
30th November
2020 Registered
JAJI China EKYC Based Mobile Banking
Software(“Mobile
Banking”) V1.0
China
2020SR1692693
JAJI
(Shanghai) Co.,
Ltd.
30th November
2020 Registered
CLPS Project Management Software(“PMS”)
V3.0
China
2021SR0113240
CLPS
Shanghai Co.,
Ltd.
21st
January 2021
Registered
CLPS Credit Card Comprehensive Information Platform
Software(“ChinaLinkV”) V2.1.1
China
2021SR0113286
CLPS
Shanghai Co.,
Ltd.
21st
January 2021
Registered
CLPS Meeting Room Reservation Management
Software(“Meeting”)
V1,0
China
2021SR0113234
CLPS
Shanghai Co.,
Ltd.
21st
January 2021
Registered
CLPS BPM Organizational Structure and Process
Approval
Software(“BPM”) V2.0
China
2021SR0216840
CLPS
Shanghai Co.,
Ltd.
7th
February 2021
Registered
CLPS EKYC Based Mobile Banking Software (“Mobile
Banking”) V2.0
China
2021SR0216890
CLPS
Shanghai Co.,
Ltd.
7th
February 2021
Registered
Hainan Qincheng BPM Organization Structure and
Process
Approval Software(“BPM”) V2.0
China
2021SR783928
Hainan
Qincheng
Software
Technology
Co., Ltd.
27th
May 2021
Registered
Hainan Qincheng ERP-TRMS Software(“ERP-TRMS”)
V2.0
China
2021SR0783904
Hainan
Qincheng
Software
Technology
Co., Ltd.
27th
May 2021
Registered
Hainan Qincheng Timesheet Management
Software(“Timesheet”)
V3.0
China
2021SR0783929
Hainan
Qincheng
Software
Technology
Co., Ltd.
27th
May 2021
Registered
63
Software Name
Country of
Registration
Registration
Number
Current
Owner
Approval Date
Status
Hainan Qincheng WeChat Based Timesheet Management
Software (“Timesheet”) V2.0
China
2021SR0783905
Hainan
Qincheng
Software
Technology
Co., Ltd.
27th May 2021
Registered
JAJI Project Management Software V4.0
China
2021SR1775321
JAJI
(Shanghai) Co.,
Ltd.
30th June 2021
Registered
CLPS Meeting Room Reservation Management Software
V2.0
China
2021SR1628925
CLPS
Shanghai Co.,
Ltd.
31st July 2021
Registered
JAJI One-Stop Platform for Talent Cultivation Based on
Internationalization V2.0
China
2021SR1775007
JAJI
(Shanghai) Co.,
Ltd.
28th September 2021
Registered
JAJI Project Lifeline Tracking Management System V1.0
China
2021SR1952575
JAJI
(Shanghai) Co.,
Ltd.
30th September 2021
Registered
JAJI Salary Query Software V1.2
China
2021SR1952576
JAJI
(Shanghai) Co.,
Ltd.
13th October 2021
Registered
JAJI Internet Financial Accounting Management Software
V2.0
China
2021SR2008521
JAJI
(Shanghai) Co.,
Ltd.
14th October 2021
Registered
JAJI Bank Clients Management Software Based on
Distributed Architecture V1.0
China
2021SR1969086
JAJI
(Shanghai) Co.,
Ltd.
14th October 2021
Registered
JAJI Talent Recommendation and Recruitment Mobile
Platform Software V1.0
China
2021SR2085396
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
JAJI BPM BPM Organizational Structure and Process
Approval Software V4.0
China
2021SR1880802
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
JAJI Online Finance Management Software Based on
Distributed Architecture V1.0
China
2021SR2008522
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
JAJI Enterprise Talent Information Analysis and
Management Software Based on Distributed
Architecture V2.0
China
2021SR1901457
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
JAJI Mobile Banking System Based on Intelligent Face
Recognition V1.0
China
2021SR1969085
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
JAJI Talent Resume Management DB Database Software
V1.5
China
2021SR1952673
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
JAJI Business Points Mall WeChat Platform Software
V1.0
China
2021SR1952574
JAJI
(Shanghai) Co.,
Ltd.
17th October 2021
Registered
CLPS EKYC Based Mobile Banking Software (“Mobile
Banking”) V3.0
China
2021SR1617316
CLPS
Shanghai Co.,
Ltd.
2nd November 2021
Registered
64
Software Name
Country of
Registration
Registration
Number
Current
Owner
Approval Date
Status
CLPS Credit Card Comprehensive Information Platform
Software(“ChinaLinkV”) V3.0
China
2021SR1617317
CLPS
Shanghai Co.,
Ltd.
2nd November 2021
Registered
CLPS Credit Card Big Data Integrated Management
Background Software V2.0
China
2021SR1619652
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Credit Card Clearing Management Software V1.0
China
2021SR1619639
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Credit Card Risk Management Software V1.0
China
2021SR1619640
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Credit Card Account Establishment and Card
Making Software V1.0
China
2021SR1619641
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Credit Card Authorization Management Software
V1.0
China
2021SR1619642
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Credit Card Customer Service Management
Software V1.0
China
2021SR1619643
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Credit Card Merchant Consumption Integrated
Comprehensive Management Software V1.0
China
2021SR1619651
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2021
Registered
CLPS Internet Financing Collection Software V1.5
China
2021SR1666790
CLPS
Shanghai Co.,
Ltd.
8th November 2021
Registered
CLPS Online Learning Platform Software V1.5
China
2021SR1666804
CLPS
Shanghai Co.,
Ltd.
8th November 2021
Registered
65
Software Name
Country of
Registration
Registration
Number
Current
Owner
Approval Date
Status
JAJI Dual Recording Platform Software V1.0
China
2021SR2116913
JAJI
(Shanghai) Co.,
Ltd.
17th November 2021
Registered
Chenqin FATA Authorized Testing Automation Tool
Software
China
2022SR1457563
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin MC Transaction Simulation Tool Software
China
2022SR1457579
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin OpenAPI Interface Resource Management
Platform Software
China
2022SR1457562
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin VISA Transaction Simulation Tool Software
China
2022SR1462651
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin Scene Engine Software
China
2022SR1462652
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin Batch Scheduling Management Platform
Software
China
2022SR1462653
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin Authorization Authentication Management
Software
China
2022SR1457578
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
3rd November 2022
Registered
Chenqin CUP Trading Simulation Tool Software
China
2022SR1474275
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
4th November 2022
Registered
Chenqin JCB Transaction Simulation Tool Software
China
2022SR1480972
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
8th November 2022
Registered
66
Software Name
Country of
Registration
Registration
Number
Current
Owner
Approval Date
Status
CLPS CRM Customer Management Software V1.0
China
2022SR1561547
CLPS
Shanghai Co.,
Ltd.
23rd November 2022
Registered
CLPS Talent Order Matching Software V1.0
China
2022SR1561546
CLPS
Shanghai Co.,
Ltd.
23rd November 2022
Registered
CLPS Talent Delivery Management Software V1.0
China
2022SR1561545
CLPS
Shanghai Co.,
Ltd.
23rd November 2022
Registered
CLPS Rules and Regulations Document Management
Software V1.0
China
2022SR1561390
CLPS
Shanghai Co.,
Ltd.
23rd November 2022
Registered
CLPS Data Sharing SD Software V2.0
China
2022SR1561392
CLPS
Shanghai Co.,
Ltd.
23rd November 2022
Registered
CLPS PL Report System Software V2.0
China
2022SR1561391
CLPS
Shanghai Co.,
Ltd.
23rd November 2022
Registered
JAJI CRM Customer Management Software User Manual
V2.0
China
2023SR0235089
JAJI
(Shanghai) Co.,
Ltd.
14th February 2023
Registered
JAJI Talent Order Matching Software User Manual V2.0
China
2023SR0235088
JAJI
(Shanghai) Co.,
Ltd.
14th February 2023
Registered
JAJI Talent Delivery Management System User Manual
V2.0
China
2023SR0235112
JAJI
(Shanghai) Co.,
Ltd.
14th February 2023
Registered
JAJI Rules and Regulations Document Management
System User Manual V2.0
China
2023SR0235113
JAJI
(Shanghai) Co.,
Ltd.
14th February 2023
Registered
JAJI Data Sharing SD Software V3.0
China
2023SR0235114
JAJI
(Shanghai) Co.,
Ltd.
14th February 2023
Registered
JAJI PL Report System Software V3.0
China
2023SR0235115
JAJI
(Shanghai) Co.,
Ltd.
14th February 2023
Registered
Digital Currency Happy Shopping Platform Software
V2.0
China
2023SR0911860
CLPS
Shenzhen Co.,
Ltd.
9th August 2023
Registered
Chenqin Digital RMB Canteen System V3.0
China
2023SR1145755
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
22nd September 2023 Registered
Chenqin Cloud Mall Platform Transaction Software V1.0
China
2023SR1176614
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
28th September 2023
Registered
Chenqin Lottery Platform Software V1.0
China
2023SR1183041
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
7th October 2023
Registered
Chenqin Rules Engine Management Platform Software
V1.0
China
2023SR1182353
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
7th October 2023
Registered
67
Software Name
Country of
Registration
Registration
Number
Current
Owner
Approval Date
Status
JAJI Decision Tree Editing Software V2.0
China
2023SR1193997
JAJI
(Shanghai)
Co., Ltd.
8th October 2023
Registered
JAJI Decision Rule UDK Editing Software V2.0
China
2023SR1205627
JAJI
(Shanghai)
Co., Ltd.
10th October 2023
Registered
JAJI Quantitative Matching Software V1.0
China
2023SR1204049
JAJI
(Shanghai)
Co., Ltd.
10th October 2023
Registered
JAJI Quantitative Configuration Software V1.0
China
2023SR1204959
JAJI
(Shanghai)
Co., Ltd.
10th October 2023
Registered
JAJI Quantitative Execution System V1.0
China
2023SR1209552
JAJI
(Shanghai)
Co., Ltd.
11th October 2023
Registered
CLPS PC AMS Asset Management System V1.0
China
2023SR1217432
CLPS
Shanghai
Co., Ltd.
11th October 2023
Registered
CLPS Video Interview System V1.0
China
2023SR1217429
CLPS
Shanghai
Co., Ltd.
11th October 2023
Registered
CLPS Talent Introduction Management System V3.0
China
2023SR1216783
CLPS
Shanghai
Co., Ltd.
11th October 2023
Registered
CLPS WeChat AMS Asset Management System V1.0
China
2023SR1221845
CLPS
Shanghai
Co., Ltd.
12th October 2023
Registered
CLPS Process Approval WeChat Software V1.0
China
2023SR1222463
CLPS
Shanghai
Co., Ltd.
12th October 2023
Registered
Chenqin Unified Management Platform for Network
Collection V3.0
China
2023SR1322594
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
27th October 2023
Registered
CLPS BPM Organizational Structure and Process
Approval Software V5.0
China
2023SR1353798
CLPS
Shanghai
Co., Ltd.
2nd November 2023
Registered
JAJI Decision Rule Scoring Card Editing Software V2.0
China
2023SR1358161
JAJI
(Shanghai)
Co., Ltd.
2nd November 2023
Registered
Chenqin Credit Card Application Approval Platform
Software V1.0
China
2023SR1392594
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
7th November 2023
Registered
68
The following is a list of the Company’s
patents:
Patent Name
Country of
Registration
Registration
Number
Current
Owner
Approval Date
Status
Credit Card Clearing and Settlement Platform, Batch Task
Processing Method and Server
China
CN 117539643 B
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
29th March 2024
Registered
Task Data Processing Method and Device for Credit Card
Platform
China
CN 117539641 B
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
2nd April 2024
Registered
Distributed Scheduling Platform and Scheduling Method
for Credit Cards
China
CN 117539642 B
Shanghai
Chenqin
Information
Technology
Services Co.,
Ltd.
2nd April 2024
Registered
Properties
On July 2023, we relocated
our principal executive office to Unit 1000, 10th Floor Millennium City III, 370 Kwun Tong Road, Kwun Tong,
Kowloon, Hong Kong
SAR. On September 24, 2021, CLPS, through its wholly-owned subsidiary, Arabian Jasmine, entered into a purchase agreement to
acquire the
commercial real estate located at 10th Floor, Millennium City III, 370 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong SAR for
a
consideration of US$11,286,971, which has been and will continue to be used as the Company’s principal executive office. The consideration
was fully paid
on December 8, 2021.
Our previous principal executive
office was located at Unit 1102, 11th Floor, Millennium City III, 370 Kwun Tong Road, Kwun Tong, Kowloon,
Hong Kong SAR. We
leased the premise, and the lease term has expired on May 5, 2021. On June 7, 2021, CLPS, through its wholly-owned subsidiary,
entered
into a purchase agreement to acquire the commercial real estate for a consideration of US$3,860,000. The consideration was fully paid
on July 21,
2021.
On July 30, 2021, CLPS, through
its wholly-owned subsidiary, Noni Singapore, entered into a purchase agreement to acquire commercial real estate
located at 60 Paya Lebar
Road #05-29 and #05-30, Singapore for a consideration of US$4,614,743. The consideration was fully paid on October 25, 2021.
In addition, the Company manages
and operates several other facilities. We rent office space in Shanghai, Hangzhou, Tianjin, Shenzhen,
Guangzhou, Dalian, Xi’an,
Chengdu, Beijing, Hainan, Japan, India, the U.S., Vietnam and the Philippines. Rent expenses amounted to $1,514,162,
$1,086,622, and $1,085,888
for the years ended June 30, 2024, 2023, and 2022, respectively. We believe our facilities are adequate for our current needs.
69
Facility
Address
Space (m2)
Shanghai Office
2nd Floor, Building 18, Shanghai Pudong Software Park, 498 Guoshoujing Road, Pudong District,
Shanghai, PRC
1,259.94
Shanghai Office
1st Floor, Building 18, Shanghai Pudong Software Park, 498 Guoshoujing Road, Pudong District,
Shanghai, PRC
914.62
Shanghai Office
Room 511&513, Building 1, No. 2966 Jinke Road, Zhangjiang High
tech Park, Shanghai, PRC
564
Dalian Office
B02#503-507, No. 30, Cuitao Street, High Tech Park, Ganjingzi District, Dalian, Liaoning Province,
PRC
1,029.54
Tianjin Office
Room 4403, F4, Building No.4, Xinhuan West Road, TEDA, Tianjin, PRC
76.55
Shenzhen Office
28th Floor, Unit 04, Ludan Building, 1011 Binhe Road, Luohu District, Shenzhen, PRC
299.00
Guangzhou Office
Unit 409-411, Tower B, China Shine Plaza, No. 9 Linhe Xi Road, Tianhe District, Guangzhou,
Guangdong, PRC
331.16
Xi’an Office
19th Floor, Building C2, Phase II, Xi’an Software New Town R&D Base, No. 156, Tiangu 8th Road,
High Tech Zone, Xi’an, Shaanxi, PRC
1,232.92
Chengdu Office
Unit 1205, Tower 2, Xiangnian Square, High-Tech District, Chengdu, Sichuan, PRC
119.52
Beijing Office
610-611, 6th Floor, Pacific Eagle Center, No.1 Building, 33 Gucheng Nanli East Street, Bajiao Street,
Shijingshan District, Beijing, PRC
327.2
Hong Kong Office
10/F, Millennium City III, 370 Kwun Tong Rd, Kwun Tong, Kowloon, Hong Kong
756.23
Hong Kong Office
Unit 1102, Level 11, Millennium City III, 370 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong
210.15
Japan Office
4F, Toyo Building 1-36-3 Nihonbashi Kakigaracho,Chuo Ku,Tokyo, Japan
40.17
India Office
DLF Cybercity, 2nd Floor, Unit No. 222, Bhubaneswar, India 751024
113.81
US Office
Two Embarcadero Center, 8th Floor, San Francisco, CA, USA 94111
6
Canada Office
7 Bayview Station Road, K1Y 2C5 Ottawa, ON, Canada
10
Hainan Office
Room B1013, Binhai Avenue, 109-9 Haihang Plaza, Hainan, PRC
63.62
Hangzhou Office
Unit 308, Building 4, No. 970-1, Gaojiao Road, Wuchang Street Hangzhou, Zhejiang, PRC
65
Philippines Office
Unit 9-060, Arthaland Century Pacific Tower, 5th Avenue Corner 30th Street, Bonifacio Global City,
Manila, Philippines
10
Singapore Office
60 Paya Lebar Road #05-29-30, Paya Lebar Square, Singapore, 409051
270
Singapore Office
11 Collyer Quay, #18-01 to #18-05, The Arcade, Singapore 049317
656
Malaysia Office
Unit 26-03, Q Sentral, Jalan Stesen Sentral 2, 50470 Kl Sentral, Kuala Lumpur, Malaysia
100
United Arab Emirates
Office
Unit IH-00-01-01-OF-01, Level 1, IH-00-01-CP-05, Dubai International Financial Centre, Dubai,
UAE
10
Guangzhou Office
21st Floor, Building A, Fengxing Plaza, No. 67, Tianhe East Road, Tianhe District, Guangzhou City,
Guangdong, PRC
2,354.13
Guangzhou Office
20th Floor, Building A, Fengxing Plaza, No. 67 Tianhe East Road, Tianhe District, Guangzhou,
Guangdong, PRC
2,354.13
70
Legal Proceedings
We are currently not involved
in any legal proceedings; nor are we aware of any claims that could have a material adverse effect on our business,
financial condition,
results of operations or cash flows.
Government Regulation
Holding Foreign Companies Accountable Act (HFCAA)
We became a Commission-identified
issuer (“CII”) under the Holding Foreign Companies Accountable Act (“HFCAA”) on November 18, 2022.
There is no
material impact on our Company by the intervention or control of the PRC government, as disclosed in the heading “Risk of Intervention
or
Control by the PRC Government” under Risk Factors. No member of the board of directors of our Company is a current member of
the Chinese Communist
Party (“CCP). Our Company’s Memorandum and Articles of Associations and bylaws do not contain any chapter
of the CCP.
Uyghur Forced Labor Prevention Act (UFLPA)
We do not conduct any operation
in or reply on any counterparty conducting operation in Xinjiang Uyghur Autonomous Region and are in full
compliance with Uyghur Forced
Labor Prevention Act.
Regulations Relating to PRC Information Technology Service Industry
According to the Catalogue
of Industries for Encouraging Foreign Investment (2022) issued by the National Development and Reform Commission
and the Ministry of Commerce,
IT services fall into the category of industries in which foreign investment is encouraged. The State Council has promulgated
several
notices since 2000 to launch favorable policies for IT services, such as preferential tax treatments and credit support.
Under rules and regulations
promulgated by various Chinese government agencies, enterprises that have met specified criteria and are recognized as
software enterprises
by the relevant government authorities in China are entitled to preferential treatment, including financing support, preferential tax
rates,
export incentives, discretion and flexibility in determining employees’ welfare benefits and remuneration. Software enterprise
qualifications are subject to
annual examination. Enterprises that fail to meet the annual examination standards will lose the favorable
enterprise income tax treatment. Enterprises
exporting software or producing software products that are registered with the relevant government
authorities are also entitled to preferential treatment
including governmental financial support, preferential import, export policies
and preferential tax rates.
Notwithstanding the foregoing,
we are aware that the State Council has promulgated the Regulation on Fair Competition Review (the “RFCR”),
which became effective on August 1, 2024. The RFCR prohibits any policy or measure that impacts productional and operational costs, unless
authorized by
law, administrative regulations, or approved by the State Council. Such circumstances include, but are not limited to, the
granting of tax incentives, selective
or differentiated financial rewards, or subsidies to specific entities. The RFCR further mandates
that market regulators establish and improve a spot-check
mechanism for fair competition review and organize spot checks of the relevant
policies or measures. In case of violation of the RFCR, the market regulator
shall urge the drafting entity of the policy or measure in
question to rectify the situation. As a result, we cannot guarantee the continued or permanent
availability of these preferential treatments.
Should any policy or measure underpinning our preferential treatment be repealed or amended, we may lose such
advantages, potentially
lead to adverse effects on our operations and financial performance.
In 2009, the Ministry of Commerce
and the Ministry of Industry and Information Technology jointly promulgated a rule aiming to protect a fair
competition environment in
the PRC service outsourcing industry. This rule requires that each of the domestic enterprises which provides IT and
technological BPO
services and each of its shareholders, directors, supervisors, managers and employees should not violate the service outsourcing contract
to disclose, use or allow others to use the confidential information of its client. Such enterprises are also required to establish an
information protection
system and take various measures to protect clients’ confidential information, including causing their employees
and third parties who have access to clients’
confidential information to sign confidentiality agreements and or non-competition
agreements.
71
Regulations on Intellectual Property Rights
The PRC Copyright Law, as
amended, together with various regulations and rules promulgated by the State Council and the National Copyright
Administration, protect
software copyright in China. These laws and regulations establish a voluntary registration system for software copyrights
administered
by the Copyright Protection Center of China. Unlike patent and trademark registration, copyrighted software does not require registration
for
protection. Although such registration is not mandatory under PRC law, software copyright owners are encouraged to go through the
registration process and
registered software may receive better protection. The PRC Trademark Law, as amended, together with its implementation
rules, protect registered
trademarks. The Trademark Office of the State Administration for Industry and Commerce handles trademark registrations
and grants a renewable protection
term of 10 years to registered trademarks.
Regulation of Foreign Currency Exchange and Dividend Distribution
Foreign Currency Exchange. The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration
Regulations (1996),
as amended on August 5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the
Interim
Measures on Administration on Foreign Debts (2003). Under these regulations, Renminbi are freely convertible for current account items,
including
the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most
capital account items, such as direct
investment, loans, repatriation of investment and investment in securities outside China, unless
the prior approval of SAFE or its local counterparts is
obtained. In addition, any loans to an operating subsidiary in China that is a
foreign invested enterprise, cannot, in the aggregate, exceed the difference
between its respective approved total investment amount and
its respective approved registered capital amount. Furthermore, any foreign loan must be
registered with SAFE or its local counterparts
for the loan to be effective. Any increase in the amount of the total investment and registered capital must be
approved by the PRC Ministry
of Commerce or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely
basis, if at
all, which could result in a delay in the process of making these loans.
The dividends paid by the
subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration
Rules of the Settlement,
Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange,
subject to
a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions under
the
capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental
authorities.
Dividend Distribution. The principal regulations governing the distribution of dividends by foreign holding companies include the Company Law of
the PRC
(2024), the Foreign Investment Law of the People’s Republic of China (2020), and the Implementing Regulations of the Foreign Investment
Law of
the People’s Republic of China (2020).
Under these regulations, wholly
foreign-owned investment enterprises in China may pay dividends only out of their retained profits, if any,
determined in accordance with
PRC accounting standards and regulations. In addition, wholly foreign-owned investment enterprises in China are required to
allocate at
least 10% of their respective retained profits each year, if any, to fund certain reserve funds unless these reserves have reached 50%
of the
registered capital of the enterprises. These reserves are not distributable as cash dividends, and a wholly foreign-owned enterprise
is not permitted to
distribute any profits until losses from prior fiscal years have been offset.
Circular 37. On July
4, 2014, SAFE issued Circular 37, which became effective as of July 4, 2014. According to Circular 37, PRC residents shall
apply to SAFE
and its branches for going through the procedures for foreign exchange registration of overseas investments before contributing the domestic
assets or interests to a SPV. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required
if the registered
overseas SPV’s basic information such as domestic individual resident shareholder, name, operating period, or
major events such as domestic individual
resident capital increase, capital reduction, share transfer or exchange, merger or division
has changed. Although the change of overseas funds raised by
overseas SPV, overseas investment exercised by overseas SPV and non-cross-border
capital flow are not included in Circular 37, we may be required to make
foreign exchange registration if required by SAFE and its branches.
Moreover, Circular 37 applies retroactively. As a result, PRC residents who have
contributed domestic assets or interests to a SPV, but
failed to complete foreign exchange registration of overseas investments as required prior to
implementation of Circular 37, are required
to send a letter to SAFE and its branches for explanation. Under the relevant rules, failure to comply with the
registration procedures
set forth in Circular 37 may result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000
for
an organization or up to RMB 50,000 for an individual. In the event of failing to register, if capital outflow occurred, a fine up to
30% of the illegal
amount may be assessed. PRC residents who control our company are required to register with SAFE in connection with
their investments in us. If we use
our equity interest to purchase the assets or equity interest of a PRC company owned by PRC residents
in the future, such PRC residents will be subject to the
registration procedures described in Circular 37.
72
New M&A Regulations and Overseas Listings
On August 8, 2006, six PRC
regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration
Commission, the State Administration
for Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly issued the Regulations on
Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006 and was
amended on
June 22, 2009. This New M&A Rule, among other things, includes provisions that purport to require that an offshore special purpose
vehicle
formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies
or individuals obtain the
approval of CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas
stock exchange.
On September 21, 2006, CSRC
published on its official website procedures regarding its approval of overseas listings by special purpose vehicles.
The CSRC approval
procedures require the filing of a number of documents with the CSRC and it would take several months to complete the approval
process.
The application of this new PRC regulation remains unclear with no consensus currently existing among leading PRC law firms regarding
the scope
of the applicability of the CSRC approval requirement.
Our PRC counsel has advised
us that, based on their understanding of the current PRC laws and regulations, that the corporate structure of the
Group Companies shall
not be deemed as “a foreign investor’s merger and acquisition of a domestic enterprise” as specified in the Article
2 of the New
M&A Rule, so the Company is not required to obtain approval from the CSRC for listing and trading of its shares. However,
uncertainties still exist as to
how the New M&A Rule will be interpreted and implemented and our opinion stated above is subject to
any new laws, rules and regulations or detailed
implementations and interpretations in any form relating to the New M&A Rule.
Regulations on Offshore Parent Holding Companies’
Direct Investment in and Loans to Their PRC Subsidiaries
An offshore company may invest
equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after
investment. Such equity investment
is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, which
include the Foreign
Investment Law of the People’s Republic of China (2020) all as amended from time to time, and their respective implementing rules;
the
Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors; and the Notice of the State Administration
on Foreign
Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment. Under the aforesaid
laws and regulations,
the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval by the
original approval authority of its establishment. In
addition, the increase of registered capital and total investment amount shall both
be registered with SAIC and SAFE. Shareholder loans made by offshore
parent holding companies to their PRC subsidiaries are regarded as
foreign debts in China for regulatory purpose, which is subject to a number of PRC laws
and regulations, including the PRC Foreign Exchange
Administration Regulations, the Interim Measures on Administration on Foreign Debts, the Tentative
Provisions on the Statistics Monitoring
of Foreign Debts and its implementation rules, and the Administration Rules on the Settlement, Sale and Payment of
Foreign Exchange. Under
these regulations, the shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered
with
SAFE. Furthermore, the total amount of foreign debts that can be borrowed by such PRC subsidiaries, including any shareholder loans, shall
not exceed
the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of which
are subject to the governmental
approval.
73
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
We are a global information
technology (“IT”), consulting and solutions service provider focused on delivering services primarily to global
institutions,
including banking, wealth management, ecommerce, and automotive both in China and globally. For more than 15 years as an IT services
provider
for a growing network of clients within the fintech and financial services industry, CLPS has expanded its business beyond core IT services,
venturing into the loan, e-commerce, academic education, and tourism sectors. Through its diversified offerings, CLPS is committed to
providing
comprehensive services and solutions for its clients. We have created and developed a particular market niche by providing turn-key
financial solutions.
Since our inception, we have
aimed to build one of the largest sales and service delivery platforms for IT services and solutions in China. The nature
of our services
is such that we provide a majority of services to our banking and credit card clients in order to build new or modify existing clients’
own
proprietary systems. We are fully committed of delivering digital transformation services with a focus on the fintech within the areas
of banking, wealth
management, e-commerce, and automotive, among others, through the utilization of innovative technology to achieve our
client’s goals. We maintain 20
delivery and/or R&D centers, of which 10 are strategically located in Mainland China (Shanghai,
Beijing, Dalian, Tianjin, Xi’an, Chengdu, Guangzhou,
Shenzhen, Hangzhou, and Hainan) and 10 are located globally (Hong Kong SAR,
the United States of America, Japan, Singapore, Australia, Malaysia, India,
the Philippines, Canada, and the United Arab Emirates). Our
extensive network enables us to serve different clients across various geographic locations. By
combining onsite or onshore support and
consulting with scalable and high-efficiency offsite or offshore services and processing, we are able to meet client
demands in a cost-effective
manner while retaining significant operational flexibility. By serving both Chinese and global clients on a common platform, we
are able
to leverage the shared resources, management proficiency, industry expertise and technological know-how to attract new business and remain
cost
competitive. We believe that maintaining our Company as a proven and reliable partner to our clients both in China and globally positions
us well to capture
greater opportunities in the rapidly evolving global market for IT consulting and solutions.
Basis of Presentation
The accompanying consolidated
financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US
GAAP”) and pursuant
to the rules and requirements of the Securities Exchange Commission (“SEC”). The accompanying consolidated financial statements
include the financial statements of CLPS and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated
upon
consolidation. Results of subsidiaries and businesses acquired from third parties are consolidated from the date on which control
is transferred to us.
74
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following
discussion and analysis of our financial condition and results of operations in conjunction with our audited
consolidated financial statements
and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that
involve risks
and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report.
Overview of Company
CLPS Incorporation (“CLPS”
or the “Company”), is a company that was established under the laws of the Cayman Islands on May 11, 2017 as a
holding company.
The Company, through its subsidiaries, designs, builds, and delivers IT services, solutions and other services to clients in the financial
services industry. The Company customizes its services to specific industries with customer service teams typically based on-site at the
customer locations.
The Company’s solutions enable its clients to meet the changing demands of an increasingly global, internet-driven,
and competitive marketplace. Mr. Xiao
Feng Yang, the Company’s Chairman of the Board, together with Mr. Raymond Ming Hui Lin, the
Company’s Chief Executive Officer and Director are the
controlling shareholders of the Company (the “Controlling Shareholders”).
On August 15, 2018, the shareholders
of CLPS SG and Ridik AU were changed to Qiner from CLPS Shanghai pursuant to the share purchase
agreements. Qiner purchased the 100% equity
interest of CLPS SG and Ridik AU from CLPS Shanghai for consideration of $0.6 million (or approximately
850,000 Singapore dollars) and
$0.1 million (or approximately 200,000 Australian dollars), respectively. These transactions did not change the holding
company’s
ownership of these entities.
On August 20, 2018, CLPS
SG acquired an 80% interest in Infogain Solutions Pte. Ltd. (“Infogain”) located in Singapore from Sharma Devendra
Prasad
and Deepak Malhotra with the final purchase price of $0.4 million (or approximately 576,000 Singapore dollars).
On April 3, 2019, Qiner purchased
a 30% equity interest in Economic Modeling Information Technology Co., Ltd. (“EMIT”). The consideration is
zero amount. Qiner
subsequently made a capital contribution of $0.44 million (RMB 3 million) to EMIT directly. There is remaining capital contribution of
$0.23 million not paid as of June 30, 2021.
On July 31, 2019, the Company
incorporated CLPS Hangzhou Co., Ltd. (“CLPS Hangzhou”), to develop the business in related areas.
On September 13, 2019, the
Company incorporated CLPS Technology Japan (“CLPS Japan”) to develop business in related areas.
On September 26, 2019, Qiner
acquired an 80% interest in Ridik Pte. Ltd. (“Ridik Pte.”) located in Singapore from Srustijeet Mishra and Routray
Sibashis
with the final purchase price of $2,462,580 (3,402,304 Singapore dollars), in the form of cash of $2,026,043 (2,799,180 Singapore dollars)
and the
Company’s common shares valued at $436,537 (603,123 Singapore dollars), respectively. Ridik Sdn. Bhd. (“Ridik Sdn.”),
Ridik Software Solutions Pte. Ltd.
(“Ridik Software Pte.”), Ridik Software Solutions Ltd. (“Ridik Software”),
and Suzhou Ridik Information Technology Co., Ltd. (“Suzhou Ridik”) are all
subsidiaries of Ridik Pte. Suzhou Ridik was liquidated
on April 16,2021. Ridik Software was dissolved on May 11,2021.
Prior to December 2019, CLPS
Shanghai held a 70% equity interest in CLPS Shenzhen and an 80% equity interest in CLPS Hong Kong, which held
the remaining 30% equity
interest in CLPS Shenzhen. And the remaining 20% equity interest in CLPS Hong Kong and remaining 6% equity interest in
CLPS Shenzhen were
recorded as a noncontrolling interests on the Company’s consolidated balance sheet. On December 9, 2019, Qiner acquired the
remaining
20% equity interest in CLPS Hong Kong from noncontrolling shareholder with the consideration of the Company’s 100,000 common shares,
and
became the sole shareholder of CLPS Hong Kong and CLPS Shenzhen.
75
On December 31, 2019, the
Company incorporated Qinson Credit Card Services Limited (“Qinson”) to develop business in related areas.
On January 6, 2020, Ridik
Pte. acquired 100% equity interest in Ridik Consulting Private Limited (“Ridik Consulting”) from third-party selling
shareholders
with the final purchase price of $5,520 (396,700 Indian Rupees).
On July 23, 2020, Qiner purchased
the 80% equity interest in CLPS Hong Kong from CLPS Shanghai for consideration of $0.64 million (HKD
5,000,000). After the equity transfer,
Qiner holds 100% of equity interest of CLPS Hong Kong. This transaction did not change the holding company’s
ownership of the entity.
On July 27, 2020, the Company
and a third-party company incorporated CLPS Guangdong Zhichuang Software Technology Co., Ltd. (“CLPS
Guangdong Zhichuang”)
in Shenzhen. The Company holds 10% of equity interest in CLPS Guangdong Zhichuang valued at $0.14 million (RMB 1,000,000).
On August 13,
2020, January 5, 2021, and February 2, 2021, the Company injected $28,571 (RMB 200,000), $46,476 (RMB 300,000) and $15,487 (RMB
100,000)
to CLPS Guangdong Zhichuang, respectively.
On August 28, 2020, the Company,
the Chairman of the Company and a third-party company incorporated CLPS Shenzhen Robotics Co. Ltd.
(“CLPS Shenzhen Robotics”)
in Shenzhen. The Company holds 10% of equity interest in CLPS Shenzhen Robotics valued at $0.14 million (RMB
1,000,000). On September
15, 2020, the Company injected $147,451 (RMB1,000,000) to CLPS Shenzhen Robotics.
On January 20, 2021, the Company
incorporated Hainan Qincheng Software Technology Co., Ltd. (“CLPS Hainan”) in Hainan to develop business
in related areas.
Prior to January 2021, Qiner
held 80% equity interest in Ridik Pte. The remaining 20% equity interest was recorded as a noncontrolling interest on
the Company’s
consolidated balance sheet. On January 29, 2021, CLPS SG acquired the remaining 20% equity interest from Srustijeet Mishra and Routray
Sibashis with final purchase price of $0.62 million (or approximately SGD 828,135), in the form of cash of $0.44 million (or approximately
SGD 579,695)
and the Company’s common shares valued at $0.18 million (or approximately SGD 248,441). Ridik Pte. and its subsidiaries
are now wholly-owned
subsidiaries of the Company.
On February 3, 2021, CLPS
Shanghai reached a capital increase agreement with the three shareholders of Shanghai Shier Information Technology
Co., Ltd. (“SSIT”).
After the capital increase, the Company holds 35% of equity interest in SSIT valued at $0.08 million (RMB 538,500). The Company
injected
the capital of $0.08 million (RMB 538,500) on March 2, 2021.
Prior to January 2021, JAJI
China held a 70% equity interest in JAJI HR. The remaining 30% equity interest in JAJI HR was recorded as a
noncontrolling interest on
the Company’s consolidated balance sheet. On January 28, 2021, JAJI China acquired the remaining 30% equity interest from
CareerWin
Executive Search Co., Ltd. (“CareerWin”).
On March 3, 2021, JAJI HR
acquired 100% equity interest in CareerWin located in Shanghai from third-party selling shareholders with the purchase
price in the form
of cash of $0.29 million (RMB 1,877,044).
On March 11, 2021, the equity
interest in Ridik Pte. was transferred to CLPS SG from Qiner pursuant to the share purchase agreements. CLPS SG
purchased the 80% equity
interest in Ridik Pte. from Qiner for consideration of $2.16 million (or approximately SGD 2,906,435). After the equity transfer,
CLPS
SG now holds 100% equity interest in Ridik Pte. This transaction did not change the holding company’s ownership of the entity.
On April 2, 2021, as part
of business strategy, the Company changed the English entity name of its majority-owned subsidiary, Judge (Shanghai)
Co., Ltd. and its
wholly-owned subsidiary Judge (Shanghai) Human Resource Co., Ltd., to JAJI (Shanghai) Co., Ltd. (“JAJI China”) and JAJI (Shanghai)
Human Resource Co., Ltd. (“JAJI HR”), respectively.
On April 14, 2021, the Company
incorporated Growth Ring Ltd. (“Growth Ring”) in British Virgin Islands to develop business in related areas.
On April 15, 2021, the Company incorporated CLPS
Xi’an Co., Ltd. (“CLPS Xi’an”) in Shaanxi to develop business in related areas.
76
On May 11, 2021, JAJI China
acquired 60% of equity interest in Beijing Bozhuo Education Technology Co., Ltd. (“Beijing Bozhuo”) located in
Beijing from
a third-party selling shareholder with the purchase price in the form of cash of $0.02 million (RMB 120,000).
On May 25, 2021, the Company
incorporated Arabian Jasmine Ltd. (“Arabian Jasmine”) in British Virgin Islands to develop business in related
areas.
On May 31, 2021, CLPS SG sold
its 80% equity interest in Infogain to the noncontrolling interest shareholder Sharma Devendra Prasad for the sale
price of $0.08 million
(SGD 100,000). After the interest transfer, Infogain is no longer a subsidiary of the Company.
On May 31, 2021, the Company
incorporated Shanghai Chenqin Information Technology Services Co., Ltd. (“Shanghai Chenqin”) in Shanghai to
develop business
in related areas.
On June 22, 2021, the Company
incorporated Noni (Singapore) Pte. Ltd. (“Noni Singapore”) in Singapore to develop business in related areas.
On June 22, 2021, the Company
and a noncontrolling interest shareholder incorporated CLPS-Beefinance Holding Limited (“CLPS-Beefinance”) in
British Virgin
Islands to develop and upgrade blockchain-based digital asset solutions for financial institutions.
In September, 2022, the Company
sold its 60% equity interest in Beijing Bozhuo to the noncontrolling interest shareholder for the sale price of
$0.01 million (RMB 96,000).
After the interest transfer, Beijing Bozhuo is no longer a subsidiary of the Company.
On October 19, 2022, the Company
incorporated CLPS Chengdu Co., Ltd. (CLPS Chengdu) in Chengdu to develop business in related areas.
On December 20, 2022, the
Company incorporated CLPS Investment Management Ltd. (CLPS Investment) in British Virgin Islands to develop
business in related areas.
On March 15, 2023, CLPS Ruicheng
Co., Ltd. (CLPS RC) was liquidated.
On April 19, 2023, the Company
incorporated JAJI Global Incorporation (JAJI Global) in Cayman Islands to develop business in related areas.
On June 27, 2023, the Company
incorporated JAJI Singapore Pte. Ltd. in Singapore to develop business in related areas.
On July 24, 2023, the Company
incorporated Ridik Technology Canada Limited to develop business in related areas.
On August 25, 2023, the Company
incorporated Shanghai Yingjia Technology Limited in Shanghai to develop business in related areas.
On August 28, 2023, the Company
incorporated Qinson Singapore Pte. Ltd. in Singapore to develop business in related areas.
On January 3, 2024, the Company,
through its subsidiary CLPS SG, acquired 100% equity interest of College of Allied Educators Pte. Ltd. (“CAE”)
to expand
into the academic education sector.
On June 7, 2024, the Company,
through its subsidiary Ridik Pte., acquired 100% equity interest of Shell Infotech Pte. Ltd. and its wholly-owned
subsidiary, Shell Infotech
Consulting Sdn. Bhd. to further strengthen our position in the Southeast Asia region for IT services.
On May 8, 2024, the Company
incorporated Ridik Technology Services Pte. Ltd in Singapore to develop business in related areas.
The Company is dedicated to
providing a full range of services and solutions across technology needs in finance. In recent years, we have both one
of the largest
IBM mainframe teams, and the largest VisionPLUS team in China, providing both development and implementation of core banking, credit
card,
online and e-commerce systems, as well as expertise across technology stacks including J2EE, .Net, C, C++ and mobile. We are ISO 9001,
ISO 14001,
ISO 27001, CMMI 5, and TMMi 3 certified, and have been granted certificates of recognition by the Shanghai government, including
Enterprise Software
Certification, High-tech Enterprise, Little Giant Company for Science and Technology and Professional
Talent Development Training Camp.
Our operations are primarily
based in Mainland China, where we derive a substantial portion of our revenues. For the years ended June 30, 2024,
2023, and 2022, our
revenues were $142.8 million, $150.4 million, and $152.0 million, respectively. Revenues generated outside of Mainland China were
approximately
$22.3 million, $16.2 million, and $14.1 million for fiscal 2024, 2023, 2022, respectively. We had a net loss of $1.8 million in fiscal
2024, a net
income of $0.2 million in fiscal 2023, and a net income of $4.6 million in fiscal 2022. We had a non-GAAP net income of $1.3
million in fiscal 2024. Our
total assets as of June 30, 2024 were $110.0 million of which cash and cash equivalent amounted to $29.1
million. Our total liabilities as of June 30, 2024
were $46.1 million.
77
Factors Affecting Our Results of Operations
We believe the most significant
factors that affect our business and results of operations include the following:
●
Our ability to obtain new clients and repeat business from existing
clients. Revenues from individual clients typically grow over time as we
seek to increase the number and scope of services provided to
each client, and as clients increase the complexity and scope of the work
outsourced to us. Therefore, our ability to obtain new clients,
as well as our ability to maintain and increase business from our existing clients,
has a significant effect on our results of operations
and financial condition. During fiscal 2024, our revenue derived from our IT consulting
services decreased by 5.2% or $7.5 million from
fiscal 2023, mainly due to decreased demand from our existing clients. IT consulting services
revenue from new clients amounted to approximately
$3.3 million in fiscal 2024. During fiscal 2023, our revenue derived from our IT
consulting services increased by 0.1% or $0.2 million
from fiscal 2022, mainly attributable to revenue growth from our new clients. IT
consulting services revenue from new clients amounted
to approximately $2.7 million in fiscal 2023.
●
Our ability to expand our portfolio of service offerings. We intend to increase our revenues by continuing to expand our service offerings,
providing quality service to our existing customers and attracting new customers. Through research and development, targeted hiring and
strategic acquisitions, we have proactively invested in broadening our existing service lines, including those for serving our specific industry
verticals.
●
Our ability to attract, retain and motivate qualified employees. Our ability to attract, train and retain a large and cost-effective pool of qualified
professionals, including our ability to leverage and expand our proprietary database of qualified IT professionals, to develop additional joint
training programs with universities, and our employees’ job satisfaction, will affect our financial performance.
We use the following key operating
metrics to oversee and manage the Company’s business: (i) developing new business, (ii) spearheaded by the
CLPS Academy, focusing
on the TCP/TDP training programs to provide highly trained and qualified employees to the clients; and (iii) retaining employees
to continue
to meet client ever-changing needs.
Our objective is to create
value for both our customers and shareholders by enhancing our position as a leading IT services provider in the banking
industry in China.
We believe our strategic initiatives will continue to generate our sales growth, allow us to focus on managing capital, leveraging costs
and
driving margins to produce profitability and return on investment for our stockholders.
Acquisitions and Investments
Investment in and dissolution of Huanyu
On September 27, 2017, the
Company made an investment of $0.15 million (RMB 1,000,000) for a 30% of equity interest in Huanyu which was
accounted for as an equity
method investment. On May 24, 2019, the Company purchased the remaining 70% equity interest of Huanyu for $0.07 million
(RMB 462,000)
and became the sole shareholder of Huanyu.
The transaction was accounted
for as a business combination using the purchase method of accounting. As the business combination was achieved
in stages, the Company
remeasured its previously held 30% of equity interest in Huanyu at its acquisition date fair value of $152,312. A loss of $19,682 was
recognized in subsidies and other income net in relation to the remeasurement. The valuation considered a discount for lack of control
premium and lack of
marketability applied to the fair value of the acquired business of Huanyu, which was determined using the income
approach.
78
The purchase price allocation
of the transaction was determined by the Company with the assistance of an independent appraisal firm based on the
estimated fair value
of the assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation to assets acquired and liabilities
assumed as of the date of acquisition was as follows:
Amounts
Cash acquired
$
79,156
Accounts receivable, net
87,674
Prepayments, deposits and other assets, net
7,707
Accounts payable and other current liabilities
(5,310)
Goodwill
50,045
Previous held equity interests
152,312
Cash consideration
66,960
Total consideration
$
219,272
The goodwill is mainly attributable
to the excess of the consideration paid over the fair value of the net assets acquired that cannot be recognized
separately as identifiable
assets under U.S. GAAP, and comprise the expected but unidentifiable business growth as a result of the synergy resulting from the
acquisition.
The goodwill is not tax deductible. No intangible assets were identified from the acquisition.
For the period from July
1, 2018 to the acquisition date of May 24, 2019 and for the year ended June 30, 2018, 30% of Huanyu’s results of
operations
was income of $35,049 (RMB 239,073) and loss of $8,684 (RMB56,461), respectively.
On January 31, 2023, Huanyu
was liquidated.
Investment in and disposal of CLPS Lihong
On March 1, 2019, the Company
purchased a 36.84% equity interest in CLPS Lihong at a cash consideration of $0.15 (RMB 1) on the condition that
the Company could inject
capital of $1.01 million (RMB 7 million) into CLPS Lihong. In May 2019, the Company made capital contribution to CLPS
Lihong of $1.01
million (RMB 7 million). The Company accounts for the investment in CLPS Lihong as an equity method investment due to its significant
influence over the entity. For the year ended June 30, 2019, the Company’s share of CLPS Lihong’s results of operations was
loss of $176,148 (RMB
1,201,523).
In April 2020, the Company
sold an 18.42% equity interest in CLPS Lihong to the third party for the consideration of $995,605 (RMB 7 million)
which was received
as of June 30, 2020. Concurrently CLPS Lihong raised additional capital from other third party investors, and the Company’s remaining
equity interest in CLPS Lihong was diluted to 7% as of June 30, 2020. The Company recognized the remaining equity interest in CLPS Lihong
as equity
investment without readily determined fair value since May 2020. For the period from July 1, 2019 to April 30, 2020, the Company’s
share of CLPS
Lihong’s results of operations was income of $250,290 (RMB 1,759,764).
In July 2021, the Company
sold its remaining 7% equity interest of CLPS Lihong to the third party for the consideration of $645,122 (RMB 4.2
million) which was
received on July 27, 2021. After the equity transfer, the Company no longer holds any equity interest in CLPS Lihong.
79
Investment in and disposal of CLPS Guangdong
Zhichuang
On July 27, 2020, the Company
and a third-party company incorporated CLPS Guangdong Zhichuang Software Technology Co., Ltd. (“CLPS
Guangdong Zhichuang”)
in Shenzhen. The Company holds 10% of equity interest in CLPS Guangdong Zhichuang valued at $0.14 million (RMB 1,000,000).
On August 13,
2020, January 5, 2021, and February 2, 2021, the Company injected $28,571 (RMB 200,000), $46,476 (RMB 300,000) and $15,487 (RMB
100,000)
to CLPS Guangdong Zhichuang, respectively. The Company recognized the equity interest in CLPS Guangdong Zhichuang as equity investment
without readily determined fair value.
In April 2022, the Company
sold its 10% equity interest in CLPS Guangdong Zhichuang to the other shareholder for $0.1 million (RMB 900,000).
After the disposal,
the Company no longer holds any equity interest in CLPS Guangdong Zhichuang.
Investment in and disposal of CLPS Shenzhen
Robotics
On August 28, 2020, the
Company, the Chairman of the Company and a third-party company incorporated CLPS Shenzhen Robotics Co. Ltd.
(“CLPS Shenzhen Robotics”)
in Shenzhen. The Company holds 10% of equity interest in CLPS Shenzhen Robotics valued at $0.14 million (RMB
1,000,000). On September
15, 2020, the Company injected $147,451 (RMB1,000,000) to CLPS Shenzhen Robotics. The Company recognized the equity
interest in CLPS
Guangdong Zhichuang as equity investment without readily determined fair value.
In May 2023, the Company
divested its entire 10% equity interest in CLPS Shenzhen Robotics, receiving the investment in the same month.
Acquisition in and dissolution of CareerWin
In January 2021, JAJI China
entered into an agreement with CareerWin to purchase CareerWin’s 30% equity interest in JAJI HR. JAJI China
previously owned 70%
of JAJI HR. After the transaction, JAJI China owned 100% of JAJI HR. At the same time, JAJI HR entered into a share purchase
agreement
with shareholders of CareerWin to purchase 100% equity interests of CareerWin to expand headhunting business, with JAJI China completing
the
purchase of 30% equity interest of JAJI HR as one of the pre-closing conditions. The total cash consideration of both transactions
was $308,975 (RMB2
million). The total consideration was allocated to the acquisition of 100% equity interests in CareerWin and the acquisition
of 30% noncontrolling interest in
JAJI HR at $289,980 (RMB1.88 million) and $18,995 (RMB0.12 million), respectively.
The acquisition of the 100%
equity interest in CareerWin was completed on March 3, 2021 and was accounted for as a business combination using
the purchase method
of accounting. The purchase price allocation of the transaction was determined by the Company with the assistance of an independent
appraisal
firm based on the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date. The most significant
variables in the
valuation are discount rate, terminal value, the number of years on which to base the cash flow projections, as well
as the assumptions and estimates used to
determine the cash inflows and outflows. The purchase price allocation to assets acquired and
liabilities assumed as of the date of acquisition was as follows:
Amounts
Cash acquired
$
4,037
Accounts receivable
24,811
Property and equipment, net
2,117
Customer contracts
126,680
Other payable and other current liabilities
(71,488)
Wages payable
(5,099)
Tax payables
(2,576)
Deferred tax liabilities
(25,336)
Goodwill
236,834
Total consideration
$
289,980
80
Identifiable intangible assets
acquired include customer relationship, which were valued using an income approach and determined to carry
estimated remaining useful
lives of approximately five years. The goodwill recognized represents the expected synergies and is not tax deductible.
Pro forma financial information
of CareerWin is not presented as the effects of the acquisition on the Company’s consolidated financial statements
were not material.
In January 2023, CareerWin
was liquidated.
Investment in Fuson
On August 1, 2021, the Company
reached an equity transfer and capital increase agreement with a third party of the target company Fuson Group
Limited (“Fuson”).
After the equity transfer and capital increase, the Company holds 35.02% of equity interest in Fuson for $0.16 million (HKD 1,225,000).
The Company made the first payment of $0.08 million (HKD 612,500) on August 16, 2021.
Acquisition of MSCT
On August 16, 2021, Growth
Ring reached a capital increase agreement with the prior shareholder of MSCT. After the capital increase, the
Company holds 53.33% equity
interest in MSCT and its wholly owned subsidiaries. The Company injected the capital of $0.2 million (HKD 1,600,000) on
August 16, 2021.
As MSCT does not possess all
the elements that are necessary to conduct normal operations as a business and had not yet commenced operations,
the transactions were
accounted for asset combinations using a cost accumulation and allocation model under which the cost of the acquisition is allocated to
the assets acquired and liabilities assumed. The carrying amounts of the net identifiable assets of MSCT as of the date of acquisition
were as follows:
Amounts
Cash acquired
$
205,711
Technology
151,168
Other payable and other current liabilities
(5,390)
Deferred tax liabilities
(23,971)
Noncontrolling interests
(121,807)
Total consideration
$
205,711
Identifiable intangible assets acquired include technology, which were
valued using an income approach and determined to carry estimated
remaining useful lives of approximately ten years.
81
Acquisition of CAE
On December 20, 2023,
CLPS SG entered into an agreement with College of Allied Educators Pte. Ltd. (“CAE”) to purchase 100% of its equity
interest,
at a total cash consideration of $3,244,145 (SGD$4,280,000). CAE is a company incorporated in Singapore, mainly engaged in providing programs,
short courses, and workshops to train and help individuals and professionals in counselling, psychology, and allied health and science.
This acquisition
created resources and business synergies by connecting highly skilled IT professionals with education platforms to collaborate,
advance, and promote IT
talent creation and development to support the Company’s long-term business expansion.
The
acquisition was completed on January 3, 2024 and was accounted for as a business combination using the purchase method of accounting.
The
purchase price allocation to assets acquired and liabilities
assumed as of the date of acquisition was as follows:
Amounts
Net assets acquired:
Cash and cash equivalents
1,469,832
Accounts receivable, net
15,094
Prepayments, deposits and other assets – current
146,410
Intangible assets:
License
909,573
Client lists
166,755
Collaboration agreement
98,537
Other current liabilities
(745,579)
Other non-current liabilities
(947)
Deferred tax liabilities
(199,727)
Goodwill
1,384,197
Total consideration
3,244,145
Acquisition of Shell Infotech Singapore and Shell Infotech Malaysia
On June 7, 2024, Ridik Pte. Ltd. entered into an agreement with Shell
Infotech Pte. Ltd. and Shell Infotech Consulting Sdn. Bhd. (collectively,
“Shell Infotech”) to purchase 100% of its equity
interest, at a total cash consideration of $887,836 (SGD$1,200,000) and $29,595 (SGD$40,000),
respectively. Shell Infotech is a leading
IT consulting and managed services provider headquartered in Singapore and was established in 2003. It offers a
wide range of IT services,
including software development, SAP solutions, enterprise applications, and managed services, with a focus on the banking and
insurance
sectors in Singapore and Malaysia. This acquisition expanded the Company’s client base and market share in Southeast Asia, while
strengthened
its core IT competencies and service offerings and solidified its commitment to global expansion.
The acquisition of the 100%
equity interest in Shell Infotech Singapore and Shell Infotech Malaysia was completed on June 7, 2024 and was
accounted for as a business
combination using the purchase method of accounting. The purchase price allocation to assets acquired and liabilities assumed as
of the
date of acquisition was as follows:
Amounts
Net assets acquired:
Cash and cash equivalents
126,410
Accounts receivable, net
574,287
Prepayments, deposits and other assets – current
32,432
Property and equipment, net
39,964
Intangible assets: Customer
relationships
569,695
Other current liabilities
(453,961)
Other non-current liabilities
(1,255)
Deferred tax liabilities
(96,848)
Goodwill
126,707
Total consideration
917,431
82
Results of Operations
Results of Operations for Continuing Operations
The following table sets forth
a summary of our consolidated statements of operations for the periods indicated.
For the years ended June 30,
2024
2023
2022
Revenue from third parties
$
142,725,554 $
150,298,963 $ 151,970,357
Revenue from related parties
87,172
57,576
52,024
Less: Cost of revenues from third parties
(109,795,857) (115,827,597) (110,989,394)
Less: Cost of revenue from related parties
(69,738)
(47,212)
(43,951)
Gross profit
32,947,131
34,481,730
40,989,036
Operating incomes (expenses):
Selling and marketing expenses
(4,573,344)
(3,300,555)
(4,103,066)
Research and development expenses
(7,155,949)
(8,336,999)
(7,971,145)
General and administrative expenses
(25,120,010)
(21,641,317)
(23,045,664)
Impairment of goodwill
-
(2,382,538)
-
Subsidies and other operating income
1,363,757
1,256,070
1,536,394
Total operating expenses
(35,485,546)
(34,405,339)
(33,583,481)
(Loss) income from operations
(2,538,415)
76,391
7,405,555
Other income
1,251,465
1,123,612
854,250
Other expenses
(556,415)
(430,357)
(575,605)
(Loss) income before income tax and share of income in equity investees
(1,843,365)
769,646
7,684,200
Provision for income taxes
160,725
674,344
3,045,992
(Loss) income before share of (loss) income in equity investees
(2,004,090)
95,302
4,638,208
Share of income (loss) in equity investees, net of tax
156,780
70,263
(50,297)
Net (loss) income
(1,847,310)
165,565
4,587,911
Less: Net income (loss) attributable to
noncontrolling interests
482,655
(26,964)
132,483
Net (loss) income attributable to CLPS Incorporation’s shareholders
$
(2,329,965) $
192,529 $
4,455,428
Basic (losses) earnings per common share
(0.09)
0.01
0.21
Weighted average number of share outstanding – basic
25,213,012
23,153,976
20,924,683
Diluted (losses) earnings per common share
(0.09)
0.01
0.21
Weighted average number of share outstanding – diluted
25,213,012
23,153,976
21,057,063
Supplemental information:
Non-GAAP income before income tax and share of income of equity investees
1,324,651
5,630,480
14,869,062
Non-GAAP net income
1,320,706
5,026,399
11,772,773
Non-GAAP net income attributable to CLPS Incorporation’s shareholders
838,051
5,053,363
11,640,290
Non-GAAP basic earnings per common share
0.03
0.22
0.56
Weighted average number of share outstanding – basic
25,213,012
23,153,976
20,924,683
Non-GAAP diluted earnings per common share
0.03
0.22
0.55
Weighted average number of share outstanding – diluted
25,213,012
23,153,976
21,057,063
83
Use of Non-GAAP Financial Measures
The consolidated financial
information is prepared in conformity with accounting principles generally accepted in the United States of America
(“U.S. GAAP”),
except that the consolidated statement of changes in shareholders’ equity, consolidated statements of cash flows, and the detailed
notes have
not been presented. The Company uses non-GAAP income before income tax and share of loss income of equity investees, non-GAAP
net income, non-
GAAP net income attributable to CLPS Incorporation’s shareholders, and basic and diluted non-GAAP net income per
share, which are non-GAAP financial
measures. Non-GAAP income before income tax and share of income (loss)of equity investees is income
before income tax and share of income (loss) of
equity investees excluding share-based compensation expenses and impairment of goodwill.
Non-GAAP net income is net income excluding share-based
compensation expenses and impairment of goodwill. Non-GAAP net income attributable
to CLPS Incorporation’s shareholders is net income attributable to
CLPS Incorporation’s shareholders excluding share-based
compensation expenses and impairment of goodwill. Basic and diluted non-GAAP net income per
share is non-GAAP net income attributable
to CLPS Incorporation’s shareholders divided by weighted average number of shares used in the calculation of
basic and diluted net
income per share. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation
expenses
and impairment of goodwill clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures
together
with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure
for planning,
forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measures are useful
supplemental information for
investors and analysts to assess its operating performance without the effect of non-cash share-based compensation
expenses and impairment of goodwill,
which have been and will continue to be significant recurring expenses in its business. However,
the use of non-GAAP financial measures has material
limitations as an analytical tool. One of the limitations of using non-GAAP financial
measures is that they do not include all items that impact the Company’s
net income for the period. In addition, because non-GAAP
financial measures are not measured in the same manner by all companies, they may not be
comparable to other similar titled measures used
by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial
measure in isolation from or as
an alternative to the financial measure prepared in accordance with U.S. GAAP.
The presentation of these
non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial
information prepared
and presented in accordance with U.S. GAAP. The following table sets forth a reconciliation of non-GAAP general and administrative
expense,
non-GAAP income before income tax and share of loss of equity investees, non-GAAP net income, non-GAAP net income attributable to CLPS
Incorporation’s shareholders, and non-GAAP Basic and diluted earnings per common share for the periods indicated:
For the
year ended
June 30,
2024
Cost of revenues
(109,865,595)
Less: share-based compensation expenses
(11,467)
Non-GAAP cost of revenues
(109,854,128)
Selling and marketing expenses
(4,573,344)
Less: share-based compensation expenses
(275,562)
Non-GAAP selling and marketing expenses
(4,297,782)
General and administrative expenses
(25,120,010)
Less: share-based compensation expenses
(2,880,987)
Non-GAAP general and administrative expenses
(22,239,023)
Loss before income tax and share of income in equity investees
(2,538,415)
Add: share-based compensation expenses
3,168,016
Non-GAAP income before income tax and share of loss of equity investees
629,601
Net income
(1,847,310)
Add: share-based compensation expenses
3,168,016
Non-GAAP net income
1,320,706
Net loss attributable to CLPS Incorporation’s shareholders
(2,329,965)
Add: share-based compensation expenses
3,168,016
Non-GAAP net income attributable to CLPS Incorporation’s shareholders
838,051
Weighted average number of share outstanding used in computing GAAP
and non-GAAP basic (losses) earnings
25,213,012
GAAP basic losses per common share
(0.09)
Add: share-based compensation expenses
0.12
Non-GAAP basic earnings per common share
0.03
Weighted average number of share outstanding used in computing GAAP diluted losses
25,213,012
Weighted average number of share outstanding used in computing non-GAAP diluted earnings
25,213,012
GAAP diluted losses per common share
(0.09)
Add: share-based compensation expenses
0.12
Non-GAAP diluted earnings per common share
0.03
84
For the Years Ended June 30, 2024 and 2023
Revenues
We derive revenues by providing
integrated IT services and solutions, including: (i) IT consulting services, which primarily includes application
development services
for banks and institutions in the financial industry, which are billed on a time-and-expense basis, (ii) customized IT solutions services,
which primarily includes customized solution development and maintenance service for general enterprises with acceptance requirement,
which are billed
either on a time-and-expense basis with enforceable right to payment or on a fixed-price basis, and (iii) other revenue
from product and third-party software
sales, training and headhunting.
Our customer contracts
may be categorized by pricing model into time-and-expense contracts and fixed-price contracts. Under time-and-expense
contracts, we
are compensated for actual time incurred by our IT professionals at negotiated daily billing rates. We are also entitled to charge
overtime fees in
addition to the daily billing rates under some time-and-expense contracts. Fixed-price contracts require us to
develop customized IT solutions throughout the
contractual period, and we are paid in installments upon completion of specified
milestones under the contracts.
The following table presents
our revenues by our service lines.
For the Year ended June 30,
2024
2023
Revenue
% of total
Revenue
Revenue
% of total
Revenue
Variance
Variance
%
IT consulting services
$ 136,844,784
95.8% $ 144,286,502
96.0%
(7,441,718)
(5.2)%
Customized IT solution services
3,147,593
2.2%
4,554,200
3.0%
(1,406,607)
(30.9)%
Other IT services
1,777,517
1.3%
1,515,837
1.0%
261,680
17.3%
Academic education services
1,042,832
0.7%
-
-%
1,042,832
-%
Total
142,812,726
100.0%
150,356,539
100.0%
(7,543,813)
(5.0)%
Our total revenues decreased
by approximately $7.6 million, or 5.0%, to approximately $142.8 million for the fiscal year ended June 30, 2024, from
approximately $150.4
million for the fiscal year ended June 30, 2023.
85
For the year ended June
30, 2024, revenue derived from our IT consulting services decreased by 5.2% to $136.8 million from $144.3 million in
fiscal 2023,
primarily due to the decreased demands for our IT consulting services from banks and other financial institutions. For fiscal
2024 and 2023,
33.6% and 38.2% of our IT consulting services revenue were from international banks, respectively.
Revenue from customized IT
solution services decreased by $1.5 million, or 30.9%, to $3.1 million for the year ended June 30, 2024, from $4.6
million in the same period
of the previous year. The decrease was primarily due to decreased demand from existing clients.
Revenue from other services
increased by $0.3 million, or 17.3%, to $1.8 million for the year ended June 30, 2024, from $1.5 million in the prior
year period.
Revenue from academic education services was $1.0 million, primarily
due to the acquisition of College of Allied Educators Pte. Ltd.
The number of clients
increased to 300 for the year ended June 30, 2024 compared to the prior year period. Revenues from top five clients
accounted
for 44.9% and 49.1% of the Company’s total revenues for fiscal 2024 and 2023, respectively.
Revenue generated outside
of Mainland China for the year ended June 30, 2024 accounted for 15.6% of total revenue compared to 10.8% in the
prior year period. The
increase was primarily due to strong performance of our operations in Singapore, Hong Kong SAR, and the U.S., reflecting the
Company's
successful and continuous implementation of its global expansion strategy.
Cost of revenues
Our cost of revenues
mainly consisted of compensation benefit expenses for our IT professionals, travel expenses and material costs. Our cost of
revenues
decreased by $6.0 million or 5.2% to approximately $109.9 million in fiscal 2024 from approximately $115.9 million in fiscal 2023
primarily due to
the decrease in IT professional compensation costs. As a percentage
of revenues, our cost of revenues was 76.9% and 77.1% for fiscal 2024 and 2023,
respectively.
Gross profit and gross margin
Our gross profit decreased
by $1.6 million, or 4.5%, to approximately $32.9 million in fiscal 2024 from approximately $34.5 million in fiscal 2023.
Gross margin increased
to 23.1% in fiscal 2024 from 22.9% for the same period of last year.
Selling and marketing expenses
Selling and marketing expenses
primarily consisted of salary and compensation expenses relating to our sales and marketing personnel, and also
included entertainment,
travel and transportation, and other expenses relating to our marketing activities.
Selling and marketing
expenses increased by $1.3 million, or 38.6%, to $4.6 million in fiscal 2024 from $3.3 million in fiscal 2023. The increase
was
primarily due to an increase in sales staff to capture business growth opportunities. Accordingly, as a percentage of sales, our selling expenses were 3.2%
of
revenues in fiscal 2024 compared to 2.2% in fiscal 2023.
86
Research and development (“R&D”)
expenses
R&D expenses primarily
consisted of compensation and benefit expenses relating to our research and development personnel as well as office
overhead and other
expenses relating to our R&D activities. Our R&D expenses were $7.2 million in fiscal 2024, which decreased by $1.1 million or
14.2%
compared to $8.3 million in fiscal 2023, representing 5.0% and 5.5% of our total revenues for fiscal 2024 and 2023, respectively.
General and administrative expenses
General and administrative
expenses primarily consisted of salary and compensation expenses relating to our finance, legal, human resources and
executive office
personnel, and included share-based compensation expenses, rental expenses, depreciation and amortization expenses, office overhead,
professional service fees and travel and transportation costs.
General and administrative expenses increased by $3.5 million, or 16.1%,
to $25.1 million in fiscal 2024 from $21.6 million in the prior year. After
the deduction of $3.2 million non-cash share-based compensation
expenses related to the grants under the Incentive Compensation Plans, non-GAAP general
and administrative expenses increased by $2.9
million, or 15.2%, to $22.2 million in fiscal 2024 from $19.3 million in the same period of the previous year.
Subsidies and other operating income
Subsidies and other operating
income primarily included government subsidies which represented amounts granted by local government authorities
as a general incentive
for us to promote development of the local technology industry. The Company records government subsidies in subsidies and other
operating
income upon received and when there is no further performance obligation. Total government subsidies amounted to $1.4 million $1.3 million
fiscal 2024 and 2023, respectively.
(Loss) income before income taxes and share of loss in equity
investees
(Loss) income before income taxes
and share of loss in equity investees decreased by $2.6 million to a $1.8 million loss in fiscal 2024 from an
income of $0.8 million
in fiscal 2023. After the deduction of non-cash share-based compensation expenses, non-GAAP income before
income taxes and
share of loss in equity investees decreased by $4.3 million, or 76.5%, to $1.3 million in fiscal 2024 from $5.6 million
in the same period of the previous year.
Provision for income taxes
Our provision for income
taxes in fiscal 2024 decreased by $0.5 million to $0.2 million from $0.7 million provision for income taxes in fiscal 2023,
mainly due
to the decrease of income before income taxes and share of loss in equity investees.
Share of income(loss) in equity investees,
net of tax
The
share of income(loss) in equity investees, net of tax in fiscal 2024 was net equity investment income of
Fuson. The share of loss in equity
investees, net of tax in fiscal 2023 was net equity investment income of SSIT, and Fuson.
87
Net (loss) income
Net (loss) income
decreased by $2.0 million, or 1,215.8%, to $1.8 million loss in fiscal 2024 from a net income of $0.2 million in fiscal 2023. After
the deduction of $3.2 million non-cash share-based compensation expenses, non-GAAP net income decreased by $3.7 million, or 73.7%, to $1.3 million in
fiscal 2024 from $5.0 million in the previous year.
Other comprehensive (loss) income
Foreign currency
translation adjustments amounted to a loss of $0.4 million and a loss of $3.5 million for the years ended June 30, 2024 and 2023,
respectively. The balance sheet amounts with the exception of equity as of June 30, 2024 were translated at 7.2672 RMB to 1.00
USD as compared to 7.2513
RMB to 1.00 USD as of June 30, 2023. The equity accounts were stated at their historical rate. The average
translation rates applied to the income statements
accounts for the years ended June 30, 2024 and 2023 were 7.2248 RMB to 1.00 USD
and 6.9536 RMB to 1.00 USD, respectively. The change in the value of
the RMB relative to the U.S. dollar may affect our financial
results reported in the U.S, dollar terms without giving effect to any underlying change in our
business or results of
operation.
For the Years Ended June 30, 2023 and 2022
Revenues
We derive revenues by providing
integrated IT services and solutions, including: (i) IT consulting services, which primarily includes application
development services
for banks and institutions in the financial industry, which are billed on a time-and-expense basis, (ii) customized IT solutions services,
which primarily includes customized solution development and maintenance service for general enterprises with acceptance requirement,
which are billed
either on a time-and-expense basis with enforceable right to payment or on a fixed-price basis, and (iii) other revenue
from product and third-party software
sales, training and headhunting.
Our customer contracts may
be categorized by pricing model into time-and-expense contracts and fixed-price contracts. Under time-and-expense
contracts, we are compensated
for actual time incurred by our IT professionals at negotiated daily billing rates. We are also entitled to charge overtime fees in
addition
to the daily billing rates under some time-and-expense contracts. Fixed-price contracts require us to develop customized IT solutions
throughout the
contractual period, and we are paid in installments upon completion of specified milestones under the contracts.
The following table presents
our revenues by our service lines.
For the Year ended June 30,
2023
2022
Revenue
% of total
Revenue
Revenue
% of total
Revenue
Variance
Variance
%
IT consulting services
$ 144,286,502
96.0% $ 144,092,811
94.8%
193,691
0.1%
Customized IT solution services
4,554,200
3.0%
6,738,118
4.4%
(2,183,918)
(32.4)%
Other
1,515,837
1.0%
1,191,452
0.8%
324,385
27.2%
Total
150,356,539
100.0%
152,022,381
100.0%
(1,665,842)
(1.1)%
Our total revenues decreased
by approximately $1.6 million, or 1.1%, to approximately $150.4million for the fiscal year ended June 30, 2023, from
approximately $152.0
million for the fiscal year ended June 30, 2022.
88
For the year ended June 30,
2023, revenue derived from our IT consulting services increased by 0.1% to $144.3 million from $144.1 million in
fiscal 2022, primarily
reflecting the increasing demands for our IT consulting services from banks and other financial institutions. For fiscal 2023 and 2022,
38.2% and 41.2% of our IT consulting services revenue were from international banks, respectively. In fiscal 2023, we strengthened our
expertise in the
financial industry to leverage our existing industry knowledge and grew our customer base of local Chinese financial
institutions.
Revenue from customized IT
solution services decreased by $2.1 million, or 32.4%, to $4.6 million for the year ended June 30, 2023, from $6.7
million in the same
period of the previous year. The decrease was primarily due to decreasing demand from existing clients.
Revenue from other services increased by $0.3 million, or 27.2%, to
$1.5 million for the year ended June 30, 2023, from $1.2 million in the prior
year period.
The number of clients remained
consistent at 265 for the year ended June 30,2023 compared to the prior year period. Revenues from top five clients
accounted for 49.1%
and 49.0% of the Company’s total revenues for fiscal 2023 and 2022, respectively.
Revenue generated outside
of Mainland China for the year ended June 30, 2023 accounted for 10.8% of total revenue compared to 9.3% in the prior
year period.
Cost of revenues
Our cost of revenues mainly
consisted of compensation benefit expenses for our IT professionals, travel expenses and material costs. Our cost of
revenues increased
by $4.9 million or 4.4% to approximately $115.9 million in fiscal 2023 from approximately $111.0 million in fiscal 2022 primarily due
to
the increase in IT professional compensation costs. as a result of optimization of our R&D staff structure by allocating a number
of staff to deliver IT services
to meet the increased demand, as well as increased labor costs. As a percentage of revenues, our cost
of revenues was 77.1% and 73.0% for fiscal 2023 and
2022, respectively.
Gross profit and gross margin
Our gross profit decreased
by $6.5 million, or 15.9%, to approximately $34.5 million in fiscal 2023 from approximately $41.0 million in fiscal 2022.
Gross margin
decreased to 22.9% in fiscal 2023 from 27.0% for the same period of last year.
Selling and marketing expenses
Selling and marketing expenses
primarily consisted of salary and compensation expenses relating to our sales and marketing personnel, and also
included entertainment,
travel and transportation, and other expenses relating to our marketing activities.
Selling and marketing expenses
decreased by $0.8 million, or 19.6%, to $3.3 million in fiscal 2023 from $4.1 million in fiscal 2022. The decrease
was primarily due
to improved efficiency in talent acquisition using an intelligent automation solution, which helped the Company to reduce time and cost
associated with the talent acquisition process. Accordingly, as a percentage of sales, our selling expenses were 2.2% of revenues in
fiscal 2023 compared to
2.7% in fiscal 2022.
89
Research and development (“R&D”)
expenses
R&D expenses primarily
consisted of compensation and benefit expenses relating to our research and development personnel as well as office
overhead and other
expenses relating to our R&D activities. Our R&D expenses were $8.3 million in fiscal 2023, which increased by $0.3 million or
4.6%
compared to $8.0 million in fiscal 2022, representing 5.5% and 5.2% of our total revenues for fiscal 2023 and 2022, respectively.
General and administrative expenses
General and administrative
expenses primarily consisted of salary and compensation expenses relating to our finance, legal, human resources and
executive office
personnel, and included share-based compensation expenses, rental expenses, depreciation and amortization expenses, office overhead,
professional service fees and travel and transportation costs.
General and administrative
expenses increased by $1.0 million, or 4.2%, to $24.0 million in fiscal 2023 from $23.0 million in the prior year. After
the deduction
of $2.3 million non-cash share-based compensation expenses related to the grants under the 2021 Incentive Compensation Plan and deduction
of $2.4 million goodwill impairment losses, non-GAAP general and administrative expenses increased by $3.2 million, or 20.2%, to $19.3
million in fiscal
2023 from $16.1 million in the same period of the previous year.
Subsidies and other operating income
Subsidies and other operating
income primarily included government subsidies which represented amounts granted by local government authorities
as a general incentive
for us to promote development of the local technology industry. The Company records government subsidies in subsidies and other
operating
income upon received and when there is no further performance obligation. Total government subsidies amounted to $1.3 million and $1.5
million
in fiscal 2023 and 2022, respectively.
Income before income taxes and share of loss in equity investees
Income before income taxes
and share of loss in equity investees decreased by $6.9 million to a $0.8 million income in fiscal 2023 from an income
of $7.7 million
in fiscal 2022. After the deduction of non-cash share-based compensation expenses and goodwill impairment losses, non-GAAP income
before
income taxes and share of loss in equity investees decreased by $9.3 million, or 62.1%, to $5.6 million in fiscal 2023 from $14.9 million
in the same
period of the previous year.
Provision for income taxes
Our provision for income
taxes in fiscal 2023 decreased by $2.3 million to $0.7 million from $3.0 million provision for income taxes in fiscal 2022,
mainly due
to the decrease of income before income taxes and share of loss in equity investees.
Share of loss in equity investees, net
of tax
The share of loss in equity
investees, net of tax in fiscal 2023 was net equity investment income of SSIT, and Fuson. The share of loss in equity
investees, net
of tax in fiscal 2022 was net equity investment loss of SSIT, EMIT and Fuson.
90
Net income
Net income decreased by
$4.4 million, or 96.4%, to $0.2 million in fiscal 2023 from a net income of $4.6 million in fiscal 2022. After the deduction
of $2.5
million non-cash share-based compensation expenses and $2.4 million goodwill impairment losses, non-GAAP net income decreased by $6.8
million,
or 57.3%, to $5.0 million in fiscal 2023 from $11.8 million in the previous year.
Other comprehensive (loss) income
Foreign currency translation
adjustments amounted to a loss of $3.5 million and a loss of $1.8 million for the years ended June 30, 2023 and 2022,
respectively. The
balance sheet amounts with the exception of equity as of June 30, 2023 were translated at 7.2513 RMB to 1.00 USD as compared to 6.6981
RMB to 1.00 USD as of June 30, 2022. The equity accounts were stated at their historical rate. The average translation rates applied
to the income statements
accounts for the years ended June 30, 2023 and 2022 were 6.9536 RMB to 1.00 USD and 6.4554 RMB to 1.00 USD,
respectively. The change in the value of
the RMB relative to the U.S. dollar may affect our financial results reported in the U.S, dollar
terms without giving effect to any underlying change in our
business or results of operation.
Cash Flows through Our Organization
CLPS Incorporation is a holding
company with no operations of its own. We conduct our operations in Mainland China primarily through our
subsidiaries in mainland China.
As a result, although other means are available for us to obtain financing at the holding company level, CLPS Incorporation’s
ability
to pay dividends to the shareholders and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries. If any
of our
subsidiaries incurs debt on its own behalf, the instruments governing such debt may restrict its ability to pay dividends to CLPS
Incorporation. In addition,
our PRC subsidiaries are permitted to pay dividends to CLPS Incorporation only out of their retained earnings,
if any, as determined in accordance with PRC
accounting standards and regulations. Further, our PRC subsidiaries are required to make
appropriations to certain statutory reserve funds. Under PRC law,
CLPS Incorporation may provide funding to our PRC subsidiaries only
through capital contributions or loans, subject to satisfaction of applicable
government registration and approval requirements. The subsidiaries
have not declared or paid any cash dividends to the holding company. CLPS
Incorporation has not declared or paid any cash dividends to
pay any cash dividends on its ordinary shares. The Company provides cash support to its
subsidiaries according its business development
plan. For fiscal years 2022, 2023, and 2024, the Company provided cash support to its subsidiaries in
Mainland China, Singapore and Hong
Kong SAR. The amounts were offset when the Company’s consolidated financial statements were prepared. The
balances due from subsidiaries
to the Company were US$22.8 million, US$24.7 million, and US$36.2 as of June 30 for fiscal 2022, 2023, and 2024,
respectively. The subsidiaries
provide cash support to the Company according its business development plan. The balances due to subsidiaries from the
Company were US$7.1
million, US$7.6 million, and US$24.8 as of June 30 for fiscal 2022, 2023, and 2024, respectively. The balances were reflected in the
section
“PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION” in our financial statements for fiscal 2022, 2023, and 2024,
respectively.
For the years ended June 30, 2022, 2023, and 2024, cash and cash equivalents of PRC companies were 99.0 million (US$14.8 million),129.1
million (US$17.8 million), and 102.5 million (US$14.1 million), respectively.
Liquidity and Capital Resources
On February 23, 2021, the
Company entered into an agreement with Maxim Group LLC (“Maxim”) that Maxim will serves as a Placement Agent
for the Company
in connection with the proposed offering of registered securities of the Company, including shares of the Company’s common stock.
On
February 28, 2021, the Company entered into a securities purchase agreement (“SPA”) with certain accredited investors.
According to the SPA, the Company
agreed to sell 2,666,666 shares of the Company’s common stock and issue unregistered warrants
to purchase up to an additional 2,666,666 shares of common
stock in the concurrent private placement transaction (the transaction). On
March 3, 2021, the Company issued 2,666,666 common shares at US$6.00 per
share to those investors, with a par value of $0.0001 per share,
and issued 2,666,666 warrants, generating total gross proceeds of $15,999,996. Net proceeds
from the transaction after issuance cost
of $1,317,119 were $14,682,877 which was allocated to common shares and warrants issued on their relative fair
value basis of $11,131,829
and $3,551,048, respectively.
As of June 30, 2024, we had
cash and cash equivalents of approximately $29.1 million. Our current assets were approximately $78.1 million, and
our current liabilities
were approximately $39.8million. Total shareholders’ equity as of June 30, 2024 was approximately $62.5 million. We believe that
we
will have sufficient working capital to operate our business for the next 12 months from the issuance date of this report.
91
Substantially all of our
operations are conducted in China and all of our revenue, expenses, cash and cash equivalents are denominated in RMB.
RMB is subject
to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China
due to PRC
exchange control regulations that restrict our ability to convert RMB into U.S. dollars. As of June 30, 2024, cash
and cash equivalents of approximately
RMB102.5 million ($14.1 million), SGD4.7 million ($3.5 million), AUD0.01 million ($0.009
million), HKD84.5 million ($10.8 million), INR3.3 million
($0.04 million), MYR0.4 million ($0.08 million), JPY5.0 million ($0.2
million), USD0.4 million, PHP4.4 million ($0.07 million), and CAD0.004 million
($0.003 million) were held by the Company and its
subsidiaries in Mainland China, Singapore, Australia, Hong Kong, India, Malaysia, Japan, the United
States of America, the
Philippines, and Canada, respectively. We would need to accrue and pay withholding taxes if we were to distribute funds from our
subsidiaries in China to our offshore subsidiaries. We do not intend to repatriate such funds in the foreseeable future, as we plan
to use existing cash balance
in PRC for general corporate purposes.
In assessing our liquidity,
we monitor and analyze our cash on hand, our ability to generate sufficient revenue sources in the future and our operating
and capital
expenditure commitments. The Company plans to fund working capital through its operations, bank borrowings and additional capital
contribution
from shareholders. Our operating cash flow was positive for the year ended June 30, 2024. We have historically funded our working capital
needs primarily from operations, advance payments from customers and loans from shareholders. Our working capital requirements are affected
by the
efficiency of our operations, the numerical volume and dollar value of our sales contracts, the progress or execution on our customer
contracts, and the timing
of accounts receivable collections.
The following table sets forth summary of our
cash flows for the periods indicated:
For the Years Ended June 30,
2024
2023
2022
Net cash provided by operating activities
$
8,925,234 $
9,705,951 $
3,200,889
Net cash used in investing activities
(12,251,016)
(306,046)
(16,290,683)
Net cash provided by (used in) financing activities
10,193,143
(4,319,331)
7,474,641
Effect of exchange rate change
(28,482)
(1,175,928)
(727,242)
Net increase (decrease) in cash
6,838,879
3,904,646
(6,342,395)
Cash and cash equivalents at the beginning of the year
22,301,633
18,396,987
24,739,382
Cash and cash equivalents at the end of the year
29,140,512
22,301,633 $
18,396,987
Operating Activities
Net cash provided by operating
activities was approximately $8.9 million in fiscal 2024, including net loss of $1.8 million, adjusted for non-cash
items of $5.6 million
and positive adjustments for changes in operating assets and liabilities of $5.1 million. The adjustments for changes in operating assets
and liabilities mainly included the decrease in accounts receivable of $7.2 million. The adjustments for changes in operating assets and
liabilities also
included an increase in prepayment, deposits and other assets of $0.3 million, a decrease in salaries and benefits payable
of $1.1 million, an increase in
accounts payable and other liabilities of $0.2 million, and a decrease in tax payables of $0.4 million
in fiscal 2024.
Net cash provided by operating
activities was approximately $9.7 million in fiscal 2023, including net income of $0.2 million, adjusted for non-cash
items of $7.2 million
and positive adjustments for changes in operating assets and liabilities of $3.4 million. The adjustments for changes in operating assets
and liabilities mainly included the decrease in accounts receivable of $0.5 million. The adjustments for changes in operating assets
and liabilities also
included a decrease in prepayment, deposits and other assets of $3.5 million, a decrease in salaries and benefits
payable of $0.8 million, an increase in
accounts payable and other liabilities of $0.2 million, and an increase in tax payables of $0.1
million in fiscal 2023.
Net cash provided by operating
activities was approximately $3.2 million in fiscal 2022, including net income of $4.6 million, adjusted for non-cash
items of $8.2 million
and negative adjustments for changes in operating assets and liabilities of $9.6 million. The adjustments for changes in operating assets
and liabilities mainly included the increase in accounts receivable of $12.3 million due to increased sales in fiscal 2022. During fiscal
2022, our accounts
receivable turnover was 116 days, an increase of 16 days from 100 days in fiscal 2021. The adjustments for changes
in operating assets and liabilities also
included an increase in salaries and benefits payable of $0.2 million and an increase in accounts
payable and other liabilities of $1.7 million in fiscal 2022.
92
Investing Activities
Net cash used in investing
activities was approximately $12.3 million in fiscal 2024, primarily due to our purchase of property and equipment of
$2.1 million, repayments from a related party of $0.8 million, loans provided to a related party of $6.5 million, purchase of short-term
investments of $2.1
million, and purchase of subsidiaries of $2.4 million in fiscal 2024, to better manage opportunities
and capitalize on the growth potential in the IT consulting
related industry and academic education industry.
Net cash used in investing
activities was approximately $0.3 million in fiscal 2023, primarily due to our purchase of property and equipment of $0.5
million, disposition
of long term investment of $0.1 million, repayments from a related party of $0.2 million in fiscal 2023, to better manage opportunities
and capitalize on the growth potential in the human resource related industry.
Net cash used in investing
activities was approximately $16.3 million in fiscal 2022, primarily due to our purchase of office building, office
equipment and furniture
of $20.8 million, disposition of long term investment of $0.4 million, loans provided to related party of $0.08 million, and maturities
of short-term investments of $4.2 million in fiscal 2022, to better manage opportunities and capitalize on the growth potential in the
human resource related
industry.
Financing Activities
Net cash provided by
financing activities was approximately $10.2 million in fiscal 2024. During the fiscal 2024, we had bank loans of
approximately $44.5
million, repaid loans of approximately $31.8 million, and paid dividend of $2.6 million.
Net cash used in financing
activities was approximately $4.3 million in fiscal 2023. During the fiscal 2023, we had bank loans of approximately
$23.4 million, repaid
loans of approximately $26.3 million, and paid dividend of $1.4 million.
Net cash provided by financing
activities was approximately $7.5 million in fiscal 2022. During the fiscal 2022, we had bank loans of approximately
$22.0 million and
repaid loans of approximately $14.5 million.
Capital Expenditures
The Company made capital
expenditures of $2.1 million, $0.5 million, and $20.8 million for the years ended June 30, 2024, 2023, and 2022,
respectively. In these
periods, our capital expenditures were mainly used for purchases of office building and office equipment. The Company will continue
to
make capital expenditures to meet the expected growth of its business.
Impact of Inflation
We do not believe the impact
of inflation on our company is material. Our operations are in China and China’s inflation rates have been relatively
stable over
the last two years: 0.2% in 2023 and 2.0% in 2022.
Contractual Obligations
The Company’s subsidiaries
lease office spaces under various operating leases. Operating lease expenses amounted to $1,514,162, $1,086,622, and
$1,413,521, for
the years ended June 30, 2024, 2023, and 2022, respectively. The following table sets forth our contractual obligations and commercial
commitments as of June 30, 2024:
Payment Due by Period
Total
Less than
1 Year
1-3 Years
More than
3 Years
Operating lease arrangements
$
3,218,549 $
1,709,211 $
1,509,338 $
-
Bank loans
23,232,856
23,232,856
-
-
Total
$
26,451,405 $
24,942,067 $
1,509,338 $
-
93
Off-Balance Sheet Arrangements
There were no off-balance
sheet arrangements and undisclosed material cash requirement for the years ended June 30, 2024 that have or that in the
opinion of management
are likely to have, a current or future material effect on our financial condition or results of operations.
Subsequent Event
None.
Critical Accounting Policies and Estimates
We prepare our consolidated
financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions
that affect our reported
amount of assets, liabilities, revenue, costs and expenses, and any related disclosures.
We believe that the following
accounting policies are the most critical to understanding and evaluating our consolidated financial condition and
results of operations.
Revenue recognition
We account for revenue recognition
in accordance with ASC Topic 606, Revenue from contracts with Customers (“ASC 606”). We provide a
comprehensive range
of IT consulting services, customized IT solution services and other service, which primarily are on a time-and-expense basis, or fixed-
price
basis. Revenue is recognized when control of promised goods or services is transferred to our customers in an amount of consideration
to which an
entity expects to be entitled to in exchange for those services.
IT consulting services
IT consulting services are
time-and-expense basis contracts. The series of IT consulting services are substantially the same from day to day, and
each day of the
service is considered to be distinct and separately identifiable as it benefits the customer daily. Further, the uncertainty related to
the service
consideration is resolved on a daily basis as we satisfy its obligation to perform IT service daily with enforceable right
to payment for performance
completed to date. Thus, revenue is recognized as service is performed and the customer simultaneously receives
and consumes the benefits from the service
daily. Payment terms and conditions vary by customer and are based on the billing schedule
established in our contracts with customers. but we generally
provide credit terms to customers ranging from one to three months. Therefore. we have determined
that our contracts do not include a significant financing
component.
Customized IT solution services
Revenues from customized IT
solution contracts require we to perform services for systems design, planning and integrating based on customers’
specific needs which requires significant production and customization. The required customization work period is generally less than
one year. Upon
delivery of the services, customer acceptance is generally required. In the same contract, we are generally required to
provide post-contract customer support
(“PCS’) for a period from three months to one year (“PCS period”) after
the customized application is delivered. The type of service for PCS is stand-ready
service on when-and-if-available basis.
There are two performance obligations
identified in the customized IT solution contract: the delivery of customized IT solution services and the
completion of the PCS. The transaction
price is allocated between the two performance obligations based on the relative standalone selling price, estimated
using the cost plus
method.
94
We recognize revenue for the
delivery of customized IT solution services at a point in time when the system is implemented and accepted by the
customer. Where we have
enforceable right to payment for performance completed to date, revenue is recognized over time, using the output method.
Revenue for
PCS is recognized ratably over time as the customer simultaneously receive and consume the benefits throughout the PCS period.
Differences between the timing
of billings and the recognition of revenues are recorded as contract assets which is included in the prepayments,
deposits and other assets,
net, or contract liabilities on the consolidated balance sheets. Contract assets are classified as current assets and the full balance
is
reclassified to accounts receivables when the right to payment becomes unconditional. There is no significant financing component.
Costs incurred in advance of
revenue recognition arising from direct and incremental staff costs in respect of services provided under the fixed fee
contracts according
to the customer’s requirements prior to the delivery of services are recorded as deferred contract costs which is included in the
prepayments, deposits and other assets, net on the consolidated balance sheets. Such deferred contract costs are recognized upon
the recognition of the related
revenues.
Academic education services
We are mainly engaged in providing
programs, short courses, and workshops to train and help individuals and professionals in counselling,
psychology, and allied health and
science. The Company’s academic education service revenue from the provision of formal educational services is in
consideration
of fixed amounts of tuition. The typical service period for academic education revenue ranges from 6 to 15 months.
Tuition fees from the provision
of formal education services received from students are generally paid in advance prior to the beginning of each
course, and are initially
recorded as contract liabilities, which is reflected as a current liability as such amounts represent revenue that we expect to recognize
within one year. Tuition fees from the provision of formal education services are recognized proportionately over the relevant period
of the respective
applicable program.
Other contracts
Other contracts primarily
comprise of the sales of headhunting services, consulting and administrative services. Revenue of headhunting services is
recognized at
a point in time when control is transferred to the customers, which generally occurs when the service is accepted by customers. Revenue
of
consulting and administrative services for other contracts is recognized over time as the customer simultaneously receives and consumes
the benefits from
the service we perform.
Income taxes
We account for current income taxes in accordance
with the laws of the relevant tax authorities. Deferred income taxes are recognized when
temporary differences exist between the tax
bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax
assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period including the
enactment date. Valuation allowances are established to reduce deferred tax assets to the amount expected to be
realized, when it is more-likely-than-not that
some portion, or all, of the deferred tax assets will not be realized.
We account for uncertainties
in income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). An uncertain tax position is
recognized
as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount
recognized is the largest
amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not
meeting the “more likely than not” test, no tax
benefit is recorded. Penalties and interest incurred related to underpayment
of income tax are classified as income tax expense in the consolidated statements
of comprehensive (loss)/ income in the period incurred.
Business Combinations
We
account for all business combinations under the purchase method of accounting in accordance with ASC Topic 805, Business Combinations
(“ASC 805”). The purchase method of accounting requires that the consideration transferred to be allocated to net assets
including separately identifiable
assets and liabilities we acquired, based on their estimated fair value. The consideration transferred
in an acquisition is measured as the aggregate of the fair
values at the date of exchange of the assets given, liabilities incurred, and
equity instruments issued as well as the contingent considerations and all
contractual contingencies as of the acquisition date. The costs
directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities
and contingent liabilities acquired
or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any
noncontrolling interests.
We recognize and measures the acquired contract assets and contract liabilities consistent with how they were recognized and
measured
in the acquiree’s financial statements. The excess of (i) the total of the cost of the acquisition, fair value of the noncontrolling
interests and
acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable
net assets of the acquiree is recorded
as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets
of the acquiree, the difference is recognized directly in the
consolidated statements of comprehensive(loss)/ income.
95
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management
The following table sets
forth our executive officers and directors, their ages and the positions held by them, as of the date of this Annual Report:
Name
Age
Position
Xiao Feng Yang
61
Chairman of the Board
Raymond Ming Hui Lin
60
Chief Executive Officer
and Director
Rui Yang
41
Chief Financial Officer
Li Li
48
President
Jin He Shao(1)(4)
57
Independent Director
Jiajia Lu(3)
47
Independent Director
Kee Chong Seng(2)
72
Independent Director
(1) Chair
of the Audit Committee.
(2) Chair
of the Compensation Committee.
(3) Chair
of the Nominating Committee.
(4) Audit
Committee Financial Expert.
Xiao Feng Yang is
the chairman of the board of the Company. Mr. Yang has over 20 years of executive management and operational experience in
the IT services
business. From October 2012 to August 2020, Mr. Yang served as chairman and president of CLPS. From April 2009 to October 2012, Mr.
Yang
served as deputy general manager of ADP China managing the service operations of HR BPO in China. Prior to 2002, Mr. Yang was the Human
Resource Director of Phillips. Mr. Yang graduated from Tongji University, Shanghai, China, with a Bachelor’s degree in electrical
engineering. Mr. Yang
received his MBA degree both from Shanghai University of Finance and Webster University (US).
Raymond Ming Hui Lin,
is the chief executive officer and director of the Company. Mr. Lin joined CLPS in February 2009 as chief executive
officer. From January
2008 to January 2009, Mr. Lin was a business consultant of VanceInfo. After VanceInfo acquired A-IT Software (Shanghai) Co. Ltd.,
Mr.
Lin acted as the general manager of A-IT Software (Shanghai) Co. Ltd. from April 2002 to December 2007. Mr. Lin is an IT outsourcing
service veteran
with a deep understanding of IT talent acquisition, training, development and service delivery. He has developed and
pioneered the first kind of training
programs for mainframe and VisionPLUS (a credit card processing solution) in China, which has made
CLPS as one of the largest mainframe resource
powerhouse and the VisionPLUS project team in Greater China. In 2015, Mr. Lin became the
MSE senior advisor in Fudan University, Shanghai, China.
Rui Yang has been the chief financial officer of the Company since December
17, 2020. From November 1, 2019 to December 16, 2020, Ms. Yang
served as the Acting Chief Financial Officer of the Company. Ms. Yang has
over 10 years of financial experiences in the financial and IT industry. Ms. Yang
joined the Company in August 2015 as Vice President
for finance controller. From December 2014 to August 2015, Ms. Yang served as financial analyst
supervisor at Shanghai Origin International
Logistics Co., Ltd. From February 2010 to July 2014, Ms. Yang served as senior financial analyst at Pactera
Technology International Ltd.
Ms. Yang holds a Bachelor’s Degree in Management from Northwest Agriculture and Forestry University and a Master’s
Degree
in Economics from Shanghai University of Finance and Economics. Ms. Yang holds the PRC Certified Public Accountant certificate.
Li Li is the president of the Company
effective July 1, 2024. From June 2019 to June 2024, Mr. Li served as the chief operating officer of the
Company. Li has 20 years of
professional and IT experience in the financial and IT industry. From June 2017 to June 2019, Mr. Li served as Vice President
of Technology
and Operations in Mastercard China. From July 2013 to June 2017, Mr. Li served as Executive Manager, Head of Business Solution and
Quality
Assurance at Commonwealth Bank of Australia China. Mr. Li graduated from Tianjin University, Tianjin, China, with a bachelor’s
degree in
Computer Science. Mr. Li holds an MSE degree from Fudan University, Shanghai, China.
Jin He Shao has served
as our independent director since January 2018. From January 2002 to present, Mr. Shao has been a partner at Shanghai
Huajin Accounting&
Consulting Professional Services. From August 1995 to December 2001, he served as senior tax manager at Phillips (China) Investment
Co.,
Ltd. Mr. Shao received a joint MBA degree from Shanghai University of Finance & Economics and The Webster University. Mr. Shao holds
the PRC
equivalent of the CPA license. In addition, Mr. Shao attended Shanghai Grain College where he majored in finance and accounting,
and STV University
where he majored in auditing.
Jiajia Lu has served
as our independent director since June 1, 2024, replacing Mr. Zhao Hui Feng who resigned from the position effective on the
same date
due to personal reasons. Ms. Lu has held the position of Vice President of Human Resources at The Coca-Cola Company in Atlanta, Georgia,
USA, bringing with her over 15 years of global experience within the Coca-Cola system. Prior to Coca-Cola, Ms. Lu held several HR, talent,
organizational
development, and management roles at Unilever China, AstraZeneca China, and Philips Electronic Groups China. Ms. Lu holds
a bachelor’s degree in
Management of Information System from the Beijing Institute of Technology and an Executive MBA from Olin
Business School of Washington University
in St. Louis, where she received the C. William Emory Executive MBA Award.
Kee Chong Seng has
served as our independent director since September 2019. Mr. Kee spent a career in the information technology industry, most
recently
as an operation manager at Citibank from 2003 until his full retirement in 2015.
96
None of the events listed
in Item 401(f) of Regulation S-K has occurred during the past ten years that is material to the evaluation of the ability or
integrity
of any of our directors, director nominees or executive officers.
Limitation on Liability and Other Indemnification Matters
The Companies Law does not
limit the extent to which Memorandum and Articles of Association may provide for indemnification of officers and
directors, except to
the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide
indemnification
against civil fraud or the consequences of committing a crime. Our Memorandum and Articles of Association permit indemnification of
officers
and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty
of such
directors or officers willful default of fraud. This standard of conduct is generally the same as permitted under the Delaware
General Corporation Law for a
Delaware corporation.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under
the foregoing
provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
B. Compensation
Executive Compensation
The following table shows the annual compensation
paid by us for the years ended June 30, 2024, 2023, and 2022.
Name/principal position
Year
Salary
Equity
Compensation
All Other
Compensation
Total Paid
Xiao Feng Yang, Chairman of the Board(1)
2024
$
104,002 $
— $
— $
104,002
2023
$
104,651 $
— $
— $
104,651
2022
$
106,104 $
— $
— $
106,104
Raymond Ming Hui Lin, CEO and Director(2)
2024
$
202,072 $
— $
— $
202,072
2023
$
258,614 $
— $
— $
258,614
2022
$
257,531 $
— $
— $
257,531
Rui Yang, CFO(3)
2024
$
154,908 $
— $
— $
154,908
2023
$
152,031 $
— $
— $
152,031
2022
$
133,841 $
— $
— $
133,841
Li Li, President(4)
2024
$
189,907 $
— $
— $
189,907
2023
$
205,359 $
— $
— $
205,359
2022
$
216,175 $
— $
— $
216,175
Jin He Shao, Independent Director(5)
2024
$
18,000 $
— $
— $
18,000
2023
$
18,000 $
— $
— $
18,000
2022
$
18,000 $
— $
— $
18,000
Kee Chong Seng, Independent Director(6)
2024
$
18,000 $
— $
— $
18,000
2023
$
18,000 $
— $
— $
18,000
2022
$
18,000 $
— $
— $
18,000
Jiajia Lu, Independent Director(7)
2024
$
1,500 $
— $
— $
1,500
2023
$
— $
— $
— $
—
2022
$
— $
— $
— $
—
Zhao Hui Feng, Independent Director(8)
2024
$
16,500 $
— $
— $
16,500
2023
$
18,000 $
— $
— $
18,000
2022
$
18,000 $
— $
— $
18,000
(1) Appointed
Chairman effective as of December 9, 2017 and President effective from December 9, 2017 to August 19, 2020.
(2) Appointed
Chief Executive Officer effective as of December 9, 2017.
(3) Appointed Chief Financial Officer effective as of December
17, 2020 and Acting Chief Financial Officer effective from November 1, 2019 to December
16, 2020.
(4) Appointed President effective as of July 1, 2024 and Chief
Operating Officer from June 2019 to June 2024.
97
(5) Appointed
Independent Director effective as of January 2018.
(6) Appointed
Independent Director effective as of September 2019.
(7) Appointed
Independent Director effective as of June 2024.
(8) Resigned as Independent Director effective June 1, 2024.
Under Chinese law, we may
only terminate employment agreements without cause and without penalty by providing notice of non-renewal one
month prior to the date
on which the employment agreement is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment
agreement in the absence of cause, then we are obligated to pay the employee one month’s salary for each year we have employed
the employee. We are,
however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed
a crime or the employee’s
actions or inactions have resulted in a material adverse effect to us.
Compensation Committee Interlocks and Insider Participation
None of our officers currently
serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of
any other entity
that has one or more officers serving as a member of our board of directors.
Outstanding Equity Incentive Awards at Fiscal
Year-End
On April 24, 2023, our annual
meeting of shareholders approved the 2023 Equity Incentive Plan (the “2023 Plan”). All of our employees, officers,
and directors,
and consultants are eligible to be granted options, restricted stock awards, stock unit awards, or stock appreciate rights (each, an
“Award”)
under the 2023 Plan. The 2023 Plan is currently administered by the Board, which has all the power to administer
the 2023 Plan according to its terms,
including the power to grant Awards, determine who may be granted Awards and the types and amounts
of Awards to be granted, prescribe Award
agreements, and establish programs for granting Awards. Awards may be made under the 2023 Plan
for up to 20,000,000 of our common shares. 4,134,000
restricted shares have been granted under the 2023 Plan as of today.
The 2023 Plan is a stock-based
compensation plan that provides for discretionary grants of, among others, stock options, stock awards and stock unit
awards to employees,
directors and consultants of the Company and its subsidiaries. The purpose of the 2023 Plan is to attract and retain outstanding
individuals
as employees, directors and consultants of the Company and its subsidiaries, to recognize the contributions made to the Company and its
subsidiaries by employees, directors and consultants, and to provide such employees, directors and consultants with additional incentive
to expand and
improve the profits and achieve the objectives of the Company and its subsidiaries, by providing such employees, directors
and consultants with the
opportunity to acquire or increase their proprietary interest in the Company through receipt of awards. The
following is a summary of the 2023 Plan and is
qualified by the full text of the 2023 Plan.
98
Administration. The
2023 Plan is administered by our board of directors, or, once constituted, the Compensation Committee of the board of directors
(we refer
to body administering the 2023 Plan as the “Committee”).
Number of Shares of Common
Shares. The number of common shares that may be issued under the 2023 Plan is 20,000,000. Shares issuable under
the 2023 Plan may
be authorized but unissued shares or treasury shares. The number of shares delivered by a participant or withheld by the Company on
behalf
of any such participant as full or partial payment of an award, including the exercise price of a stock option or of any required withholding
taxes, shall
not again be available for issuance pursuant to subsequent awards, and shall count towards the aggregate number of shares
that may be issued under the 2023
Plan. Any shares purchased by the Company with proceeds from a stock option exercise shall not again
be available for issuance pursuant to subsequent
awards, shall count against the aggregate number of shares that may be issued under the
2023 Plan and shall not increase the number of shares available
under the 2023 Plan. If there is a lapse, forfeiture, expiration, termination
or cancellation of any award for any reason, or if shares are issued under such
award and thereafter are reacquired by the Company pursuant
to rights reserved by the Company upon issuance thereof, the shares subject to such award or
reacquired by the Company shall again be
available for issuance pursuant to subsequent awards, and shall not count towards the aggregate number of shares
that may be issued under
the 2023 Plan.
Eligibility. All employees,
directors, and consultants of the Company are eligible to receive awards under the 2023 Plan.
Awards to Participants.
The Plan provides for discretionary awards of, among others, stock options, stock awards, stock unit awards and stock
appreciation
rights to participants. Each award made under the 2023 Plan will be evidenced by a written award agreement specifying the terms and
conditions
of the award as determined by the Committee in its sole discretion, consistent with the terms of the 2023 Plan.
Stock Options. Subject
to the terms of the 2023 Plan, the Committee may from time to time grant stock options to participants. Stock Options
granted under the
2023 Plan to employees shall be non-qualified stock options (NSOs) unless the award agreement expressly provides that the stock option
is
an incentive stock options (ISO). Stock options granted under the 2023 Plan to consultants and directors who are not employees shall
be NSOs The grant of
each stock option shall be evidenced by a written stock option agreement specifying the type of stock option granted,
the exercise period, the exercise price,
the terms for payment of the exercise price, the expiration date of the stock option, the number
of shares to be subject to each stock option and such other
terms and conditions established by the Committee, in its sole discretion,
not inconsistent with the 2023 Plan.
Stock Awards. The Committee
may, in its discretion, (a) grant shares under the 2023 Plan to any participant without consideration from such
participant or (b) sell
shares under the 2023 Plan to any participant for such amount of cash, shares or other consideration as the Committee deems
appropriate.
Each shares granted or sold hereunder shall be subject to such restrictions, conditions and other terms as the Committee may determine
at the
time of grant or sale, the general provisions of the Plan, the restrictions, terms and conditions of the related Stock Award Agreement
Stock Unit Awards. The
Committee may, in its discretion, grant stock unit awards to any participant. Each stock unit subject to the award shall
entitle the participant
to receive, on the date or the occurrence of an event (including the attainment of performance goals) as described in the stock unit
award
agreement, a share or cash equal to the fair market value of a share on the date of such event as provided in the stock unit award agreement.
Stock Appreciation Rights
or SAR. The Committee may grant SARs to participants. Upon exercise, a SAR entitles the participant to receive from the
Company the
number of shares having an aggregate fair market value equal to the excess of the fair market value of one share as of the date on which
the
SAR is exercised over the exercise price, multiplied by the number of shares with respect to which the SAR is being exercised. The
Committee, in its
discretion, shall be entitled to cause the Company to elect to settle any part or all of its obligations arising out
of the exercise of an SAR by the payment of
cash in lieu of all or part of the shares it would otherwise be obligated to deliver in an
amount equal to the fair market value of such shares on the date of
exercise. Cash shall be delivered in lieu of any fractional Shares.
The terms and conditions of any such award shall be determined at the time of grant.
99
Payment for Stock Options
and Withholding Taxes. In connection with any award, and as a condition to the issuance or delivery of any Shares to the
participant
in connection therewith, the Company shall require the participant to pay the Company the minimum amount of federal, state, local or foreign
taxes required to be withheld, and in the Company’s sole discretion, the Company may permit the participant to pay the Company up
to the maximum
individual statutory rate of applicable withholding. The Company in its sole discretion may make available one or more
of the following alternatives for the
payment of such taxes: (i) in cash; (ii) in cash received from a broker-dealer to whom the participant
has submitted notice together with irrevocable
instructions to deliver promptly to the Company the amount of sales proceeds from the sale
of the shares subject to the award to pay the withholding taxes;
(iii) by directing the Company to withhold such number of shares otherwise
issuable in connection with the award having an aggregate fair market value
equal to the minimum amount of tax required to be withheld;
(iv) by delivering previously acquired shares of the Company that are acceptable to the Board
that have an aggregate fair market value
equal to the amount required to be withheld; or (v) by certifying to ownership by attestation of such previously
acquired shares. The
Committee shall have the sole discretion to establish the terms and conditions applicable to any alternative made available for payment
of the required withholding taxes.
Amendment of Award Agreements;
Amendment and Termination of the 2023 Plan; Term of the 2023 Plan. The Committee shall have the authority to
amend any award agreement
at any time; provided however, that no such amendment shall adversely affect the right of any participant under any outstanding
award
agreement in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation
or rule
of any stock exchange on which the shares are listed. The Board may terminate, suspend, or amend the 2023 Plan, in whole or in
part, from time to time,
without the approval of the shareholders of the Company, unless such approval is required by applicable law,
regulation or rule of any stock exchange on
which the shares are listed. No amendment or termination of the 2023 Plan shall adversely
affect the right of any participant under any outstanding award in
any material way without the written consent of the participant, unless
such amendment or termination is required by applicable law, regulation or rule of any
stock exchange on which the shares are listed.
Subject to the foregoing, the Committee may correct any defect or supply an omission or reconcile any
inconsistency in the 2023 Plan or
in any award granted hereunder in the manner and to the extent it shall deem desirable, in its sole discretion, to effectuate
the 2023
Plan. The Board shall have the authority to amend the 2023 Plan to the extent necessary or appropriate to comply with applicable law,
regulation or
accounting rules in order to permit participants who are located outside of the United States to participate in the 2023
Plan. Notwithstanding anything to the
contrary contained herein, no awards shall be granted on or after the tenth anniversary of the adoption
of this Plan.
Director Compensation
All directors hold office
until the next annual meeting of shareholders until their successors have been duly elected and qualified. There are no
family relationships
among our directors or executive officers. Officers are elected by and serve at the discretion of the Board of Directors. Employee
directors
do not receive any compensation for their services. Non-employee directors are entitled to receive $1,500 per month for serving as directors
and
may receive option grants from our company.
Clawback Policy
On December 1, 2023, our
board of directors adopted a clawback policy (the “Clawback Policy”) permitting the Company to seek the recoupment
of
incentive compensation received by any of the Company’s current and former executive officers (as determined by the board in
accordance with Section
10D of the Exchange Act and the Nasdaq rules) and such other senior executives/employees who may from time
to time be deemed subject to the Clawback
Policy by the board (collectively, the “Covered Executives”). The amount to be
recovered will be the excess of the incentive compensation paid to the
Covered Executive based on the erroneous data over the
incentive compensation that would have been paid to the Covered Executive had it been based on
the restated results, as determined
by the board. If the board cannot determine the amount of excess incentive compensation received by the Covered
Executive directly
from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect
of the
accounting restatement. Refer to Exhibit 97.1 of this Annual Report for the Company’s Clawback Policy.
Employment Agreements
Xiao Feng Yang Employment Agreement
On December 9, 2017, we entered
into an employment agreement with Xiao Feng Yang pursuant to which he agreed to serve as our President. The
agreement provides for an
annual base salary of RMB144,000 and HK$566,472 (a total of approximately USD94,100) payable in accordance with the
Company’s ordinary
payroll practices. Under the terms of the agreement, commencing with the year ended June 30, 2018, Mr. Yang will be entitled to
receive
an annual cash bonus the extent and timing of which are to be determined by the Company’s Compensation Committee; Mr. Yang is also
entitled to
reimbursement of reasonable expenses, and vacation, sick leave, health and other benefits customary to the agreements of this
nature. This employment
agreement was automatically terminated upon Mr. Yang’s resignation in August 2020. The Company has paid
Mr. Yang any unpaid portion of his salary
through the date of his termination, and any unpaid bonus through the date of termination, as
well as any unpaid or unused portions of his benefits under the
employment agreement.
100
Raymond Ming Hui Lin Employment Agreement
On December 9, 2017, we entered
into an employment agreement with Raymond Ming Hui Lin pursuant to which he agreed to serve as our Chief
Executive Officer. The agreement
provides for an annual base salary of RMB144,000 and HK$389,880 (a total of approximately USD71,400) payable in
accordance with the Company’s
ordinary payroll practices. Under the terms of the agreement, commencing with the year ended June 30, 2018, Raymond
Ming Hui Lin will
be entitled to receive an annual cash bonus the extent and timing of which are to be determined by the Company’s Compensation
Committee;
he is also entitled to reimbursement of reasonable expenses, and vacation, sick leave, health and other benefits customary to the agreements
of
this nature. The term of the agreement shall expire on December 8, 2022, which term will automatically extend for additional 12 month
periods unless a party
to the agreement terminates it upon 90 days’ notice. If the executive’s employment with the Company
is terminated for any reason, the Company will pay to
such executive any unpaid portion of his salary through the date of his termination,
and any unpaid bonus through the date of termination, as well as any
unpaid or unused portions of his benefits under the agreement. If
his employment is terminated at our election without “cause” (as defined in the agreement),
which requires 30 days’
advanced notice, or by him for “good reason” (as defined in the agreement), Raymond Ming Hui Lin shall be entitled to receive
severance payments equal to 9 months’ of his base salary and a pro rata portion of his target annual bonus for the year when termination
occurs. Raymond
Ming Hui Lin has agreed not to compete with us for 9 months after the termination of his employment; he also executed
certain non-solicitation,
confidentiality and other covenants customary for agreements of this nature.
Rui Yang Employment Agreement
On November 1, 2019, we entered
into an employment agreement with Rui Yang pursuant to which she agreed to serve as our Acting Chief
Financial Officer. Ms. Yang was appointed
as Chief Financial Officer effective as of December 17, 2020. The agreement provides for an annual salary of
RMB420,000 (a total of approximately
USD60,000) payable in accordance with the Company’s ordinary payroll practices. Under the terms of the agreement,
commencing with
the year ended June 30, 2020, Ms. Yang will be entitled to receive an annual cash bonus the extent and timing of which are to be
determined
by the Company’s Compensation Committee; she is also entitled to reimbursement of reasonable expenses, and vacation, sick leave,
health and
other benefits customary to the agreements of this nature. The term of the agreement shall expire on October 2024, which term
will automatically extend for
additional 12 month periods unless a party to the agreement terminates it upon 90 days’ notice. If
the executive’s employment with the Company is
terminated for any reason, the Company will pay to such executive any unpaid portion
of her salary through the date of her termination, and any unpaid
bonus through the date of termination, as well as any unpaid or unused
portions of her benefits under the agreement. If her employment is terminated at our
election without “cause” (as defined
in the agreement), which requires 30 days’ advanced notice, or by her for “good reason” (as defined in the agreement),
Rui Yang shall be entitled to receive severance payments equal to 9 months’ of her base salary and a pro rata portion of her target
annual bonus for the year
when termination occurs. Rui Yang has agreed not to compete with us for 9 months after the termination of her
employment; she also executed certain non-
solicitation, confidentiality and other covenants customary for agreements of this nature.
Li Li Employment Agreement
On June 2019, we entered into
an employment agreement with Li Li pursuant to which he agreed to serve as our Chief Operating Officer. Mr. Li
was appointed as President
effective as of July 1, 2024. The agreement provides an annual salary of RMB 360,000 and HK$273,600 (approximately
US$85,200) and 12,000
shares of common stock to be granted in June 2020. Under the terms of the agreement, commencing with the year ended June 30,
2019, Li
Li will be entitled to receive an annual cash bonus the extent and timing of which are to be determined by the Company’s Compensation
Committee; he is also entitled to reimbursement of reasonable expenses, and vacation, sick leave, health and other benefits customary
to the agreements of
this nature. The term of the agreement shall expire on June 2022; which term will automatically extend for additional
12 month periods unless a party to the
agreement terminates it upon 90 days’ notice. If the executive’s employment with the
Company is terminated for any reason, the Company will pay to such
executive any unpaid portion of his salary through the date of his
termination, and any unpaid bonus through the date of termination, as well as any unpaid or
unused portions of his benefits under the
agreement. If his employment is terminated at our election without “cause” (as defined in the agreement), which
requires 30
days’ advanced notice, or by him for “good reason” (as defined in the agreement), Li Li shall be entitled to receive
severance payments equal to 9
months’ of his base salary and a pro rata portion of his target annual bonus for the year when termination
occurs. Li Li has agreed not to compete with us for
9 months after the termination of his employment; he also executed certain non-solicitation,
confidentiality and other covenants customary for agreements of
this nature.
C.
Board Practices
Composition of Board; Risk Oversight
Our Board of Directors presently
consists of 5 directors. Pursuant to our Memorandum and Articles of Association, our officers will be elected by
and serve at the discretion
of the board. Our directors are not subject to a term of office and hold office until such time as they resign or are removed from
office
by resolution of our shareholders. A director will be removed from office automatically if, among other things, the director becomes bankrupt
or makes
any arrangement or composition with his creditors, or becomes physically or mentally incapable of acting as director. Except
as noted above, there are no
family relationships between any of our executive officers and directors. Officers are elected by, and serve
at the discretion of, the board of directors. Our
board of directors shall hold meetings on at least a quarterly basis.
101
Under the NASDAQ rules we
are only required to maintain a board of directors comprised of at least 50% independent directors, and an audit
committee of at least
two members, comprised solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange
Act
of 1934. There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless
so fixed by us in a
general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or
nominated.
While it may be deemed a “controlled
company” under the NASDAQ Marketplace Rules (specifically, as defined in Rule 5615(c)), the Company
does not intend to avail itself
of the corporate governance exemptions afforded to a controlled company under the NASDAQ Marketplace Rules. Similarly,
the Company intends
to comply with all applicable NASDAQ corporate governance requirements irrespective of its “foreign private issuer” status.
Our board plays a significant
role in our risk oversight. The board makes all relevant Company decisions. As such, it is important for us to have our
Chief Executive
Officer serve on the board as he plays key roles in the risk oversight or the Company. As a company with a small board of directors, we
believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.
Director Independence
Our board has reviewed the
independence of our directors, applying the NASDAQ independence standards. Based on this review, the board
determined that each of Jin
He Shao, Kee Chong Seng, and Jiajia Lu are “independent” within the meaning of the NASDAQ rules. In making this
determination,
our board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our
board
deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent
directors will meet on a
regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive
session without the presence of non-independent
directors and management.
Board Committees
Currently, three committees
have been established under the board: the Audit Committee, the Compensation Committee and the Nominating
Committee.
The Audit Committee is responsible
for overseeing the accounting and financial reporting processes of our company and audits of the financial
statements of our company,
including the appointment, compensation and oversight of the work of our independent auditors. The Compensation Committee
of the board
of directors reviews and makes recommendations to the board regarding our compensation policies for our officers and all forms of
compensation,
and also administers our incentive compensation plans and equity-based plans (but our board retains the authority to interpret those plans).
The Nominating Committee of the board is responsible for the assessment of the performance of the board, considering and making recommendations
to the
board with respect to the nominations or elections of directors, overseeing cybersecurity risk management, and other governance
issues. The nominating
committee considers diversity of opinion and experience when nominating directors.
102
Audit Committee
The Audit Committee will be responsible for, among
other matters:
●
appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;
●
discussing with our independent registered public accounting firm the independence of its members from its management;
●
reviewing with our independent registered public accounting firm the scope and results of their audit;
●
approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
●
overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim
and annual financial statements that we file with the SEC;
●
reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and
regulatory requirements;
●
coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures
●
establishing procedures for the confidential and or anonymous submission of concerns regarding accounting, internal controls or auditing
matters; and
●
reviewing and approving related-party transactions.
Our Audit Committee consists
of Jin He Shao, Kee Chong Seng, and Jiajia Lu, with Mr. Shao serving as chair of the Audit Committee. Our board
has affirmatively determined
that each of the members of the Audit Committee meets the definition of “independent director” for purposes of serving on
an
Audit Committee under Rule 10A-3 of the Exchange Act and NASDAQ rules. In addition, our board has determined that Mr. Shao qualifies
as an “audit
committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K and meets the
financial sophistication requirements of the
NASDAQ rules.
Compensation Committee
The Compensation Committee will be responsible
for, among other matters:
●
reviewing and approving, or recommending to the board of directors to approve the compensation of our CEO and other executive officers and
directors;
●
reviewing key employee compensation goals, policies, plans and programs;
●
administering incentive and equity-based compensation;
●
reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and
●
appointing and overseeing any compensation consultants or advisors.
Our Compensation Committee
consists of Jin He Shao, Kee Chong Seng, and Jiajia Lu, with Mr. Kee serving as chair of the Compensation
Committee. Our board has affirmatively
determined that each of the members of the Compensation Committee meets the definition of “independent director”
for purposes
of serving on Compensation Committee under NASDAQ rules.
Nominating Committee
The Nominating Committee will
be responsible for, among other matters:
●
selecting or recommending for selection candidates for directorships;
●
evaluating the independence of directors and director nominees;
●
reviewing and making recommendations regarding the structure and composition of our board and the board committees;
103
●
developing and recommending to the board corporate governance principles and practices;
●
reviewing and monitoring the Company’s Code of Business Conduct and Ethics;
●
overseeing the evaluation of the Company’s management; and
●
overseeing the Company’s cybersecurity risk management.
Our Nominating Committee consists
of consists of Jin He Shao, Kee Chong Seng, and Jiajia Lu, with Ms. Lu serving as chair of the Nominating
Committee. Our board has affirmatively
determined that each of the members of the Nominating Committee meets the definition of “independent director”
for purposes
of serving on a Nominating Committee under NASDAQ rules.
Duties of Directors
Under Cayman Islands law,
our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a
duty to exercise
the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of
care to
us, our directors must ensure compliance with our memorandum and articles of association. We have the right to seek damages if
a duty owed by our
directors is breached. The functions and powers of our board of directors include, among others:
●
appointing officers and determining the term of office of the officers;
●
authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;
●
exercising the borrowing powers of the company and mortgaging the property of the company;
●
executing checks, promissory notes and other negotiable instruments on behalf of the company; and
●
maintaining or registering a register of mortgages, charges or other encumbrances of the company.
A director may vote, attend
a board meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is
interested. A director
must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction
we
have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting
or a written resolution of
the board or any committee of the board that a director is a shareholder, director, officer or trustee of any
specified firm or company and is to be regarded as
interested in any transaction with such firm or company will be sufficient disclosure,
and, after such general notice, it will not be necessary to give special
notice relating to any particular transaction.
The directors may receive
such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or
prepaid for all
traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our board of directors
or
committees of our board of directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as
a director. The
compensation committee will assist the directors in reviewing and approving the compensation structure for the directors.
Our board of directors may
exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property
or any part thereof, to issue debentures,
debenture stock and other securities whenever money is borrowed or as security for any debt,
liability or obligation of the company or of any third party.
A director is not required
to hold shares as a qualification to office.
D.
Employees
The table below provides information
as to the total number of employees at the end of the last three fiscal years. We have no contracts or collective
bargaining agreements
with labor unions and have never experienced work stoppages due to labor dispute. We consider our relations with our employees to
be good.
2024
2023
2022
Number of Employees
3,325
3,509
3,824
E.
Share Ownership
See Item 7 below.
104
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major shareholders
The following table sets forth
certain information regarding beneficial ownership of our shares by each person who is known by us to beneficially
own more than 5% of
our shares. The table also identifies the share ownership of each of our directors, each of our named executive officers, and all directors
and officers as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with
respect to the shares
indicated. Our major shareholders do not have different voting rights than any other holder of our shares.
We have determined beneficial
ownership in accordance with the rules of the SEC. Under such rules, beneficial ownership includes any shares over
which the individual
has sole or shared voting power or investment power as well as any shares that the individual has the right to subscribe for within 60
days of September 18, 2018 through the exercise of any warrants or other rights. Except as indicated by the footnotes below, we believe,
based on the
information furnished to us, that the persons and entities named in the table below have sole voting and investment power
or the power to receive the
economic benefit with respect to all common shares that they beneficially own, subject to applicable community
property laws. None of the stockholders
listed in the table are a broker-dealer or an affiliate of a broker dealer. None of the stockholders
listed in the table are located in the United States and none of
the common shares held by them are located in the United States. Applicable
percentage ownership is based on 27,840,669 common shares outstanding as of
September 24, 2024. Unless otherwise indicated, the address
of each beneficial owner listed in the table below is c/o CLPS Incorporation, c/o Unit 1000,
10th Floor, Millennium City III, 370 Kwun
Tong Road, Kwun Tong, Kowloon, Hong Kong SAR.
Name of Beneficial Owner
Common
Shares
Ownership%
(1)
Xiao Feng Yang (2)(7)
5,817,950
20.90%
Raymond Ming Hui Lin (3)(6)(7)
8,677,873
31.17%
Rui Yang (4)(6)
959,688
3.45%
Li Li (6)(8)
991,863
3.56%
Jin He Shao (5)(7)
20,000
*
Kee Chong Seng (7)(10)
33,500
*
Jiajia Lu (7)
3,000
*
All directors and executive officers as a group (7 persons)
16,503,874
59.28%
Qinrui Ltd. (2)
4,976,000
17.87%
Qinhui Ltd. (3)
4,999,996
17.96%
5% or greater beneficial owners as a group
9,975,996
35.83%
*
Less than 1%.
(1) Beneficial ownership is
determined in accordance with the rules of the SEC and includes voting or investment power with respect to the common shares
or the
power to receive the economic benefit of the common shares.
105
(2) A British Virgin Islands
corporation with the mailing address of c/o Vistra Corporate Services Centre, Wickham’s Cay II, Road Town, Tortola, VG 1110,
British Virgin Islands, with Xiao Feng Yang as its sole shareholder. As such, Mr. Yang is deemed to be the owner of all shares of
the Company held by
this entity. The total grant of 20,000 common shares vests in whole immediately on the grant date of award.
Represents vested portion of the restricted
stock granted dated as of August 23, 2021. The total grant of 50,000 common shares and
vest immediately on the grant date of award. Represents vested
portion of the restricted stock granted dated as of January 31, 2022.
The total grant of 270,000 common shares and vest immediately on the grant date of
award. From September 24, 2021 to September 24,
2022, a total of 220,823 shares were disposed of in various occasions, resulting in the net increased
holding of 49,177 shares.
Represents vested portion of the restricted stock granted dated as of November 14, 2022. The total grant of 50,000 common
shares
vests in whole immediately on the grant date of award. Represents vested portion of the restricted stock granted dated as of August
16, 2023. The
total grant of 75,000 common shares vests in whole immediately on the grant date of award. Represents vested portion of the restricted stock granted
dated as
of July 11, 2024. The total grant of 75,000 common shares vests in whole immediately on the grant date of award.
(3) A British Virgin Islands
corporation with the mailing address of c/o Vistra Corporate Services Centre, Wickham’s Cay II, Road Town, Tortola, VG
1110,
British Virgin Islands, with Raymond Ming Hui Lin as its sole shareholder. As such, Mr. Lin is deemed to be the owner of
all shares of the Company
held by this entity. The total grant of 520,000 common shares vests in whole immediately on the grant date
of award. Represents vested portion of the
restricted stock granted dated as of August 23, 2021. The total grant of 350,000 common
shares and 50,000 vest immediately on the grant date of award,
the rest will vest on May 23, 2022. Represents vested portion of the
restricted stock granted dated as of January 31, 2022. The total grant of 517,000
common shares and vest immediately on the grant
date of award. From September 24, 2021 to September 24, 2022, a total of 100,211 shares were
disposed of in various occasions,
resulting in the net increased holding of 716,789 shares. Represents vested portion of the restricted stock granted dated
as of
November 14, 2022. The total grant of 325,000 common shares vests in whole immediately on the grant date of award. Represents vested
portion
of the restricted stock granted dated as of August 16, 2023. The total grant of 530,000 common shares vests in whole
immediately on the grant date of
award. Represents vested portion of the restricted stock granted dated as
of July 11, 2024. The total grant of 536,000 common shares vests in whole
immediately on the grant date of award. Represents vested portion of the restricted stock granted dated as of July
11, 2024. The total grant of 536,000
common shares vests in whole immediately on the grant date of award.
(4) The total grant of 12,000
common shares vested in whole on November 1, 2021. Represents vested portion of the restricted stock granted dated as of
August 23,
2021. The total grant of 100,000 common shares and vest on May 23, 2022. Represents vested portion of the restricted stock granted
dated as
of January 31, 2022. The total grant of 100,000 common shares and vest immediately on the grant date of award. From
September 24, 2021 to
September 24, 2022, a total of 31,120 shares were disposed of in various occasions, resulting in the net
increased holding of 180,880 shares. Represents
vested portion of the restricted stock granted dated as of August 23, 2021. The
total grant of 48,000 common shares and 12,000 vest on November 1,
2022. Represents vested portion of the restricted
stock granted dated as of November 14, 2022. The total grant of 150,000 common shares vests in
whole immediately on the grant date
of award. Represents vested portion of the restricted stock granted dated as of August 16, 2023. The total grant of
250,000 common
shares vests in whole immediately on the grant date of award. From September 24, 2022 to September 24, 2023, a total of 28,738
shares were disposed of in various occasions, resulting in the net increased holding of 383,262 shares. Represents vested portion of the restricted stock
granted dated as of July
11, 2024. The total grant of 300,000 common shares vests in whole immediately on the grant date of award.
(5) Represents vested portion
of the restricted stock granted dated as of August 23, 2021. The total grant of 2,000 common shares vests in whole
immediately on
the grant date of award. Represents vested portion of the restricted stock granted dated as of January 31, 2022. The total grant of
2,000
common shares vests in whole immediately on the grant date of award. Represents vested portion of the restricted stock granted
dated as of November
14, 2022. The total grant of 2,000 common shares vests in whole immediately on the grant date of award.
Represents vested portion of the restricted
stock granted dated as of August 16, 2023. The total grant of 3,000 common shares vests
in whole immediately on the grant date of award. Represents
vested portion of the restricted stock granted dated as of July 11,
2024. The total grant of 3,000 common shares vests in whole immediately on the grant
date of award.
106
(6) Executive officer.
(7) Director.
(8) The total grant of 12,000
common shares vested in whole on June 11, 2022. Represents vested portion of the restricted stock granted dated as of August
23,
2021. The total grant of 150,000 common shares and vest on May 23, 2022. Represents vested portion of the restricted stock granted
dated as of
August 23, 2021. The total grant of 76,000 common shares and 10,000 vest on June 11, 2022. Represents vested portion of
the restricted stock granted
dated as of January 31, 2022. The total grant of 150,000 common shares vests in whole immediately on
the grant date of award. From September 24,
2021 to September 24, 2022, a total of 22,671 shares were disposed of in various
occasions, resulting in the net increased holding of 299,329 shares.
Represents vested portion of the restricted stock granted dated
as of August 23, 2021. The total grant of 76,000 common shares and 22,000 vest on June
11, 2022. Represents vested portion of
the restricted stock granted dated as of November 14, 2022. The total grant of 100,000 common shares vests in
whole immediately on
the grant date of award. Represents vested portion of the restricted stock granted dated as of August 16, 2023. The total grant of
150,000 common shares vests in whole immediately on the grant date of award. From September 24, 2022 to September 24, 2023, a total
of 12,725
shares were acquired from the market. Represents vested portion of the restricted stock granted dated as
of July 11, 2024. The total grant of 150,000
common shares vests in whole immediately on the grant date of award.
(9) Represents vested portion
of the restricted stock granted dated as of August 23, 2021. The total grant of 2,000 common shares vests in whole
immediately on
the grant date of award. Represents vested portion of the restricted stock granted dated as of January 31, 2022. The total grant of
2,000
common shares vests in whole immediately on the grant date of award. Represents vested portion of the restricted stock granted
dated as of November
14, 2022. The total grant of 2,000 common shares vests in whole immediately on the grant date of award.
Represents vested portion of the restricted
stock granted dated as of August 16, 2023. The total grant of 3,000 common shares vests
in whole immediately on the grant date of award. Represents
vested portion of the restricted stock granted dated as
of July 11, 2024. The total grant of 3,000 common shares vests in whole immediately on the grant
date of award.
(10)Represents vested portion
of the restricted stock granted dated as of August 23, 2021. The total grant of 2,000 common shares vests in whole
immediately on
the grant date of award. Represents vested portion of the restricted stock granted dated as of January 31, 2022. The total grant of
2,000
common shares vests in whole immediately on the grant date of award. From March 10, 2021 to April 1, 2022 a total of 16,500
shares were acquired
from the market. Represents vested portion of the restricted stock granted dated as of November 14, 2022. The
total grant of 2,000 common shares vests
in whole immediately on the grant date of award. Represents vested portion of the
restricted stock granted dated as of August 16, 2023. The total grant of
3,000 common shares vests in whole immediately on the grant
date of award. Represents vested portion of the restricted stock granted dated as
of July
11, 2024. The total grant of 3,000 common shares vests in whole immediately on the grant date of award.
107
As of September 24, 2024,
there were nine holders of record entered in our share register, of which no holders were U.S. residents. The number of
individual holders
of record is based exclusively upon our share register and does not address whether a share or shares may be held by the holder of record
on behalf of more than one person or institution who may be deemed to be the beneficial owner of a share or shares in our company. To
our knowledge, no
other shareholder beneficially owns more than 5% of our shares. Our company is not owned or controlled directly or
indirectly by any government or by any
corporation or by any other natural or legal person severally or jointly. Our major shareholders
do not have any special voting rights.
B.
Related Party Transactions
Parties are considered to
be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over
the
other party in making financial and operational decisions. The related parties that had transactions or balances with the Company in 2024
and 2023
consisted of:
Related Party
Relationship with the Company
Xiao Feng Yang
Chairman of the Board
Raymond Ming Hui Lin
CEO of the Company
EMIT
Equity investee of the Company
Beijing Bright Technology Co., Ltd (“Beijing Bright”)
Noncontrolling interest shareholder of JAJI China
UniDev
Equity investee of the Company
Fuson Group Limited (“Fuson”)
Equity investee of the Company
MCT
Noncontrolling interest shareholder of MSCT
(a)
Related party balances
As of June 30,
2024
2023
Due from related parties:
Fuson Group (a)
3,559,109
189,363
UniDev(c)
—
201,908
Total
3,559,109
391,271
Due from related parties, non-current:
Fuson Group (b)
2,374,298
—
Total
2,374,298
—
Due from related parties mainly represents loan
unreceived IT service fee from Fuson Group.
(a) The balance as of June 30, 2024 represents loans due from Fuson Group
with interest rates ranging from 2.90% to 5.35%, which should be paid within
one year. The balance as of June 30, 2023 represents unreceived
IT service fee from Fuson Group.
(b) The balance represents loans due from Fuson Group with interest rates ranging from 3.50% to 6.50%, which
should be paid within 42 months.
(c) The balance represents unreceived IT service fee
from UniDev.
As of June 30,
2024
2023
Due to related parties:
Fuson Group
14,774
—
MCT
5,456
5,444
UniDev
—
19,445
Total
20,230
24,889
Due to related parties mainly represents the deposit
to Fuson Group and unpaid administrative fee to MCT and UniDev.
108
(b)
Related party transactions
For the year ended,
2024
2023
2022
a)
Consulting services provided to related parties
Fuson Group
87,172
57,418
-
UniDev
-
-
46,008
EMIT
-
158
6,016
87,172
57,576
52,024
b)
Services provided
by related parties
UniDev
165,676
269,966
34,995
Fuson Group
18,894
-
-
EMIT
-
221,584
157,762
Beijing Bright
-
99,208
142,487
184,570
590,758
335,244
c)
Loans provided to related parties
Fuson Group
6,043,329
130,402
-
Beijing Bright
415,236
-
-
UniDev
55,365
143,810
-
EMIT
-
-
83,651
6,513,930
274,212
83,651
d)
Repayment of loans from related parties
Beijing Bright
415,236
-
-
Fuson Group
194,897
-
-
UniDev
193,777
-
-
EMIT
-
204,211
15,491
803,910
204,211
15,491
e)
Interest income received from related parties
Fuson Group
14,481
1,518
-
UniDev
8,549
6,342
-
Beijing Bright
2,907
-
-
EMIT
-
3,704
9,260
25,937
11,564
9,260
f)
Rental income from related party
Fuson Group
59,016
10,718
3,587
g)
Other revenue
from related party
Fuson Group
61,244
-
-
C.
Interests of Experts and Counsel
Not required.
ITEM 8. FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial Information.
See Item 18 for our audited consolidated financial
statements.
Legal Proceedings
We are currently not involved
in any legal proceedings; nor are we aware of any claims that could have a material adverse effect on our business,
financial condition,
results of operations or cash flows.
109
Dividend
Policy
The holders of shares of our
common shares are entitled to dividends out of funds legally available when and as declared by our board of directors.
Our board of directors
has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. Should we decide in the future to
pay dividends, as a holding company, our ability to do so and meet other obligations depends upon the receipt of dividends or other payments
from our
operating subsidiary and other holdings and investments. In addition, the operating companies may, from time to time, be subject
to restrictions on their
ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions
on the conversion of local currency into U.S.
dollars or other hard currency and other regulatory restrictions. In the event of our liquidation,
dissolution or winding up, holders of our common shares are
entitled to receive, ratably, the net assets available to shareholders after
payment of all creditors.
B.
Significant Changes
Except as disclosed elsewhere
in this Annual Report, we have not experienced any significant changes since the date of our audited consolidated
financial statements
included in this Annual Report.
ITEM 9. THE OFFER AND LISTING
A.
Offer and Listing Details
The following table sets forth, for the calendar months indicated and
through June 30, 2024, the monthly high and low sale prices for our shares, as
reported on NASDAQ Stock Market. The closing price for
the Company’s securities on October 15, 2024 was $1.39 per share.
Shares
High
Low
Monthly Highs and Lows
June 2024
$
0.99 $
0.88
July 2024
$
0.97 $
0.68
August 2024
$
1.27 $
0.68
September 2024
$
1.43 $
1.01
B.
Plan of Distribution
Not Applicable.
C.
Markets
Our shares have been listed
on the NASDAQ Stock Market under the symbol CLPS since May 24, 2018 following the completion of our initial
public offering.
D.
Selling Shareholders
Not Applicable.
E.
Dilution
Not Applicable.
F.
Expenses of the Issue
Not Applicable.
ITEM 10. ADDITIONAL INFORMATION
A.
Share Capital
Not Applicable.
110
B.
Memorandum and Articles of Association
The information required by
Item 10.B of Form 20-F is included in the section titled “Description of Share Capital” in our Registration Statement on
Form
F-1 initially filed with the SEC on March 27, 2018, and subsequently updated (File No.: 333-223956), which section is incorporated herein
by
reference.
C.
Material Contracts
We have not entered into any material contracts other than in the ordinary
course of business and other than those described in “Item 4. Information
on the Company” and in “Item 7. Major shareholders
and Related Party Transactions” or elsewhere in this annual report.
D.
Exchange controls
Under Cayman Islands law,
there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions
that affect
the remittance of dividends, interest or other payments to non-resident holders of our shares.
E.
Taxation
The following summary of
the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our common shares is
based upon laws and
relevant interpretations thereof in effect as of the date of this Annual Report, all of which are subject to change. This summary does
not
deal with all possible tax consequences relating to an investment in our common shares, such as the tax consequences under state,
local and other tax laws.
Cayman Islands Taxation
The Cayman Islands currently
levy no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation
in the nature
of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman
Islands
except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands.
The Cayman Islands is
not party to any double tax treaties that are applicable to any payments made to or by the Company. There are no
exchange control regulations or currency
restrictions in the Cayman Islands.
Material PRC Income Tax Considerations
Under the new EIT Law and
the Implementing Rules, an enterprise established outside of the PRC with “de facto management bodies” within the
PRC is considered
as a resident enterprise and will be subject to a PRC income tax on its global income. According to the Implementing Rules, “de
facto
management bodies” refer to “establishments that carry out substantial and overall management and control over the manufacturing
and business operations,
personnel, accounting, properties, etc. of an enterprise.” Accordingly, our holding company may be considered
a resident enterprise and may therefore be
subject to a PRC income tax on our global income. The State Administration of Taxation issued
the Notice Regarding the Determination of Chinese-
Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the
Basis of De Facto Management Bodies, or Circular 82, on April 22,
2009. Circular 82 provides certain specific criteria for determining
whether the “de facto management body” of a Chinese-controlled offshore incorporated
enterprise is located in China. Although
Circular 82 only applies to offshore enterprises controlled by PRC enterprises and not those invested in by
individuals or foreign enterprises,
the determining criteria set forth in Circular 82 may reflect the State Administration of Taxation’s general position on how
the
“de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless
of whether they are
controlled by PRC enterprises or controlled by or invested in by individuals or foreign enterprises. If we are considered
a resident enterprise and earn income
other than dividends from our PRC subsidiary, such PRC income tax on our global income could significantly
increase our tax burden and materially and
adversely affect our cash flow and profitability.
If the PRC tax authorities
determine that CLPS Incorporation or any of our subsidiaries outside of China is a “resident enterprise” for PRC
enterprise
income tax purposes, a number of PRC tax consequences could follow. First, CLPS Incorporation or any of our subsidiaries outside of China
may
be subject to enterprise income tax at a rate of 25% on our worldwide taxable income, as well as PRC enterprise income tax reporting
obligations. Second,
under the EIT Law and its implementing rules, dividends paid between “qualified resident enterprises”
are exempt from enterprise income tax.
If CLPS Incorporation or any
of our subsidiaries outside of China were treated as a PRC “non-resident enterprise” under the EIT Law, then
dividends that
it receives from its PRC operating subsidiary (assuming such dividends were considered sourced within the PRC) (1) may be subject to a
5%
PRC withholding tax, if the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance
of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “PRC - Hong Kong Tax Treaty”)
were applicable, or (2) if such treaty
does not apply (i.e., because the PRC tax authorities may deem the Hong Kong enterprise to be a
conduit not entitled to treaty benefits), may be subject to a
10% PRC withholding tax. Any such taxes on dividends could materially reduce
the amount of dividends, if any, we could pay to its shareholders.
111
Finally, the new “resident
enterprise” classification could result in a situation in which a 10% PRC tax is imposed on dividends we pay to its non-
PRC shareholders
that are not PRC tax “resident enterprises” and gains derived by them from transferring our common shares or warrants, if
such income is
considered PRC-sourced income by the relevant PRC authorities. In such event, we may be required to withhold the 10% PRC
tax on any dividends paid to
its non-PRC resident shareholders. Our non-PRC resident shareholders also may be responsible for paying
PRC tax at a rate of 10% on any gain realized
from the sale or transfer of common shares or warrants in certain circumstances. We would
not, however, have an obligation to withhold PRC tax with
respect to such gain. If any such PRC taxes apply, a non-PRC resident shareholder
may be entitled to a reduced rate of PRC taxes under an applicable income
tax treaty and or a foreign tax credit against such shareholder’s
domestic income tax liability (subject to applicable conditions and limitations). Prospective
investors should consult with their own
tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any
available foreign
tax credits.
General
The following is a summary
of the material U.S. federal income tax consequences of owning and disposing of our ordinary shares. The discussion
below of the U.S.
federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our shares that is for U.S. federal
income tax
purposes:
●
an individual citizen or resident of the United States;
●
a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the
United States, any state thereof or the District of Columbia;
●
an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
●
a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control
all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.
If a beneficial owner of our
shares is not described as a U.S. Holder in one of the four bullet points above and is not an entity treated as a partnership
or other
pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.”
This summary is based on the
Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing Treasury regulations
promulgated
thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations,
possibly on a retroactive basis.
This discussion does not address
all aspects of U.S. federal income taxation that may be relevant to us or to any particular holder of our shares based
on such holder’s
individual circumstances. In particular, this discussion considers only holders that own our shares as capital assets within the meaning
of
Section 1221 of the Code. This discussion also does not address the potential application of the alternative minimum tax or the U.S.
federal income tax
consequences to holders that are subject to special rules, including:
●
financial institutions or financial services entities;
●
broker-dealers;
●
taxpayers who have elected mark-to-market accounting;
●
tax-exempt entities;
●
governments or agencies or instrumentalities thereof;
●
insurance companies;
●
regulated investment companies;
●
real estate investment trusts;
●
certain expatriates or former long-term residents of the United States;
112
●
persons that actually or constructively own 5% or more of our voting shares;
●
persons that acquired our shares pursuant to the exercise of employee stock options, in connection with employee stock incentive plans or
otherwise as compensation;
●
persons that hold our shares as part of a straddle, constructive sale, hedging, conversion or other integrated transaction; or
●
persons whose functional currency is not the U.S. dollar.
This discussion does not address
any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws.
Additionally, this
discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our securities through
such
entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner
of our shares, the U.S. federal
income tax treatment of a partner in the partnership will generally depend on the status of the partner
and the activities of the partnership. This discussion
also assumes that any distribution made (or deemed made) in respect of our shares
and any consideration received (or deemed received) by a holder in
connection with the sale or other disposition of such shares will be
in U.S. dollars.
We have not sought, and will
not seek, a ruling from the Internal Revenue Service (or “IRS”), or an opinion of counsel as to any U.S. federal income
tax
consequence described herein. The IRS may disagree with one or more aspects of the discussion herein, and its determination may be upheld
by a court.
Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not
adversely affect the accuracy of the
statements in this discussion.
BECAUSE OF THE COMPLEXITY
OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER
OF OUR SECURITIES MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN,
EACH HOLDER OF OUR SECURITIES IS URGED TO
CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OWNERSHIP
AND DISPOSITION OF
OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S.
FEDERAL
TAX LAWS AND APPLICABLE TAX TREATIES.
Tax Consequences to U.S. Holders of Common Shares
Taxation of Distributions Paid on Common Shares
Subject to the passive foreign
investment company (or “PFIC”), rules discussed below, a U.S. Holder generally will be required to include in gross
income
as ordinary income the amount of any cash dividend paid on our common shares. A cash distribution on such shares will be treated as a
dividend for
U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits
(as determined for U.S. federal
income tax purposes). Any distributions in excess of such earnings and profits generally will be applied
against and reduce the U.S. Holder’s basis in its
common shares and, to the extent in excess of such basis, will be treated as gain
from the sale or exchange of such common shares.
With respect to corporate
U.S. Holders, dividends on our shares will not be eligible for the dividends-received deduction generally allowed to
domestic corporations
in respect of dividends received from other domestic corporations. With respect to non-corporate U.S. Holders, dividends on our
shares
may be taxed at the lower applicable long-term capital gains rate provided that (1) our common shares are readily tradable on an established
securities
market in the United States or, in the event we are deemed to be a Chinese “resident enterprise” under the EIT
Law, we are eligible for the benefits of the
Agreement between the Government of the United States of America and the Government of the
People’s Republic of China for the Avoidance of Double
Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income,
or the “U.S.-PRC Tax Treaty,” (2) we are not a PFIC, as discussed below, for
either the taxable year in which the dividend
was paid or the preceding taxable year, and (3) certain holding period requirements are met. Under published
IRS authority, shares are
considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States only if
they
are listed on certain exchanges, which presently include the Nasdaq Stock Market. U.S. Holders should consult their own tax advisors regarding
the tax
treatment of any dividends paid with respect to our common shares.
113
If PRC taxes apply to dividends
paid to a U.S. Holder on our common shares, such U.S. Holder may be entitled to a reduced rate of PRC tax under
the U.S-PRC Tax Treaty.
In addition, such PRC taxes may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability
(subject to certain limitations). U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and
their eligibility for the
benefits of the U.S.-PRC Tax Treaty.
Taxation on the Disposition of Common Shares
Upon a sale or other taxable
disposition of our common shares, and subject to the PFIC rules discussed below, a U.S. Holder should recognize
capital gain or loss in
an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the common shares. Capital
gains recognized by U.S. Holders generally are subject to U.S. federal income tax at the same rate as ordinary income, except that long-term
capital gains
recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a maximum rate of 20%. Capital
gain or loss will constitute
long-term capital gain or loss if the U.S. Holder’s holding period for the common shares exceeds one
year. The deductibility of capital losses is subject to
various limitations. If PRC taxes would otherwise apply to any gain from the disposition
of our common shares by a U.S. Holder, such U.S. Holder may be
entitled to a reduction in or elimination of such taxes under the U.S.-PRC
Tax Treaty. Any PRC taxes that are paid by a U.S. Holder with respect to such gain
may be treated as foreign taxes eligible for credit
against such holder’s U.S. federal income tax liability (subject to certain limitations that could reduce or
eliminate the available
tax credit). U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility
for
the benefits of the U.S.-PRC Tax Treaty.
Passive Foreign Investment Company Rules
A foreign (i.e., non-U.S.)
corporation will be a PFIC if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro
rata share
of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively,
a
foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined
based on fair market value
and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which
it is considered to own at least 25% of the shares
by value, are held for the production of, or produce, passive income. Passive income
generally includes dividends, interest, rents and royalties (other than
certain rents or royalties derived from the active conduct of
a trade or business) and gains from the disposition of passive assets. Based on our current
composition and assets, we do not expect to
be treated as a PFIC under the current PFIC rules. Our PFIC status, however, will not be determinable until after
the end of each taxable
year. Accordingly, there can be no assurance with respect to our status as a PFIC for our current taxable year or any future taxable
year.
If we are determined to be a PFIC and a U.S. Holder did not make either a timely qualified electing fund (or “QEF”), election
for our first taxable year
as a PFIC in which the U.S. Holder held (or was deemed to hold) common shares, or a mark-to-market election,
as described below, such holder generally
will be subject to special rules with respect to:
●
any gain recognized by the U.S. Holder on the sale or other disposition of its common shares; and
●
any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that
are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the common shares during the three
preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the common shares).
Under these rules,
●
the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the common shares;
●
the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the
period in the U.S. Holder’s holding period before the first day of our first taxable year in which we are a PFIC, will be taxed as ordinary
income;
●
the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the
highest tax rate in effect for that year and applicable to the U.S. Holder; and
●
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year of the U.S.
Holder.
114
In general, a U.S. Holder
may avoid the PFIC tax consequences described above in respect to our common shares by making a timely QEF election
to include in income
its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current
basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends. There
can be no assurance,
however, that we will pay current dividends or make other distributions sufficient for a U.S. Holder who makes a
QEF election to satisfy the tax liability
attributable to income inclusions under the QEF rules, and the U.S. Holder may have to pay the
resulting tax from its other assets. A U.S. Holder may make a
separate election to defer the payment of taxes on undistributed income
inclusions under the QEF rules, but if deferred, any such taxes will be subject to an
interest charge.
The QEF election is made on
a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder
generally makes a QEF
election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company
or Qualified
Electing Fund), to a timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections
generally
may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent
of the IRS. In order to comply
with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request
from a U.S. Holder, we will endeavor to
provide to the U.S. Holder no later than 90 days after the request such information as the IRS
may require, including a PFIC annual information statement, in
order to enable the U.S. Holder to make and maintain a QEF election. However,
there is no assurance that we will have timely knowledge of our status as a
PFIC in the future or of the required information to be provided.
If a U.S. Holder has made
a QEF election with respect to our common shares, and the special tax and interest charge rules do not apply to such
shares (because of
a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares), any gain
recognized on the appreciation of our common shares generally will be taxable as capital gain and no interest charge will be imposed.
As discussed above,
U.S. Holders of a QEF are currently taxed on their pro rata shares of a PFIC’s earnings and profits, whether
or not distributed. In such case, a subsequent
distribution of such earnings and profits that were previously included in income generally
should not be taxable as a dividend to those U.S. Holders who
made a QEF election. The tax basis of a U.S. Holder’s shares in a
QEF will be increased by amounts that are included in income, and decreased by amounts
distributed but not taxed as dividends, under the
above rules. Similar basis adjustments apply to property if by reason of holding such property the U.S.
Holder is treated under the applicable
attribution rules as owning shares in a QEF.
Although a determination as
to our PFIC status will be made annually, an initial determination that our company is a PFIC will generally apply for
subsequent years
to a U.S. Holder who held common shares while we were a PFIC, whether or not we meet the test for PFIC status in those years. A U.S.
Holder
who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold)
our common
shares, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In
addition, such U.S. Holder will not
be subject to the QEF inclusion regime with respect to such shares for any taxable year of ours that
ends within or with a taxable year of the U.S. Holder and
in which we are not a PFIC. On the other hand, if the QEF election is not effective
for each of our taxable years in which we are a PFIC and the U.S. Holder
holds (or is deemed to hold) our common shares, the PFIC rules
discussed above will continue to apply to such shares unless the holder makes a purging
election, and pays the tax and interest charge
with respect to the gain inherent in such shares attributable to the pre-QEF election period.
Alternatively, if a U.S. Holder, at the close of its taxable
year, owns shares in a PFIC that are treated as marketable stock, the U.S. Holder may make
a mark-to-market election with respect to
such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year
of the U.S. Holder
in which the U.S. Holder holds (or is deemed to hold) shares in us and for which we are determined to be a PFIC, such holder generally
will not be subject to the PFIC rules described above in respect to its common shares. Instead, in general, the U.S. Holder will include
as ordinary income
each year the excess, if any, of the fair market value of its common shares at the end of its taxable year over the
adjusted basis in its common shares. The
U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any,
of the adjusted basis of its common shares over the fair market value
of its common shares at the end of its taxable year (but only to
the extent of the net amount of previously included income as a result of the mark-to-market
election). The U.S. Holder’s basis
in its common shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale
or other
taxable disposition of the common shares will be treated as ordinary income.
115
The mark-to-market election
is available only for stock that is regularly traded on a national securities exchange that is registered with the SEC, or
on a foreign
exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair
market
value. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election
in respect to our
common shares under their particular circumstances.
If we are a PFIC and, at any
time, have a foreign subsidiary that is classified as a PFIC, U.S. Holders generally would be deemed to own a portion of
the shares of
such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution
from, or dispose of all or part of our interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to
provide to a U.S. Holder
no later than 90 days after the request the information that may be required to make or maintain a QEF election
with respect to the lower-tier PFIC. However,
there is no assurance that we will have timely knowledge of the status of any such lower-tier
PFIC or will be able to cause the lower-tier PFIC to provide the
required information. U.S. Holders are urged to consult their own tax
advisors regarding the tax issues raised by lower-tier PFICs. If a U.S. Holder owns (or
is deemed to own) shares during any year in a
PFIC, such holder may have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market
election is made). The rules dealing
with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in
addition to those described
above. Accordingly, U.S. Holders of our common shares should consult their own tax advisors concerning the application of the
PFIC rules
to our common shares under their particular circumstances.
Tax Consequences to Non-U.S. Holders of Common Shares
Dividends paid to a Non-U.S.
Holder in respect to its common shares generally will not be subject to U.S. federal income tax, unless the dividends
are effectively
connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable
income tax
treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States).
In addition, a Non-U.S. Holder
generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our
common shares,
unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable
income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains in the United States) or the
Non-U.S. Holder is an
individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition
and certain other conditions are met (in
which case, such gain from United States sources generally is subject to tax at a 30% rate or
a lower applicable tax treaty rate).
Dividends and gains that are
effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required
by an applicable
income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to tax
in the
same manner as for a U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes,
may also be subject to an
additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
Backup Withholding and Information Reporting
In general, information reporting
for U.S. federal income tax purposes should apply to distributions made on our common shares within the United
States to a non-corporate
U.S. Holder and to the proceeds from sales and other dispositions of our common shares by a non-corporate U.S. Holder to or
through a
U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States will be subject
to
information reporting in limited circumstances. In addition, backup withholding of United States federal income tax, currently at a
rate of 28%, generally will
apply to dividends paid on our common shares to a non-corporate U.S. Holder and the proceeds from sales and
other dispositions of shares by a non-
corporate U.S. Holder, in each case who (a) fails to provide an accurate taxpayer identification
number; (b) is notified by the IRS that backup withholding is
required; or (c) in certain circumstances, fails to comply with applicable
certification requirements. A Non-U.S. Holder generally may eliminate the
requirement for information reporting and backup withholding
by providing certification of its foreign status, under penalties of perjury, on a duly executed
applicable IRS Form W-8 or by otherwise
establishing an exemption.
Backup withholding is not
an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a
Non-U.S.
Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is
timely furnished to
the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the
availability of and procedure for
obtaining an exemption from backup withholding in their particular circumstances.
F. Dividends and paying agents
Not required.
G. Statement by experts
Not required.
116
H. Documents on display
Documents concerning us that
are referred to in this document may be inspected at c/o Unit 1000, 10th Floor, Millennium City III, 370 Kwun Tong
Road, Kwun Tong, Kowloon,
Hong Kong SAR. In addition, we file annual reports and other information with the Securities and Exchange Commission. We
file annual reports
on Form 20-F and submit other information under cover of Form 6-K. As a foreign private issuer, we are exempt from the proxy
requirements
of Section 14 of the Exchange Act and our officers, directors and principal shareholders are exempt from the insider short-swing disclosure
and
profit recovery rules of Section 16 of the Exchange Act. Annual reports and other information we file with the Commission may be inspected
at the public
reference facilities maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington, D.C. 20549, and copies
of all or any part thereof may be
obtained from such offices upon payment of the prescribed fees. You may call the Commission at 1-800-SEC-0330
for further information on the operation
of the public reference rooms and you can request copies of the documents upon payment of a duplicating
fee, by writing to the Commission. In addition, the
Commission maintains a web site that contains reports and other information regarding
registrants (including us) that file electronically with the Commission
which can be assessed at http://www.sec.gov.
I. Subsidiary Information
Not required.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk
Our exposure to interest rate
risk primarily relates to interest income generated by excess cash, which is mostly held in interest-bearing bank
deposits. While interest-earning
instruments carry a degree of interest rate risk, we have not been exposed, nor do we anticipate being exposed, to material
risks due
to changes in market interest rates.
Foreign Currency Risk
A majority of the Company’s
expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets
and liabilities
are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required
by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”).
Remittances in currencies
other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory
bodies which require certain
supporting documentation in order to affect the remittance.
Our
functional currency is the RMB, and our financial statements are presented in U.S. dollars. The RMB depreciated by 3.7% in fiscal
2022,
depreciated by 8.3% in fiscal 2023, and depreciated by 0.2% in fiscal 2024, respectively. It is difficult to predict how
market forces or PRC or U.S.
government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The
change in the value of the RMB relative to the U.S.
dollar may affect our financial results reported in the U.S. dollar terms
without giving effect to any underlying changes in our business or results of
operations. Currently, our assets, liabilities,
revenues and costs are denominated in RMB.
To
the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes,
appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion.
Conversely, if
the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition
or investments or other
business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount
available to the Company.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
On
February 28, 2021, the Company entered into a securities purchase agreement (“SPA”) with certain accredited investors. According
to the SPA,
the Company agreed to sell 2,666,666 shares of the Company’s common stock and issue unregistered warrants to purchase
up to an additional 2,666,666
shares of common stock in the concurrent private placement transaction (the transaction). On March 3, 2021,
the Company issued 2,666,666 common shares
at US$6.00 per share to those investors, with a par value of $0.0001 per share, and issued
2,666,666 warrants, generating total gross proceeds of $15,999,996.
Net proceeds from the transaction after issuance cost of $1,317,119
were $14,682,877 which was allocated to common shares and warrants issued on their
relative fair value basis of $11,131,829 and $3,551,048,
respectively. All 2,666,666 warrants are currently outstanding and will automatically expire on
March 2, 2026 if not being exercised already.
The terms of the warrant agreement are provided as exhibit 10.17 hereto in Item 19.
12.A.
Debt Securities
Not
applicable.
12.B.
Warrants and Rights
Not
applicable.
12.C.
Other Securities
Not
applicable.
12.D.
American Depositary Shares
Not applicable.
117
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There has been no default of any indebtedness nor
is there any arrearage in the payment of dividends.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness
of the design and operation
of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (“Exchange Act”)
Rules 13a-
15(e) or 15d-15(e)) as of June 30, 2022 as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
Based on that evaluation,
management, including our Chief Executive Officer and Chief Financial Officer, has concluded as of June 30, 2024, our
disclosure controls
and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish
under
the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and
forms, and that the
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
Management’s Annual Report on Internal
Control over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Our internal control over
financial reporting is
a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance
regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in
accordance with
U.S. generally accepted accounting principles.
Management assessed the effectiveness
of our internal control over financial reporting as of June 30, 2024. In making this assessment, management
used the framework set forth
in the report Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission,
or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the
control
environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring. Based on this evaluation,
our
management has concluded that our internal control over financial reporting was effective as of June 30, 2024.
It is possible that, had we
performed a formal assessment of our internal control over financial reporting or had our independent registered public
accounting firm
perform an audit of our internal control over financial reporting, internal control deficiencies may have been identified. See “Item
3. Key
Information—D. Risk Factors—Risks Related to Our Business—If we fail to maintain an effective system of internal
control over financial reporting, our
ability to accurately and timely report our financial results or prevent fraud may be adversely
affected, and investor confidence and the market price of our
shares may be adversely impacted.”
Changes in Internal Controls over Financial
Reporting
There were no changes in our
internal control over financial reporting during the year ended June 30, 2024, that have materially affected, or are
reasonably likely
to materially affect our internal control over financial reporting.
ITEM 16. RESERVED
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
Our Board of Directors has
determined that Jin He Shao is an audit committee financial expert as that term is defined in Item 16A(b) of Form 20-F,
and “independent”
as that term is defined in the NASDAQ listing standards.
ITEM 16B. CODE OF ETHICS.
Our Board has adopted a code
of business conduct and ethics that applies to our directors, officers and employees. A copy of this code is available
on our website.
We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business
Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller,
or persons performing
similar functions.
118
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table represents
the approximate aggregate fees for services billed by Ernst & Young Hua Ming LLP for the period indicated:
June 30,
2024
June 30,
2023
USD’000
USD’000
Audit Fees
$
533 $
454
Audit Related Fees
5
7
Tax Fees
-
-
All Other Fees
-
-
Total Fees
$
538 $
461
Our Audit Committee evaluated
and approved in advance the scope and cost of the engagement of an auditor before the auditor rendered its audit
and non-audit services.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
None.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS.
No purchase of our securities was made by us or
our affiliates in 2023.
ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a Cayman Islands exempted company listed
on the Nasdaq Global Market, we are subject to the Nasdaq Stock Market Rules corporate
governance listing standards. However, Nasdaq
Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its
home country. Certain
corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Stock
Market
Rules. We opt to follow home country practice specified by Nasdaq, including the frequency of holding annual general meeting of shareholders.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
Our board of directors has established insider
trading policies and procedures to provide guidance on the purchases, sales, and other dispositions of
our securities by our directors,
officers, employees and other relevant persons, with the goal of promoting compliance with applicable insider trading laws,
rules and
regulations, and the listing standards of the Nasdaq.
The Guidelines on Trading in our Common Shares
are filed as Exhibit 11.1 to this annual report on Form 20-F.
119
ITEM 16K. CYBERSECURITY
Cybersecurity is a top priority
for CLPS and is integral to our business strategy and operations. We are committed to protecting the confidentiality,
integrity, and availability
of our information systems and data.
Risk Assessment and Management
We maintain a robust cybersecurity
risk management program to identify, assess, and mitigate potential threats to our systems and data. Our
Technical Infrastructure (TI)
department is responsible for the design, implementation, and maintenance of our cybersecurity infrastructure and controls.
Regular and
comprehensive risk assessments are conducted to identify vulnerabilities and prioritize mitigation efforts. We employ a layered security
approach, including strong access controls, encryption, firewalls, intrusion detection and prevention systems, and continuous monitoring.
We have developed and regularly
test a comprehensive incident response plan to address cybersecurity incidents effectively. Any cybersecurity
incident is promptly reported
to the TI department, which conducts a preliminary assessment and takes action. Incidents deemed material are escalated
immediately to
the President for further evaluation and decision-making.
As of the date of this report,
we have not experienced any material cybersecurity incidents that have had a significant impact on our business,
financial condition,
or operations. However, we recognize the evolving nature of cybersecurity threats and remain vigilant in our efforts to protect our
systems
and data.
Governance
Our board of directors is
actively engaged in overseeing cybersecurity risk management. The nominating committee is responsible for providing
oversight of our cybersecurity
program, including the evaluation of our risk management framework, incident response capabilities, and resource allocation.
We invest in our cybersecurity
workforce through ongoing training, development, and recruitment efforts.
120
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements
pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The financial statements are filed as part of this
Annual Report beginning on page F-1.
121
CLPS INCORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2024, 2023 AND
2022
CLPS INCORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1408)
F-2 — F-3
Consolidated Balance Sheets as of June 30, 2023 and 2024
F-4 — F-5
Consolidated Statements of Comprehensive (loss) / Income for the Years Ended June 30, 2022, 2023 and 2024
F-6 — F-7
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2022, 2023 and 2024
F-8 — F-9
Consolidated Statements of Cash Flows for the Years Ended June 30, 2022, 2023 and 2024
F-10 — F-11
Notes to the Consolidated Financial Statements for the Years Ended June 30, 2022, 2023 and 2024
F-12 — F-53
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors
of CLPS Incorporation
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of CLPS Incorporation (the Company) as of June 30, 2024 and 2023, the related consolidated
statements of comprehensive
(loss)/income, changes in shareholders’ equity and cash flows for each of the three years in the period ended June 30, 2024, and
the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all
material respects, the financial position of the Company at June 30, 2024 and 2023, and the
results of its operations and its cash flows for each of the three
years in the period ended June 30, 2024, in conformity with U.S. generally
accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
Critical Audit Matter
The critical audit matter communicated below is a matter arising from
the current period audit of the financial statements that was communicated or required
to be communicated to the audit committee and that:
(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective
or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical
audit matter or on the accounts or disclosures to which it relates:
Valuation of the acquired intangible assets of College of Allied Educators Pte. Ltd.
Description of the
Matter
As described in Note 3 to the
consolidated financial statements, the Company completed its acquisition of College of Allied
Educators Pte. Ltd. (“CAE”)
on January 3, 2024 for a total purchase consideration of $3.24 million. The purchase price was
allocated to the net tangible and intangible
assets acquired and liabilities assumed based on their estimated fair values. The fair
value of identified intangible assets was approximately
$1.17 million, which consisted of license, client lists, and collaboration
agreement.
Auditing the Company’s valuation of the
acquired intangible assets of CAE was complex due to the significant estimation
uncertainty in determining the fair value of identified
intangible assets. The Company used the income approach to measure
collaboration agreement and client lists, and relief-from-royalty method
to measure license. The significant assumptions used to
estimate the fair value of the intangible assets included projected revenue growth
rates, royalty rate, and discount rate. These
significant assumptions are forward looking and could be affected by future economic and
market conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding of management’s
processes related to the determination of fair value of the acquired intangible assets,
and management's evaluation of the underlying
assumptions described above.
To test the estimated fair value of the acquired
intangible assets, we performed audit procedures that included, among others,
assessing the appropriateness of the valuation methodologies
used and testing the significant assumptions used in the model,
including the completeness and accuracy of the underlying data. We compared
the projected revenue growth rates to the historical
results of CAE and considered current industry and economic trends. We involved our
valuation specialists to assist in assessing the
valuation methodologies used by the Company, and evaluating the royalty rate and discount
rate used in the valuation. We also
performed sensitivity analyses of the significant assumptions discussed above to evaluate the changes
in the fair value of the
acquired intangible assets resulting from changes in the assumptions.
/s/ Ernst & Young Hua Ming LLP
We have served as the Company’s auditor
since 2018.
Shanghai, the People’s Republic of China
October 18, 2024
F-3
CLPS
INCORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in U.S. dollars (“$”), except
for number of shares)
As of June 30,
Notes
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
29,116,431
22,214,029
Restricted cash
24,081
87,604
Short-term investments
2,100,000
-
Accounts receivable, net
4
38,779,209
48,515,467
Prepayments, deposits and other assets, net
5
4,497,578
1,665,736
Amounts due from related parties
13
3,559,109
391,271
Total Current Assets
78,076,408
72,874,107
Non-current assets:
Property and equipment, net
6
21,168,524
20,112,305
Intangible assets, net
7
2,254,372
726,175
Goodwill
8
1,473,899
-
Operating lease right-of-use assets
9
2,776,858
815,324
Long-term investments
10
613,807
456,598
Prepayments, deposits and other assets, net
5
594,603
252,656
Amounts due from a related party
13
2,374,298
-
Deferred tax assets, net
14
697,047
81,899
Total Assets
110,029,816
95,319,064
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank loans
11
23,232,856
10,554,617
Accounts payable
949,137
690,035
Accrued expenses and other current liabilities
799,495
324,021
Tax payables
14
2,351,615
2,503,375
Contract liabilities
1,139,001
918,470
Salaries and benefits payable
12
9,941,541
10,586,239
Operating lease liabilities
9
1,361,928
712,302
Amounts due to related parties
13
20,230
24,889
Total current liabilities
39,795,803
26,313,948
Non-current liabilities:
Operating lease liabilities
9
1,638,243
104,114
Deferred tax liabilities
14
378,344
185,382
Unrecognized tax benefits
14
3,413,850
2,320,918
Other non-current liabilities
883,963
885,901
Total Liabilities
46,110,203
29,810,263
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
CLPS
INCORPORATION
CONSOLIDATED
BALANCE SHEETS-(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
As of June 30,
Notes
2024
2023
Commitments and Contingencies
15
Shareholders’ Equity:
Common shares, $0.0001 par value, 100,000,000 shares authorized; 25,640,056 shares issued and
outstanding as of June 30, 2024; 23,650,122 shares issued and outstanding as of June 30, 2023
19
2,564
2,365
Additional paid-in capital
19
61,351,200
58,183,383
Statutory reserves
19
5,553,104
5,356,828
(Accumulated deficit) retained earnings
(51,728)
5,029,021
Accumulated other comprehensive loss
19
(4,345,902)
(3,990,594)
Total CLPS Incorporation’s Shareholders’ Equity
62,509,238
64,581,003
Noncontrolling interests
20
1,410,375
927,798
Total Shareholders’ Equity
63,919,613
65,508,801
Total Liabilities and Shareholders’ Equity
110,029,816
95,319,064
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
CLPS
INCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
(Amounts in U.S. dollars (“$”), except
for number of shares)
For the years ended June 30,
Notes
2024
2023
2022
Revenue from third parties
142,725,554
150,298,963
151,970,357
Revenue from related parties
13
87,172
57,576
52,024
Total revenue
21
142,812,726
150,356,539
152,022,381
Cost of revenue from third parties
(109,795,857) (115,827,597) (110,989,394)
Cost of revenue from related parties
(69,738)
(47,212)
(43,951)
Total cost of revenue
(109,865,595) (115,874,809) (111,033,345)
Gross profit
32,947,131
34,481,730
40,989,036
Operating income (expenses):
Selling and marketing expenses
(4,573,344)
(3,300,555)
(4,103,066)
Research and development expenses
(7,155,949)
(8,336,999)
(7,971,145)
General and administrative expenses
(25,120,010)
(21,641,317)
(23,045,664)
Impairment of goodwill
-
(2,382,538)
-
Subsidies and other operating income
1,363,757
1,256,070
1,536,394
Total operating expenses
(35,485,546)
(34,405,339)
(33,583,481)
(Loss) income from operations
(2,538,415)
76,391
7,405,555
Other income
1,251,465
1,123,612
854,250
Other expenses
(556,415)
(430,357)
(575,605)
(Loss) income before income tax and share of income(loss) in equity investees
(1,843,365)
769,646
7,684,200
Provision for income taxes
14
160,725
674,344
3,045,992
(Loss) income before share of income (loss) in equity investees
(2,004,090)
95,302
4,638,208
Share of income (loss) in equity investees, net of tax
156,780
70,263
(50,297)
Net (loss) income
(1,847,310)
165,565
4,587,911
Less: net income (loss) attributable to noncontrolling interest
482,655
(26,964)
132,483
Net (loss) income attributable to CLPS Incorporation's shareholders
(2,329,965)
192,529
4,455,428
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
CLPS
INCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME-(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
For the years ended June 30,
Notes
2024
2023
2022
Other comprehensive loss
Foreign currency translation loss
(355,386)
(3,532,507)
(1,828,542)
Less: foreign currency translation loss attributable to noncontrolling interests
(78)
(92,161)
(48,211)
Other comprehensive loss attributable to CLPS Incorporation’s shareholders
(355,308)
(3,440,346)
(1,780,331)
Comprehensive (loss) income attributable to CLPS Incorporation's
shareholders
(2,685,273)
(3,247,817)
2,675,097
Comprehensive income (loss) attributable to noncontrolling interests
482,577
(119,125)
84,272
Comprehensive (loss) income
(2,202,696)
(3,366,942)
2,759,369
Basic (losses) earnings per common share
16
(0.09)
0.01
0.21
Weighted average number of share outstanding – basic
25,213,012
23,153,976
20,924,683
Diluted (losses) earnings per common share
16
(0.09)
0.01
0.21
Weighted average number of share outstanding – diluted
25,213,012
23,153,976
21,057,063
The accompanying notes are an integral part of
these consolidated financial statements.
F-7
CLPS INCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
(Amounts in U.S. dollars (“$”), except
for number of shares)
Retained
Accumulated
Additional
Earnings
Other
Common Share
Paid-in
Statutory (Accumulated Comprehensive Noncontrolling
Notes
Shares
Amount
Capital
Surplus
Deficits)
Income (Loss)
Interests
Total
Balance at June 30,
2021
20,293,552
2,029 48,516,695 4,214,075
2,726,165
1,230,083
1,041,648 57,730,695
Net income for the
year
-
-
-
-
4,455,428
-
132,483 4,587,911
Appropriation of
statutory reserve
-
-
-
857,801
(857,801)
-
-
-
Foreign currency
translation loss
-
-
-
-
-
(1,780,331)
(48,211) (1,828,542)
Stock-based
compensation
18
-
- 7,184,862
-
-
-
- 7,184,862
Surrender of shares
(220,823)
(22)
22
-
-
-
-
-
Exercise of share
options and vesting
of restricted shares
18
2,372,093
237
3,630
-
-
-
-
3,867
Noncontrolling
interests through an
acquisition
3
-
-
-
-
-
-
121,807
121,807
Balance at June 30,
2022
22,444,822
2,244 55,705,209 5,071,876
6,323,792
(550,248)
1,247,727 67,800,600
Cumulative effect of
adoption of ASU
2016-13
-
-
-
-
(26,664)
-
-
(26,664)
Net income for the
year
-
-
-
-
192,529
-
(26,964)
165,565
Appropriation of
statutory reserve
-
-
-
284,952
(284,952)
-
-
-
Foreign currency
translation loss
-
-
-
-
-
(3,440,346)
(92,161) (3,532,507)
Disposal of a
subsidiary
-
-
-
-
-
-
6,283
6,283
Stock-based
compensation
18
-
- 2,478,295
-
-
-
- 2,478,295
Exercise of share
options and vesting
of restricted shares
18
1,205,300
121
(121)
-
-
-
-
-
Dividends paid
to noncontrolling
interests
-
-
-
-
-
-
(207,087)
(207,087)
Dividends paid to
shareholders
-
-
-
-
(1,175,684)
-
- (1,175,684)
Balance at June 30,
2023
23,650,122
2,365 58,183,383 5,356,828
5,029,021
(3,990,594)
927,798 65,508,801
The accompanying notes are an integral part of
these consolidated financial statements.
F-8
CLPS INCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
Retained
Accumulated
Additional
Earnings
Other
Common Share
Paid-in
Statutory (Accumulated Comprehensive Noncontrolling
Notes
Shares
Amount
Capital
Surplus
Deficits)
Income (Loss)
Interests
Total
Net loss for the year
-
-
-
-
(2,329,965)
-
482,655 (1,847,310)
Appropriation of
statutory reserve
-
-
-
196,276
(196,276)
-
-
-
Foreign currency
translation loss
-
-
-
-
-
(355,308)
(78)
(355,386)
Stock-based
compensation
18
-
- 3,168,016
-
-
-
- 3,168,016
Exercise of share
options and vesting
of restricted shares
18
1,989,934
199
(199)
-
-
-
-
-
Dividends paid to
shareholders
-
-
-
-
(2,554,508)
-
- (2,554,508)
Balance at June 30,
2024
25,640,056
2,564 61,351,200 5,553,104
(51,728)
(4,345,902)
1,410,375 63,919,613
The accompanying notes are an integral part of
these consolidated financial statements.
F-9
CLPS
INCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in U.S. dollars (“$”), except
for number of shares)
For the years ended June 30,
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income
(1,847,310)
165,565
4,587,911
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Share-based compensation
3,168,016
2,478,295
7,184,862
Depreciation and amortization
1,252,493
1,219,812
912,248
Deferred tax (benefits)/expenses
(717,679)
264,027
245,830
Lease expense to reduce operating lease right-of -use assets
1,487,063
1,070,385
-
Loss on disposal of a long-term investment
-
-
(138,479)
Share of (income)/loss in equity investees, net of tax
(156,780)
(70,263)
50,297
Loss on disposal of subsidiaries
-
38,674
-
Provision for/(reversal of) credit losses
589,529
(10,525)
(178,010)
Loss from disposal of property and equipment
9,720
-
19,188
Impairment of long-term investments
-
85,326
102,155
Impairment of goodwill
-
2,382,538
-
Others
-
(258,262)
-
Changes in assets and liabilities:
Accounts receivable
7,208,359
454,071
(12,317,416)
Prepayment, deposits and other assets
(308,440)
3,457,373
(123,268)
Amounts due from related parties
(26,274)
27,836
222,553
Accounts payable
212,771
346,438
(215,853)
Accrued expenses and other current liabilities
(189,912)
3,850
106,994
Contract liabilities
(226,575)
331,330
260,228
Tax payables
(303,260)
148,309
640,057
Amounts due to related parties
(19,445)
(291,087)
(115,260)
Salaries and benefits payable
(1,118,578)
(769,939)
174,100
Operating lease liabilities
(1,181,396)
(1,101,526)
-
Unrecognized tax benefit
1,092,932
(266,276)
1,782,752
Net cash provided by operating activities
8,925,234
9,705,951
3,200,889
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment
(2,117,282)
(519,282)
(20,750,110)
Proceeds from disposal of property and equipment
8,521
158,365
552
Acquisition of intangible assets
-
-
(9,076)
Payments for business acquisitions, net of cash acquired
from acquisitions
(2,358,172)
-
-
Acquisition of long-term investments
-
-
(409,625)
Disposition of long-term investments
-
111,066
786,427
Disposition of subsidiaries
-
13,806
-
Maturities of short-term investments
1,119,635
14,130,000
-
Purchases of short-term investments
(3,219,635)
(14,130,000)
-
Maturities of short-term investments, net
-
-
4,159,309
Repayments from related parties
829,847
204,211
15,491
Loans provided to related parties
(6,513,930)
(274,212)
(83,651)
Net cash used in investing activities
(12,251,016)
(306,046)
(16,290,683)
The accompanying notes are an integral part of
these consolidated financial statements.
F-10
CLPS
INCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
For the years ended June 30,
2024
2023
2022
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loans
44,508,794
23,388,911
21,955,625
Repayments of short-term bank loans
(31,761,143)
(26,325,471)
(14,484,851)
Proceeds from exercise of options
-
-
3,867
Dividends paid to shareholders
(2,554,508)
(1,175,684)
-
Dividends paid to noncontrolling interests
-
(207,087)
-
Net cash provided by (used in) financing activities
10,193,143
(4,319,331)
7,474,641
Effect of exchange rate changes on cash
(28,482)
(1,175,928)
(727,242)
Net increase (decrease) in cash
6,838,879
3,904,646
(6,342,395)
Cash and cash equivalents and restricted cash at the beginning of the year
22,301,633
18,396,987
24,739,382
Cash, cash equivalents and restricted cash at the end of the year
29,140,512
22,301,633
18,396,987
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income tax paid
857,515
1,619,792
676,179
Interest paid
407,574
365,893
342,144
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
29,116,431
22,214,029
18,396,987
Restricted cash
24,081
87,604
-
Total cash, cash equivalents and restricted cash shown in the statements of cash flows
29,140,512
22,301,633
18,396,987
The accompanying notes are an integral part of
these consolidated financial statements.
F-11
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
CLPS Incorporation (“CLPS” or
the “Company”), is a company that was established under the laws of the Cayman Islands on May 11, 2017, as a holding
company. The Company, through its subsidiaries, designs, builds, and delivers IT services, solutions, product services and academic
education service. The
Company customizes its services to specific industries with customer service teams typically based on-site at
the customer locations. The Company’s
solutions enable its clients to meet the changing demands in an increasingly global,
internet-driven, and competitive marketplace. Mr. Xiao Feng Yang, the
Company’s Chairman of the Board, together with Mr.
Raymond Ming Hui Lin, the Company’s Chief Executive Officer (“CEO”) are the controlling
shareholders of the
Company (the “controlling shareholder”). On June 8, 2018, the Company completed its initial public offering
(“IPO”) on the Nasdaq
Capital Market.
Details of the significant subsidiaries of the
Company are set out below:
Name of Entity
Date of Incorporation/
Acquisition
Place of
Incorporation
Percentage of
Equity
Ownership
Principal
Activities
Qiner Co., Limited (“Qiner”)
Incorporated on
April 21, 2017
Hong Kong, China
100%
Holding Company
Qinheng Co., Limited (“Qinheng”)
Incorporated on
June 9, 2017
Hong Kong, China
100%
Holding Company
Shanghai Qincheng Information Technology Co.,
Ltd. (“CLPS QC” or “WOFE”)
Incorporated on
August 4, 2017
Shanghai, China
100%
Holding Company
Shanghai Chenqin Information Technology Services
Co., Ltd.
Incorporated on
May 31, 2021
Shanghai, China
100%
Holding Company
CLPS Shanghai Co., Ltd. (“CLPS Shanghai”,
formerly ChinaLink
Professional Service Co., Ltd.)
Incorporated on
August 30, 2005
Shanghai, China
100%
Software development
CLPS Dalian Co., Ltd. (“CLPS Dalian”)
Incorporated on
May 25, 2011
Dalian, China
100%
Software development
CLPS Beijing Hengtong Co., Ltd. (“CLPS Beijing”)
Incorporated on
March 30, 2015
Beijing, China
100%
Software development
CLPS Technology (Singapore) Pte. Ltd. (“CLPS
SG”)
Incorporated on
August 18, 2015
Singapore
100%
Software development
Ridik Technology (Australia) Pty Ltd. (“Ridik AU”)
Incorporated on
November 10, 2015
Australia
100%
Software development
CLPS Technology (Hong Kong) Co., Limited
(“CLPS Hong Kong”)
Incorporated on
January 7, 2016
Hong Kong, China
100%
Software development
JAJI (Shanghai) Co., Ltd (“JAJI China”, formerly,
Judge (Shanghai) Co., Ltd.)
Acquired on
November 9, 2016
Shanghai, China
60%
Software development
CLPS Shenzhen Co., Ltd. (“CLPS Shenzhen”)
Incorporated on
April 7, 2017
Shenzhen, China
100%
Software development
CLPS Guangzhou Co., Ltd. (“CLPS Guangzhou”)
Incorporated on
September 27, 2017
Guangzhou, China
100%
Software development
F-12
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS - continued
Name of Entity
Date of Incorporation/
Acquisition
Place of
Incorporation
Percentage of
Equity
Ownership
Principal
Activities
CLPS Hangzhou Co. Ltd.
(“CLPS Hangzhou”)
Incorporated on
July 31, 2019
Hangzhou, China
100%
Software development
Ridik Pte. Ltd.
(“Ridik Pte.”)
Acquired on
September 26, 2019
Singapore
100%
Software development
Ridik Software Solutions Pte. Ltd. (“Ridik Software
Pte.”)
Acquired on
September 26, 2019
Singapore
100%
Software development
Qinson Credit Card Services Limited (“Qinson”)
Incorporated on
December 31, 2019
Hong Kong, China
100%
Software development
CLPS Technology (California) Inc. (“CLPS
California”)
Incorporated on January
2, 2020
California, the United
States of America
100%
Software development
Hainan Qincheng Software Technology Co., Ltd.
(“Hainan Qincheng”)
Incorporated
On January 20, 2021
Hainan, China
100%
Software development
CLPS Xi’an Co., Ltd.
Incorporated
On April 15, 2021
Xi’an, China
100%
Software development
College of Allied educators Pte. Ltd. (“CAE”)
Acquired on
January 3, 2024
Singapore
100%
Academic education
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying consolidated financial statements
have been prepared in accordance with the United States generally accepted accounting principles
(“U.S. GAAP”).
The accompanying consolidated financial statements
include the financial statements of CLPS and its subsidiaries. All inter-company balances and
transactions have been eliminated upon consolidation.
Results of subsidiaries and businesses acquired from third parties are consolidated from the date on
which control is transferred to the
Company.
F-13
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Use of estimates and assumptions
In preparing the consolidated financial statements in conformity with
U.S. GAAP, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the
reporting period. These estimates are based on information as of the date of the consolidated financial
statements. Significant estimates
required to be made by management include, but are not limited to, allowance for expected credit losses, useful lives of
property and
equipment and intangible assets, goodwill impairment, impairment of long-lived assets and long-term investments, purchase price allocation
and fair value of noncontrolling interests for business combinations and asset acquisition, provision for accrued expenses and other current
liabilities,
valuation allowance of deferred tax assets, provision for uncertain tax positions, incremental borrowing rates for operating
lease liabilities, fair value
measurements of equity investments without readily determinable fair values, fair value of warrants and
fair value of and estimated forfeitures for share-
based compensation. Actual results could differ from those estimates.
Short-term investments
Short-term investments include time deposits
with maturities of less than one year and investments in wealth management products, where certain deposits
with variable interest rates
or where principal amounts are not guaranteed, are placed with certain financial institutions. The Company accounts for short-
term investments
in debt in accordance with ASC topic 320, Investments—Debt Securities (“ASC 320”). The Group classifies the
short-term investments in
debt as “held-to-maturity”, “trading” or “available-for-sale”, whose classification
determines the respective accounting methods stipulated by ASC 320.
Dividend and interest income, including amortization of the premium
and discount arising at acquisition, for all categories of investments in securities, are
included in earnings. Any realized gains or
losses on the sale of the short-term investments, are determined on a specific identification method, and such
gains and losses are reflected
in earnings during the period in which gains or losses are realized. The securities that the Group has the positive intent and the
ability
to hold to maturity are classified as held-to-maturity securities and stated at amortized cost.
Cash and cash equivalents
Cash and cash equivalents primarily consist of
cash and bank deposits, which are unrestricted as to withdrawal and use. The Company considers all highly
liquid investment instruments
with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains
most of its
bank accounts in mainland China. Deposits in the licensed banks in mainland China are protected by Deposit Insurance System (“DIS”)
managed
by the People’s Bank of China (“PBOC”) up to a limit of RMB500,000.
F-14
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –
continued
Accounts receivable and allowance for credit losses
The Company maintains an allowance for credit
losses and records the allowance for credit losses as an offset to accounts receivable and contract assets and
the estimated credit losses
charged to the allowance is classified as “General and administrative expenses” in the consolidated statements of comprehensive
(loss) /income. The Company assesses collectability by reviewing accounts receivable and contract assets on a collective basis where similar
characteristics
exist, primarily based on similar business line, service or product offerings and on an individual basis when the Company
identifies specific customers with
known disputes or collectability issues. In determining the amount of the allowance for credit losses,
the Company considers historical collectability based on
past due status, the age of the balances, credit quality of the Company’s
customers based on ongoing credit evaluations, current economic conditions,
reasonable and supportable forecasts of future economic conditions,
and other factors that may affect the Company’s ability to collect from customers.
Delinquent account balances are written-off after
management has determined that the likelihood of collection is not probable.
Long-term investments
The Company’s long-term investments consist
of equity-method investments and equity investments without readily determinable fair values.
Investments in entities in which the Company can
exercise significant influence but does not own a majority equity interest or control are accounted for using
the equity method of accounting
in accordance with ASC Topic 323, Investments-Equity Method and Joint Ventures (“ASC 323”). The share of earnings or
losses of the investee are recognized in the consolidated statements of comprehensive(loss)/ income. Equity method adjustments include
the Company’s
proportionate share of investee income or loss, adjustments to recognize certain differences between the Company’s
carrying value and its equity in net assets
of the investee at the date of investment, impairments, and other adjustments required by
the equity method. The Company assesses its equity investment for
other-than-temporary impairment by considering factors as well as all
relevant and available information including, but not limited to, current economic and
market conditions, the operating performance of
the investees including current earnings trends, the general market conditions in the investee’s industry or
geographic area, factors
related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, and cash burn rate
and other
company-specific information. Any gain or loss from the disposition of the equity method investments is included in the consolidated
statements of
comprehensive (loss)/ income equal to difference between the proceeds the Company receives and the carrying amounts of the
investment disposed.
For equity investments without readily determinable
fair values, the Company elects to use the measurement alternative in accordance with ASC Topic 321,
Investments-Equity Securities
(“ASC 321”) to measure such investments at cost minus impairment adjusted by observable price changes in orderly
transactions
for the identical or a similar investment of the same issuer as of the date that the observable transaction occurred. These investments
are
measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse
effect. An impairment
loss is recognized in the consolidated statements of comprehensive (loss)/ income equal to the amount by which the
carrying value exceeds the fair value of
the investment. For the years ended June 30, 2024, 2023 and 2022, no such investment was remeasured
and accordingly no unrealized gains (losses) was
recognized.
Business combination
The Company accounts for all business combinations
under the purchase method of accounting in accordance with ASC Topic 805, Business Combinations
(“ASC 805”). The purchase
method of accounting requires that the consideration transferred to be allocated to net assets including separately identifiable
assets
and liabilities the Company acquired, based on their estimated fair value. The consideration transferred in an acquisition is measured
as the aggregate
of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as
well as the contingent considerations and all
contractual contingencies as of the acquisition date. The costs directly attributable to
the acquisition are expensed as incurred. Identifiable assets, liabilities
and contingent liabilities acquired or assumed are measured
separately at their fair value as of the acquisition date, irrespective of the extent of any
noncontrolling interests. The Company recognizes
and measures the acquired contract assets and contract liabilities consistent with how they were
recognized and measured in the acquiree’s
financial statements. The excess of (i) the total of the cost of the acquisition, fair value of the noncontrolling
interests and acquisition
date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the
acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the acquiree,
the difference is recognized
directly in the consolidated statements of comprehensive (loss)/ income.
F-15
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Noncontrolling interests
The noncontrolling interests are presented in
the consolidated balance sheets, separately from equity attributable to the shareholders of the Company.
Noncontrolling interests in the
results of the Company are presented on the consolidated statements of comprehensive (loss)/ income as an allocation of the
total income
or loss for the year between noncontrolling interest holders and the shareholders of the Company.
Property and equipment, net
Property and equipment, net, are stated at cost
less accumulated depreciation and impairment, if any. The straight-line method is used to compute
depreciation over the estimated useful
lives of the assets, as follows:
Useful life
Leasehold improvements
The shorter of remaining lease terms or the estimated useful
lives
Transportation equipment
5-10 years
Equipment and office furniture
1-5 years
Office buildings
31 or 50 years
Office building related facility, machinery and equipment
1-5 years
Expenditures for maintenance and repairs, which
do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for
major renewals and betterments
which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets
retired
or sold are removed from the respective accounts, and any gain or loss is charged to the consolidated statements of comprehensive (loss)/
income.
Direct costs that are related to the construction
of property and equipment and incurred in connection with bringing the assets to their intended use are
capitalized as construction in
progress. Construction in progress is transferred to specific property and equipment, and the depreciation of these assets
commences when
the assets are ready for their intended use.
Intangible assets, net
Intangible assets, net, are carried at cost less
accumulated amortization and any recorded impairment. Intangible assets acquired through business
combinations are recognized as assets
separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion, and are measured
at fair
value upon acquisition.
Amortization is computed using the straight-line
method over the following estimated useful lives as it reflects the estimated pattern in which the economic
benefits of the intangible
assets are to be consumed:
Useful life
Customer relationship
10 years
Client lists
2 years
Software
3 – 10 years
License
20 years
Collaboration agreement
4 years
The Company does not have any indefinite-lived
intangibles other than goodwill.
F-16
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Goodwill
Goodwill represents the excess of the consideration
over the fair value of the net assets acquired at the date of acquisition. Goodwill is allocated to applicable
reporting units. Upon disposition
of a business entity, goodwill is allocated to the disposed entity based on the relative fair value of that entity compared to
the fair
value of the reporting unit in which it was included. Goodwill is not amortized but rather tested for impairment at least annually at
the reporting unit
level by applying a fair-value based test in accordance with accounting and disclosure requirements for goodwill. This
test is performed by management
annually or more frequently if the Company believes impairment indicators are present. The Company has
the option to assess qualitative factors first to
determine whether it is necessary to perform the two-step test in accordance with ASC
350-20, Intangibles - Goodwill and Other. If the Company believes,
as a result of the qualitative assessment, that it is more-likely-than-not
that the fair value of the reporting unit is less than its carrying amount, the quantitative
impairment test is required. Otherwise, no
further testing is required. In the qualitative assessment, the Company considers primary factors such as industry
and market considerations,
overall financial performance of the reporting unit, and other specific information related to the operations.
In performing quantitative impairment test, the
Company compares the carrying amount of the reporting unit to the fair value of the reporting unit based on
estimated fair value using
a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value of
the
reporting unit, goodwill is not impaired. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, an
impairment loss shall be
recognized in an amount equal to that excess.
Impairment loss of nil, $2,382,538, nil was recognized
for the years ended June 30, 2024, 2023 and 2022, respectively.
Impairment of long-lived assets
The Company reviews its long-lived assets, other
than goodwill, including property and equipment and intangible assets with definite lives for impairment
whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be recoverable in accordance with ASC Topic 360,
Property,
Plant and Equipment. When these events occur, the Company assesses recoverability by comparing the carrying values of the long-lived
assets to
the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If
the sum of the expected
undiscounted cash flows is less than the carrying amounts of the assets, the Company would recognize an impairment
loss based on the excess of the carrying
value over the fair value of the assets and record the impairment in earnings. The adjusted carrying
amount of the asset becomes the new cost basis and
depreciated over the asset’s remaining useful live. Long-lived assets are grouped
with other assets and liabilities at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other
assets and liabilities for the purpose of the impairment testing.
No impairment losses were provided for the years
ended June 30, 2024, 2023 and 2022.
F-17
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Revenue recognition
The Company accounts for revenue recognition in
accordance with ASC Topic 606, Revenue from contracts with Customers (“ASC 606”). Revenue is
recognized when control
of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects
to
be entitled to in exchange for those services.
IT consulting services
IT consulting services are time-and-expense basis
contracts. The series of IT consulting services are substantially the same from day to day, and each day of
the service is considered
to be distinct and separately identifiable as it benefits the customer daily. Further, the uncertainty related to the service consideration
is resolved on a daily basis as the Company satisfies its obligation to perform IT service daily with enforceable right to payment for
performance completed
to date. Thus, revenue is recognized as service is performed and the customer simultaneously receives and consumes
the benefits from the service daily.
Payment terms and conditions vary by customer and are based on the billing schedule established in
our contracts with customers, but the Company generally
provides credit terms to customers ranging from one to three months. Therefore,
the Company has determined that its contracts do not include a significant
financing component.
Customized IT solution service
Customized IT solution contracts require the Company
to perform services for systems design, planning and integrating based on customers’ specific needs
which requires significant production
and customization. The required customization work period is generally less than one year. Upon delivery of the
services, customer acceptance
is generally required. In the same contract, the Company is generally required to provide post-contract customer support
(“PCS’)
for a period from three months to one year (“PCS period”) after the customized application is delivered. The type of service
for PCS is stand-ready
service on when-and-if-available basis.
There are two performance obligations identified
in the customized IT solution contract: the delivery of customized IT solution service and the completion of
the PCS. The transaction
price is allocated between the two performance obligations based on the relative standalone selling price, estimated using the cost
plus
method.
The Company recognizes revenue for the delivery
of customized IT solution service at a point in time when the system is implemented and accepted by the
customer. Where the Company has
enforceable right to payment for performance completed to date, revenue is recognized over time, using the output
method. Revenue for
PCS is recognized ratably over time as the customer simultaneously receive and consume the benefits throughout the PCS period.
Differences between the timing of billings and
the recognition of revenues are recorded as contract assets which is included in the prepayments, deposits and
other assets, net, or contract
liabilities on the consolidated balance sheets. Contract assets are classified as current assets and the full balance is reclassified
to
accounts receivables when the right to payment becomes unconditional. There is no significant financing component.
Costs incurred in advance of revenue recognition
arising from direct and incremental staff costs in respect of services provided under the fixed fee contracts
according to the customer’s
requirements prior to the delivery of services are recorded as deferred contract costs which is included in the prepayments,
deposits
and other assets, net on the consolidated balance sheets. Such deferred contract costs are recognized upon the recognition of the
related revenues.
F-18
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Revenue recognition (continued)
Academic education service
The Company engages in providing programs, short
courses, and workshops to train and help individuals and professionals in counselling, psychology, and
allied health and science.
The Company’s academic education service
revenue from the provision of formal educational services is in consideration of fixed amounts of tuition. The
typical service period
for academic education revenue ranges from 6 to 15 months.
Tuition fees from the provision of formal education
services received from students are generally paid in advance prior to the beginning of each course, and
are initially recorded as contract
liabilities, which is reflected as a current liability as such amounts represent revenue that the Company expects to recognize
within
one year. Tuition fees from the provision of formal education services are recognized proportionately over the relevant period of the
respective
program.
Other contracts
Other contracts primarily comprise of the sales
of headhunting services, consulting, administrative services and software. Revenue from headhunting services
is recognized at a point
in time when control is transferred to the customers, which generally occurs when the goods or services are accepted by customers.
Revenue
from consulting and administrative services is recognized over time as the customer simultaneously receives and consumes the benefits
from the
service as the Company performs.
The balances of contract assets were $690,554
and $691,025 as of June 30, 2024 and 2023, respectively, which were included in prepayments, deposits and
other assets, net on the consolidated
balance sheets. The decrease in contract assets is mainly due to the difference between the timing of billings and the
recognition of
customized IT solution revenues.
The balances of contract liabilities were $1,139,001
and $918,470 as of June 30, 2024 and 2023, respectively. The balance related to unsatisfied performance
obligations under IT consulting
and solutions service and academic education service is expected to be recognized as revenues over the remaining contract
period. The
increase in contract liabilities is mainly due to the acquisition of CAE. During the year ended June 30, 2024, $890,099 was recognized
in revenue
from the contract liability balance at the beginning of the period.
The Company does not disclose the value of unsatisfied
performance obligations for (i) contracts with an original expected length of one year or less and (ii)
contracts for which the Company
recognizes revenue at the amount to which it has the right to invoice for services performed.
Revenue includes reimbursements of travel and
out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenues.
The Company is subject to value added tax (the
“VAT”) that is imposed on and concurrent with the revenues earned for services provided in mainland China.
The Company’s
applicable value added tax rate is 6%. VAT are recorded as reduction of revenues when incurred.
The Company’s disaggregated revenue disclosures are presented
in Note 21.
F-19
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Cost of revenues
Cost of revenues of IT consulting services and customized IT solution
service mainly consisted of compensation expenses for the Company’s IT
professionals, travel expenses and material costs.
Cost of revenue of academic education service
consists primarily of staff costs, education expenses and others.
Research and development expenses
Research and development expenses are incurred
in the development of new software modules and products in conjunction with anticipated customer
projects. Technological feasibility
for the Company’s software products is reached before the products are released for sale. To date, expenditures incurred
after technological feasibility was established and prior to completion of software development have not been material, and accordingly,
the Company has
expensed all costs when incurred.
Government subsidies
Government subsidies mainly represent amounts
granted by local government authorities as an incentive for companies to promote development of the local
technology industry. The Company
also receives government subsidies related to government sponsored projects, and records such government subsidies as a
liability when
it is received. The Company recognizes the government subsidies in the consolidated statements of comprehensive (loss)/ income when there
is reasonable assurance that the Company will receive the government grant and comply with the conditions attached to the grant to be
received.
Leases
The Company determines whether an arrangement
is or contains a lease at inception.
The Company has elected
the practical expedient for the short-term lease exemption for contracts with lease terms
of 12 months or less.
For operating leases, the Company records a lease
liability and corresponding right-of-use (“ROU”) asset at lease commencement. Lease terms are based on
the non-cancellable
term of the lease and may contain options to extend the lease when it is reasonably certain that the Company will exercise the option.
Lease liabilities represent the present value of the lease payments not yet paid, discounted using the discount rate for the lease at
lease commencement.
The Company estimates its incremental borrowing
rate for its leases at the commencement date to determine the present value of future lease payments when
the implicit rate is not readily
determinable in the lease. In estimating its incremental borrowing rate, the Company considers its credit rating and publicly
available
data of borrowing rates for loans of similar amount, currency and term as the lease.
Operating lease expense is recognized as a single
cost on a straight-line basis over the lease term.
F-20
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Employee defined contribution plan
Full time employees of the Company in mainland
China participate in a government mandated multi-employer defined contribution plan pursuant to which
certain pension benefits, medical
care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor
regulations require
that the Company make contributions to the government for these benefits based on a certain percentage of the employee’s salaries.
The
Company has no legal obligation for the benefits beyond the contributions. The total amount is expensed as incurred. The expenses
related to these plans
were $15,861,290, $18,025,748 and $16,771,118 for the years ended June 30, 2024, 2023 and 2022, respectively.
Income taxes
The Company accounts for current income taxes
in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when
temporary differences exist between
the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax
assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period including the
enactment date. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized,
when it is more-likely-than-not that
some portion, or all, of the deferred tax assets will not be realized.
The Company accounts for uncertainties in income taxes in accordance
with ASC Topic 740, Income Taxes (“ASC 740”). An uncertain tax position is
recognized as a benefit only if it is “more
likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest
amount of tax
benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not”
test, no tax
benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense
in the consolidated statements
of comprehensive (loss)/ income in the period incurred.
Warrants
Equity-classified warrants are initially measured
at the grant date fair value. Subsequent changes in fair value are not recognized as long as the contract
continues to be classified in
equity. The Company, with the assistance of an independent third-party valuation firm, used the Black-Scholes pricing model to
estimate
the fair value of warrants. The determination of estimated fair value of warrants on the grant date was mainly affected by the Company’s
stock price
as well as assumptions regarding a number of subjective variables. These variables include the Company’s expected stock
price volatility over the expected
term of the awards, a risk-free interest rate and any expected dividends.
F-21
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - continued
Share-based payment
The Company accounts for share-based payment in
accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). Share awards issued
to employees and directors,
including employee stock option plans (“ESOPs”) and restricted share units (“RSUs”) are measured at fair value
at the grant date.
The Company, with the assistance of an independent third-party valuation firm, determined the fair value of the share
options granted to employees. The
Company uses the binomial lattice model to estimate the fair value of ESOPs, and uses the closing stock
price at the grant date to measure the fair value of
RSUs. The Company recognizes compensation expenses, net of forfeitures, using the
accelerated method over the requisite service periods.
Forfeitures are estimated at the time of grant
and revised in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical
data to estimate pre-vesting
ESOPs and RSUs’ forfeitures and records share-based compensation expense only for those awards that are expected to vest.
A change in the terms or conditions of share-based
payment awards is accounted for as a modification of awards. The Company measures the incremental
compensation cost of a modification
as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its
terms are modified,
based on the share price and other pertinent factors at the modification date. For vested awards, the Company recognizes incremental
compensation
cost in the period the modification occurred. For unvested awards, the Company recognizes, over the remaining requisite service period,
the
sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification
date.
A cancellation of an award that is not accompanied
by the concurrent grant of (or offer to grant) a replacement award or other valuable consideration shall be
accounted for as a repurchase
for no consideration. Accordingly, the Company recognized previously unrecognized compensation cost at the cancellation
date and reversed
previously recognized share capital to additional paid-in capital.
Earnings per share
Basic earnings per share is computed using the
weighted average number of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average
number of common shares and potential common shares outstanding during the period, which may include RSUs,
options and warrants. The computation
of diluted earnings per share does not assume conversion, exercise, or contingent issuance of securities that would
have an anti-dilutive
effect (i.e. an increase in earnings per share amounts) on earnings per share.
F-22
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Foreign currency
The functional currency of the Company is US$.
The functional currencies of the Company’s subsidiaries are the local currency of the country in which the
subsidiary operates,
which is determined based on ASC Topic 830, Foreign Currency Matters (“ASC 830”).
Transactions denominated in foreign currencies
are re-measured into the functional currency at the exchange rates as set forth in the H.10 statistical release of
the U.S. Federal Reserve
Board prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are re-measured at the
exchange
rates prevailing at the balance sheet dates. Non-monetary items that are measured in terms of historical costs in foreign currency are
re-measured
using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidated
statements of comprehensive
(loss)/ income.
The Company’s financial statements are reported
using US$. The financial statements of the Company’s subsidiaries whose functional currencies are not
US$ are translated from the
functional currency to the reporting currency. Assets and liabilities are translated at the exchange rates at the balance sheet dates,
equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average
rate for the year.
Translation adjustments are reported as accumulated comprehensive income (loss) and are shown as a separate component
of other comprehensive income
(loss) in the consolidated statements of comprehensive(loss)/ income.
Fair value of financial instruments
The Company applies ASC Topic 820, Fair Value
Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for
measuring fair value
and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided for fair value measurements.
ASC 820 establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value as follows:
Level 1 — Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Includes other inputs that
are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs which
are supported by little or no market activity.
ASC 820 describes three main approaches to measuring
the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost
approach. The market approach uses prices
and other relevant information generated from market transactions involving identical or comparable assets or
liabilities. The income
approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the
value indicated
by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to
replace an asset.
Financial instruments of the Company primarily
consist of cash and cash equivalents, short-term investments, accounts receivable, other assets, note
receivables, amounts due from related
parties, equity investments without readily determinable fair values, equity method investments, accounts payable and
other current liabilities,
amounts due to related party, short-term bank loans and long-term bank loans. The carrying amounts of these financial instruments,
except
for equity investments without readily determinable fair values, equity method investments and long-term bank loans, approximate their
fair values
because of their generally short term maturities.
Equity method investments have no quoted
market prices and it is not practicable to estimate their fair value without incurring excessive costs. For equity
method
investments without readily determinable fair values, the Company elected to use the measurement alternative to measure those
investments in the
cases of an impairment charge is recognized, fair value of an investment is remeasured in an acquisition/a
disposal, and an orderly transaction for identical or
similar investments of the same issuer is identified. The non-recurring fair
value measurements to the carrying amount of an investment usually requires
management to estimate a price adjustment for the
different rights and obligations between a similar instrument of the same issuer with an observable price
change in an orderly
transaction and the investment held by the Company. The valuation methodologies involved require management to use the observable
transaction price at the transaction date and other unobservable inputs (level 3) such as volatility of comparable companies and
probability of exit events as it
relates to liquidation and redemption preferences.
F-23
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Fair value of financial instruments (continued)
As of June 30, 2024 and 2023, the Company had
no financial assets and liabilities measured and recorded at fair value on a non-recurring basis.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the
changes in equity of the Company during a period from transactions and other events and circumstances
excluding transactions resulting
from investments by owners and distributions to owners. Accumulated other comprehensive income (loss) of the Company
includes foreign
currency translation adjustments related to the Company’s subsidiaries whose functional currency is not US$.
Statements of cash flows
In accordance with ASC Topic 230, Statement
of Cash Flows (“ASC 230”), cash flows from the Company’s operations are formulated based upon the local
currencies.
As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes
in the
corresponding balances on the balance sheets.
Concentrations and risks
- Foreign currency risk
A majority of the transactions of the Company’s
mainland China subsidiaries are denominated in Renminbi (“RMB”) and a significant portion of the
Company and its subsidiaries’
assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In mainland China,
certain foreign
exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other
than
RMB by the Company in China must be processed through PBOC or other China foreign exchange regulatory bodies which require certain
supporting
documentation in order to affect the remittance.
The functional currency for the Company’s
mainland China subsidiaries is RMB, and the financial statements are presented in U.S. dollars. RMB depreciated
by 0.2%, 8.3%, and 3.7%
in fiscal years 2024, 2023 and 2022, respectively. It is difficult to predict how market forces or mainland China or U.S. government
policy
may impact the exchange rate between RMB and U.S. dollar in the future. The change in the value of RMB relative to U.S. dollars may affect
the
Company’s financial results reported in U.S. dollars without giving effect to any underlying changes in its business or results
of operations. Currently,
majority of the Company’s assets, liabilities, revenues and costs are denominated in RMB.
F-24
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Concentrations and risks (continued)
- Foreign currency risk (continued)
To the extent that the Company needs to convert
U.S. dollars into RMB for capital expenditures and working capital and other business purposes,
appreciation of RMB against U.S. dollar
would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if
the Company decides to convert
RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments or other
business purposes,
appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.
- Concentration of credit risk
Financial instruments that potentially subject
the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, account
receivables, contract
assets, other assets, note receivables, and amounts due from related parties. As of June 30, 2024 and 2023, the Company has
$29,140,512
and $22,301,633 in cash and cash equivalents and restricted cash, which is held by financial institutions in mainland China and international
financial institutions outside of mainland China. In the event of bankruptcy of one of these financial institutions, the Company may not
be able to claim its
cash and cash equivalents and restricted cash back in full. As of June 30, 2024, the Company and its subsidiaries
had $147,102,483, $10,815,654,
$3,479,656, etc., of cash and cash equivalents on deposit at financial institutions in mainland China,
Hong Kong, Singapore, etc. As of June 30, 2023, the
Company and its subsidiaries had $17,809,090, $2,832,122, $1,289,130, etc., of cash
and cash equivalents on deposit at financial institutions in mainland
China, Hong Kong, Singapore, etc. The Company continues to monitor
the financial strength of the financial institutions. There has been no recent history of
default in relation to these financial institutions.
-
Significant customers
The Company conducts credit evaluations on its
customers and generally does not require collateral or other security from such customers.
The top two customers and their affiliates accounted
for 16.7% and 10.1% of total revenues during the year ended June 30, 2024. The top two customers and
their affiliates accounted for 21.4%
and 9.4% of total revenues during the year ended June 30, 2023. The top two customers and their affiliates accounted for
20.6% and 12.2%
of total revenues during the year ended June 30, 2022. The top two customers accounted for 14.50% and 9.8% of the Company’s total
accounts receivable balance as of June 30, 2024. The top two customers accounted for 32.3% and 4.1% of the Company’s total accounts
receivable balance
as of June 30, 2023.
Risks and uncertainties
The significant operations of the Company are
located in mainland China. Accordingly, the Company’s business, financial condition, and results of
operations may be influenced
by political, economic, and legal environments in the mainland China, as well as by the general state of mainland China
economy. The Company’s
results may be adversely affected by changes in the political, regulatory and social conditions in mainland China. Although the
Company
has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its
organization
and structure disclosed in Note 1, it may not be indicative of future results.
Recent accounting pronouncements
In November 2023, the FASB issued ASU 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU No. 2023-
07”), to expand the annual
and interim disclosure requirements for reportable segments, including public entities with a single reportable segment, primarily
through
enhanced disclosures about significant segment expenses. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023,
and for
interim periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 is effective for the Company’s
annual reporting period
beginning July 1, 2024. The Company is currently evaluating the impact of adopting this standard.
In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures (“ASU
No. 2023-09”), to expand
the disclosures in an entity’s
income tax rate reconciliation table and income taxes paid both in U.S. and foreign jurisdictions. ASU No. 2023-09 is effective
for fiscal
years beginning after December15, 2024, with early adoption permitted. ASU 2023-09 is effective for the Company’s
annual reporting period
beginning July 1, 2025. The Company is currently evaluating the impact of adopting this standard.
F-25
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 3 – ACQUISITION AND DECONSOLIDATIONS
OF SUBSIDIARIES
Acquisition of MSCT
On May 18, 2021, a subsidiary of the Company,
Growth Ring Ltd. (“Growth Ring”) entered into a capital increase agreement with Minshang Creative
Technology Holdings Limited
(“MCT”) to purchase MCT’s 53.33% equity interest in MSCT Investment Holdings Limited ("MSCT"), at a total
cash
consideration of $205,711 (HK$1,600,000). After the transaction, Growth Ring owned 53.33% of MSCT and MCT owned the remaining 46.67%
equity
interests.
The acquisition of the 53.33% equity interest
in MSCT was completed on August 16, 2021. As MSCT does not possess all the elements that are necessary to
conduct normal operations as
a business and had not yet commenced operations, such acquisition is accounted for as an acquisition of using a cost
accumulation and
allocation model under which the cost of the acquisition is allocated to the assets acquired and liabilities assumed. The carrying amounts
of
the net identifiable assets of MSCT as of the date of acquisition were as follows:
Amounts
Net assets acquired:
Cash and cash equivalents
205,711
Intangible assets: Software
151,168
Other current liabilities
(5,390)
Deferred tax liabilities
(23,971)
Noncontrolling interests
(121,807)
Total consideration
205,711
The valuation used in the purchase price allocation
described above was determined by the Company with the assistance of independent third-party valuation
firm. The valuation report applied
generally accepted valuation methodology, the income approach. As the acquiree is a private company, the fair value
estimates of noncontrolling
interest is based on significant inputs considered by market participants which mainly include (a) discount rate, (b) projected
terminal value based on future cash flows, (c) equity multiples or enterprise value multiples of companies in the same industries
and (d) adjustment for lack
of control or lack of marketability.
F-26
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 3 – ACQUISITION AND DECONSOLIDATIONS
OF SUBSIDIARIES - continued
Acquisition of CAE
On December 20, 2023, CLPS SG entered into an
agreement with College of Allied Educators Pte. Ltd. (“CAE”) to purchase 100% of its equity interest, at a
total cash consideration
of $3,244,145 (SGD$4,280,000). CAE is a company incorporated in Singapore, mainly engaged in providing programs, short
courses, and workshops
to train and help individuals and professionals in counselling, psychology, and allied health and science. This acquisition created
resources
and business synergies by connecting highly skilled IT professionals with education platforms to collaborate, advance, and promote IT
talent
creation and development to support the Company’s long-term business expansion.
The acquisition was completed on January 3, 2024
and was accounted for as a business combination using the purchase method of accounting. The purchase
price allocation of the transaction
was determined by the Company with the assistance of an independent appraisal firm based on the estimated fair value of
the assets acquired
and liabilities assumed as of the acquisition date. The purchase price allocation to assets acquired and liabilities assumed as of the
date of
acquisition was as follows:
Amounts
Net assets acquired:
Cash and cash equivalents
1,469,832
Accounts receivable, net
15,094
Prepayments, deposits and other assets
146,410
Intangible assets:
License
909,573
Client lists
166,755
Collaboration agreement
98,537
Other current liabilities
(745,579)
Other non-current liabilities
(947)
Deferred tax liabilities
(199,727)
Goodwill
1,384,197
Total consideration
3,244,145
Identifiable intangible assets acquired include
license, client lists and collaboration agreement. Client lists and collaboration agreement were both valued
using an income approach
and determined to carry estimated remaining useful lives of two years and four years, respectively. License was valued using a
relief
from royalty method and determined to carry estimated remaining useful lives of twenty years (a Level 3 measurement). Significant assumptions
used
in the valuation of intangible assets are projected revenue growth rates, royalty rate, and discount rate. Goodwill recognized represents
the expected synergies
from integrating academic education with the company's business and is not tax deductible.
The actual results of operation after the acquisition
date and pro forma results of operations for the acquisitions have not been presented because the effects
were not material.
F-27
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 3 – ACQUISITION AND DECONSOLIDATIONS
OF SUBSIDIARIES - continued
Acquisition of Shell Infotech
On June 7, 2024, Ridik Pte. Ltd. entered into
an agreement with Shell Infotech Pte. Ltd. and Shell Infotech Consulting Sdn. Bhd. (collectively, “Shell
Infotech”) to purchase
100 % of its equity interest, at a total cash consideration of $887,836 (SGD$1,200,000) and $29,595 (SGD$40,000), respectively.
Shell
Infotech is a leading IT consulting and managed services provider headquartered in Singapore and was established in 2003. It offers a
wide range of IT
services, including software development, SAP solutions, enterprise applications, and managed services, with a focus
on the banking and insurance sectors in
Singapore and Malaysia. This acquisition expanded the Company’s client base and market share
in Southeast Asia, while strengthened its core IT
competencies and service offerings and solidified its commitment to global expansion.
The acquisition of the 100% equity interest in
Shell Infotech was completed on June 7, 2024 and was accounted for as a business combination using the
purchase method of accounting.
The purchase price allocation of the transaction was determined by the Company with the assistance of an independent
appraisal firm based
on the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date. Significant assumptions used in
the
valuation of intangible assets are projected revenue growth rates and discount rate. The purchase price allocation to assets acquired
and liabilities assumed as
of the date of acquisition was as follows:
Amounts
Net assets acquired:
Cash and cash equivalents
126,410
Accounts receivable, net
574,287
Prepayments, deposits and other assets – current
32,432
Property and equipment, net
39,964
Intangible assets: Customer
relationships
569,695
Other current liabilities
(453,961)
Other non-current liabilities
(1,255)
Deferred tax liabilities
(96,848)
Goodwill
126,707
Total consideration
917,431
Identifiable intangible assets acquired include
customer relationship. Customer relationship was valued using an income approach and determined to carry
estimated remaining useful lives
of ten years. The goodwill recognized represents the expected synergies with the company's existing business and is not tax
deductible.
The actual results of operation after the acquisition
date and pro forma results of operations for the acquisitions have not been presented because the effects
were not material.
F-28
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 4 – ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following:
As of June 30,
2024
2023
Trade accounts receivable
39,178,089
48,582,555
Less: allowance for credit losses
(398,880)
(67,088)
Accounts receivable, net
38,779,209
48,515,467
The movement of the allowance for credit losses is as follows:
For the year ended
2024
2023
Balance at beginning of the year
67,088
126,372
Adoption of ASU 2016-13
-
13,372
Provision for credit losses
338,878
11,238
Recovery of accounts receivable
(7,038)
(15,788)
Write off for accounts receivable
-
(67,599)
Foreign currency translation adjustments
(48)
(507)
Balance at end of the year
398,880
67,088
NOTE 5 – PREPAYMENTS, DEPOSITS AND OTHER ASSETS, NET
Prepayments, deposits and other assets, net consisted of the following:
As of June 30,
2024
2023
Prepaid expenses*
901,567
510,462
Contract assets
690,554
691,025
Advances and deposits to suppliers*
968,151
155,179
Deferred contract costs
726,691
114,400
Note receivables
1,376,357
280,223
Advances to employees
408,480
100,090
Prepaid VAT
59,647
74,329
Less: allowance for credit losses
(39,266)
(7,316)
Total
5,092,181
1,918,392
Less: non-current portion
(594,603)
(252,656)
Prepayments, deposits and other assets – current portion
4,497,578
1,665,736
*
Prepaid expenses, advances and deposits to suppliers primarily
consists of advances and deposits to suppliers for purchasing goods or services that have
not been received or provided.
F-29
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 5 – PREPAYMENTS, DEPOSITS AND OTHER ASSETS, NET - continued
The movement of the allowance for credit losses is as follows:
For the year ended
2024
2023
Balance at beginning of the year
7,316
-
Adoption of ASU 2016-13
-
13,292
Provision for other receivable and contract assets
31,900
-
Recovery of other receivable and contract assets
-
(5,976)
Foreign currency translation adjustment
50
-
Balance at end of the year
39,266
7,316
NOTE 6 – PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
As of June 30,
2024
2023
Office buildings
20,400,547
20,354,809
Equipment and office furniture
1,682,622
1,203,729
Office building related facility, machinery and equipment
182,932
182,503
Transportation equipment
710,782
37,421
Leasehold improvements
1,767,487
772,210
Total
24,744,370
22,550,672
Less: accumulated depreciation
(3,575,846)
(2,438,367)
Property and equipment, net
21,168,524
20,112,305
Depreciation expense was $1,036,767, $1,040,734,
and $709,836, for the years ended June 30, 2024, 2023 and 2022, respectively. No impairment losses
were recognized for the years ended
June 30, 2024, 2023 and 2022.
As of June 30, 2024, the office building with
carrying amount of $15,651,184 is mortgaged to secure financing credit facility of HKD 58,000,000 from Taipei
Fubon Bank.
F-30
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 7 – INTANGIBLE ASSETS, NET
As of June 30, 2024 and 2023, intangible assets,
net consisted of the following:
As of June 30, 2024
Gross
carrying value
Accumulated
amortization
Net carrying
value
Customer relationship
1,490,555
(442,862)
1,047,693
Client lists
162,338
(40,584)
121,754
License
885,478
(22,137)
863,341
Collaboration agreement
95,927
(11,991)
83,936
Software
216,873
(96,856)
120,017
Others
22,522
(4,891)
17,631
Total
2,873,693
(619,321)
2,254,372
As of June 30, 2023
Gross
carrying value
Accumulated
amortization
Net carrying
value
Customer relationship
924,351
(346,632)
577,719
Software
222,982
(74,526)
148,456
Total
1,147,333
(421,158)
726,175
The amortization expenses were $196,859, $179,078
and $202,412 for the years ended June 30, 2024, 2023 and 2022, respectively. Estimated future
amortization expenses are as follows:
Year ending June 30,
Amortization
expense
2025
329,929
2026
282,490
2027
236,059
2028
220,406
2029
208,415
No impairment losses were recognized for the years ended June 30, 2024,
2023 and 2022.
F-31
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 8 – GOODWILL
The Company had two reporting units, consisting of IT services and
Academic education services as of June 30, 2024.
The changes in the carrying amount of goodwill for each reporting unit
for the year ended June 30, 2024 were as follows:
IT services
Academic
education
services
Total
Balance as of July 1, 2023
-
-
-
Acquired (Note 3)
126,707
1,384,197
1,510,904
Foreign currency translation adjustment
(337)
(36,668)
(37,005)
Balance as of June 30, 2024
126,370
1,347,529
1,473,899
For the year ended June 30, 2024, the Company
performed a qualitative assessment of the goodwill for the reporting units based on the requirements of ASC
350-20. The Company assessed
the totality of events or circumstances, and determined that it is not more likely than not that the fair value of the reporting
units
was less than their carrying amount. Therefore, no impairment loss was recognized for the year ended June 30, 2024.
For the year ended June 30, 2023, the Company
bypassed the qualitative assessment and performed a quantitative assessment of the goodwill for the
reporting unit based on the requirements
of ASC 350-20. The Company performed a quantitative assessment by estimating the fair value of the reporting unit
based on market approach
using multiples of comparable companies and other relevant information generated from market transactions involving identical or
comparable
assets or liabilities. The fair value of the reporting unit is less than its carrying value and therefore, impairment loss of $2,382,538
was
recognized for the year ended June 30, 2023.
NOTE 9 – LEASE
The Company has operating leases as the lessee
for certain offices.
The Company’s lease agreements include lease
payments that are fixed, do not contain material residual value guarantees or variable lease payments. The
leases have remaining lease
terms of up to three years without option to extend the lease. The Company’s leases do not contain restrictions or covenants that
restrict the Company from incurring other financial obligations. The Company’s lease agreements may contain lease and non-lease
components. Non-lease
components primarily include payments for property management fee. Consideration for lease and non-lease components
are allocated on a relative
standalone selling price basis.
F-32
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 9 – LEASE - continued
Operating leases as Lessee
The operating lease cost was $1,514,162
and $1,070,385 for the year ended June 30, 2024 and 2023, respectively.
As of and for the year ended
June 30,
2024
2023
Other information
Cash paid for operating leases
1,181,396
1,101,526
ROU assets obtained in exchange for new operating lease liabilities
3,553,256
815,324
Weighted-average remaining lease term (in years):
Operating leases
2.25
1.21
Weighted-average discount rate:
Operating leases
5.10%
5.54%
For the year ended June 30, 2024, total
operating lease expenses of $578,756, $651,526, $259,930, $23,950 were recorded in cost of revenue, general and
administrative expenses,
selling expenses and research and development expenses, respectively.
For the year ended June 30, 2023, total operating
lease expenses of $783,669, $263,775, $55,082 were recorded in general and administrative expenses,
selling expenses and research and
development expenses, respectively.
Future minimum lease payments for operating
leases as of June 30, 2024, are as follows:
Operating
Leases
2025
1,709,211
2026
1,067,162
2027
442,176
Total minimum lease payments
3,218,549
Less: imputed interest
(218,378)
Total lease liability balance
3,000,171
Minimum payments related to leases not yet commenced as of June 30, 2024
264,637
F-33
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 10 – LONG-TERM INVESTMENTS
As of June 30,
2024
2023
Equity investments without readily determinable fair values
Beijing UniDev Software Co., Ltd. (“UniDev”)
232,414
232,924
Total equity investments without readily determinable fair values
232,414
232,924
Equity method investments
Fuson Group Limited (“Fuson”) and its subsidiaries (“Fuson Group”)
368,009
210,243
Shanghai Shier Information Technology Co., Ltd. (“Shier”)
13,384
13,431
Total equity method investments
381,393
223,674
613,807
456,598
Equity investments without readily determinable fair values
As of June 30, 2024 and 2023, the Company had
an equity interest of 15% in UniDev.
The Company recognized an impairment loss of nil,
$32,744 for Huaqin Robotics., and nil for the years ended June 30, 2024, 2023, and 2022, respectively,
in“Other expenses”
in the Consolidated Statements of Comprehensive (Loss)/Income.
There were no downward adjustments (including
impairment charges) or any upward adjustments recognized on equity investments without readily
determinable fair value during the years
presented.
Equity method investments
As of June 30, 2024 and 2023, the Company had
an equity interest of 35.02% and 35% in Fuson Group and Shier, respectively.
The Company accounts for the investments in Shier
and Fuson Group as equity method investments due to its significant influence over the entities.
No impairment loss was recorded for the year ended
June 30, 2024. An impairment loss of $52,582 of Shier for the years ended June 30, 2023, and an
impairment loss of $102,155 of Economic
Modeling Information Technology Co., Ltd. (“EMIT”) for the year ended June 30, 2022 was recognized in “Other
expenses”
in the Consolidated Statements of Comprehensive (Loss)/Income.
The carrying amount of the equity method investments
in excess of the Company’s proportionate interest was not material and recognized as equity method
goodwill.
Selected financial information of the equity method investees are not
presented as the effects were not material.
F-34
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 11 – BANK LOANS
Bank loans as of June 30, 2024 and 2023 amounted
to $23,232,856 and $10,554,617, respectively. Bank loans consisted of several bank loans denominated
in RMB and SGD.
As of June 30, 2024, the Company had total financing
credit facilities of $15,979,054 of which the used amount was $11,088,036. An office building with a
carry amount of $15,651,184 was mortgaged
to secure the credit facility of HKD58,000,000 with Taipei Fubon Bank.
The effective weighted average interest rates were 2.950%, 3.467% and 3.771% for the years ended June 30, 2024, 2023 and 2022, respectively.
One of the loan agreements contained certain financial
covenants. The Company was in compliance with all covenants as of June 30, 2024.
As of June 30, 2024, all loan principals will
be due within 1 year.
NOTE 12 – SALARIES AND BENEFITS PAYABLE
Full time employees of the Company located in
mainland China participate in a government-mandated defined contribution plan pursuant to which certain
pension benefits, medical care,
unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The Company
accrued for these benefits
based on certain percentages of the employees’ salaries. Salaries and benefits payable included $975,776 and $1,181,491 accrued
employer portion of social benefits payable to local governments as of June 30, 2024 and 2023, respectively.
NOTE 13 – RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party
has the ability, directly or indirectly, to control the other party or exercise significant influence over the other
party in making financial
and operational decisions. The related parties that had transactions or balances with the Company in 2024 and 2023 consisted of:
Related Party
Relationship with the Company
Xiao Feng Yang
Chairman of the Board
Raymond Ming Hui Lin
CEO of the Company
EMIT
Equity investee of the Company
Beijing Bright Technology Co., Ltd (“Beijing Bright”)
Noncontrolling interest shareholder of JAJI China
UniDev
Equity investee of the Company
Fuson Group
Equity investee of the Company
MCT
Noncontrolling interest shareholder of MSCT
F-35
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 13 – RELATED PARTY TRANSACTIONS - continued
(a) Related party balances
The balances due from and due to related parties were as follows:
As of June 30,
2024
2023
Due from related parties, current:
Fuson Group (a)
3,559,109
189,363
UniDev (c)
-
201,908
Total
3,559,109
391,271
Due from related parties, non-current:
Fuson Group (b)
2,374,298
-
Total
2,374,298
-
(a) The balance as of June 30, 2024 represents loans due from Fuson
Group with interest rates ranging from 2.90% to 5.35%, which
should be paid within
one year. The balance as of June 30, 2023 represents unreceived IT service fee from Fuson Group.
(b) The balance represents loans due from Fuson Group with interest rates ranging from 3.50% to 6.50%, which
should be paid within 42 months.
(c) The balance represents unreceived IT service fee from UniDev.
As of June 30,
2024
2023
Due to related parties:
Fuson Group
14,774
-
MCT
5,456
5,444
UniDev
-
19,445
Total
20,230
24,889
Due to related parties mainly represents the deposit
to Fuson Group and unpaid administrative fee to MCT and UniDev.
F-36
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 13 – RELATED PARTY TRANSACTIONS - continued
(b) Related party transactions
For the year ended,
2024
2023
2022
a) Consulting services provided to related parties
Fuson Group
87,172
57,418
-
UniDev
-
-
46,008
EMIT
-
158
6,016
87,172
57,576
52,024
b) Services provided by related parties
UniDev
165,676
269,966
34,995
Fuson Group
18,894
-
-
EMIT
-
221,584
157,762
Beijing Bright
-
99,208
142,487
184,570
590,758
335,244
c) Loans provided to related parties
Fuson Group
6,043,329
130,402
-
Beijing Bright
415,236
-
-
UniDev
55,365
143,810
-
EMIT
-
-
83,651
6,513,930
274,212
83,651
d) Repayment of loans from related parties
Beijing Bright
415,236
-
-
Fuson Group
194,897
-
-
UniDev
193,777
-
-
EMIT
-
204,211
15,491
803,910
204,211
15,491
e) Interest income received from related parties
Fuson Group
14,481
1,518
-
UniDev
8,549
6,342
-
Beijing Bright
2,907
-
-
EMIT
-
3,704
9,260
25,937
11,564
9,260
f) Rental income from related party
Fuson Group
59,016
10,718
3,587
g) Other revenue from related party
Fuson Group
61,244
-
-
F-37
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 14 – TAXES
(a) Corporate Income Taxes (“CIT”)
Cayman Islands
and BVI
Under the current laws
of the Cayman Islands and BVI, the Company and subsidiaries in BVI are not subject to tax on income or capital gains.
Hong Kong
Subsidiaries in Hong
Kong are subject to Hong Kong profits tax rate at a rate of 16.5%, and foreign-derived income is exempted from income tax.
Singapore
Subsidiaries in Singapore
are subject to Singapore corporate income tax at a rate of 17.0%, and foreign-derived income is exempted from income tax.
Mainland China
Under the Enterprise Income Tax (“EIT”)
Law of mainland China, enterprises are usually subject to a unified 25% enterprise income tax rate while
preferential tax rates, tax holidays
and tax exemption may be granted if qualified. EIT Law grants a preferential tax rate to High and New Technology
Enterprises (“HNTEs”).
An enterprise qualified as HNTE and awarded with the “HNTE” certificate may enjoy a reduced EIT rate of 15%. CLPS Shanghai,
the Company’s main operating subsidiary in mainland China, was recognized as qualified HNTEs since 2013. Its latest qualified periods
are for 2022 to 2024
and it enjoys a preferential tax rate of 15%. JAJI (Shanghai), one of the Company’s operating subsidiary in
mainland China, was also recognized as qualified
HNTEs since 2022. Its latest qualified periods are for 2022 to 2024 and it enjoys a preferential
tax rate of 15%.
A qualified enterprise in encouraged industries
registered in the Hainan Free Trade Port and engaged in substantive operations may enjoy a reduced EIT rate
of 15%. CLPS Hainan, a Company’s
subsidiary in mainland China, was recognized as a qualified enterprise engaged in encouraged industries registered in
the Hainan Free
Trade Port and engaged in substantive operations. It enjoys the reduced EIT rate of 15%.
F-38
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 14 – TAXES - continued
(a) Corporate Income Taxes (“CIT”) (continued)
(Loss) income before income taxes
For the year ended June 30,
2024
2023
2022
Mainland China
2,878,314
4,350,067
17,366,634
Non- mainland China
(4,721,679)
(3,580,421)
(9,682,434)
(1,843,365)
769,646
7,684,200
The following table reconciles the statutory rate to the Company’s
effective tax rate:
For the year ended June 30,
2024
2023
2022
Mainland China statutory income tax rate
25.0%
25.0%
25.0%
Effect of income tax rate difference in other jurisdictions
(56.5)%
115.5%
25.8%
Effect of tax rate changes on deferred taxes
(8.9)%
7.9%
(0.3)%
Effect of mainland China preferential tax rate and tax relief
(27.0)%
(28.5)%
(10.1)%
Tax exempt income
1.6%
(5.1)%
-
Research and development credits
96.6%
(230.4)%
(18.0)%
Business insurance
(5.7)%
13.7%
1.5%
Late payment interest
(20.0)%
42.5%
0.5%
Withholding tax
(4.7)%
9.1%
-
Depreciation and amortization
(2.2)%
7.5%
0.4%
Investment gain/loss
(2.3)%
43.2%
(1.5)%
Statutory income/expense
3.9%
(6.1)%
(1.4)%
Intercompany transfers
(10.9)%
(24.7)%
10.8%
Change in valuation allowances
3.6%
43.3%
6.6%
Goodwill impairment
-
69.0%
-
Others
(1.2)%
5.8%
0.5%
Effective tax rate
(8.7)%
87.7%
39.8%
F-39
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 14 – TAXES - continued
(a) Corporate Income Taxes (“CIT”) (continued)
The provision (benefit) for income tax consists of the following:
For the year ended June 30,
2024
2023
2022
Current income tax
878,404
410,317
2,800,162
Deferred income tax
(717,679)
264,027
245,830
Total provision for income tax expenses
160,725
674,344
3,045,992
As of June 30, 2024,
the Company had net operating loss carry forwards of approximately $6,590,910 from the Company’s subsidiaries of mainland China,
which will expire between 2024 and 2029 if not utilized. As of June 30, 2024, the Company had net operating loss carry forwards of approximately
$1,732,014, $281,093, $1,423,959, $234,931 and $33,620 from its operations in Singapore, Australia, Hong Kong, Japan and Philippines,
respectively. The
net operating losses in Singapore, Australia and Hong Kong will be carried forward indefinitely while the net operating
losses in Japan and Philippines will
be carried forward for 10 years and 3-5 years, respectively.
The significant components of the deferred tax assets and liabilities
are as follows:
As of June 30,
2024
2023
Deferred tax assets:
Net operating loss carry forwards
1,394,349
996,177
Accrued expenses
27,184
39,516
Lease liabilities
641,646
169,375
Share of investee’s loss
27,125
27,078
Others
118,734
28,724
Valuation allowances
(935,005)
(1,009,596)
Total deferred tax assets
1,274,033
251,274
Deferred tax liabilities:
ROU assets
576,986
169,375
Intangible assets
378,344
117,781
Share of investee’s income
-
67,601
Total deferred tax liabilities
955,330
354,757
Net deferred tax assets
697,047
81,899
Net deferred tax liabilities
378,344
185,382
F-40
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 14 – TAXES - continued
(a) Corporate Income Taxes (“CIT”) (continued)
As of June 30, 2024 and 2023, valuation allowances
were provided against deferred tax assets in entities which were in a three-year cumulative losses
position and/or are not forecasted
to turn profits in the foreseeable future.
For the years ended June 30, 2024, 2023 and 2022,
the Company accrued dividend distribution withholding tax for the remittance of earnings from
subsidiaries in mainland China to offshore
entities of $147,982, $70,016 and nil, respectively. As of June 30, 2024 and 2023, the Company intended to
permanently partially reinvest
the remaining undistributed earnings from subsidiaries of mainland China to fund future operations and thus nil and $62,237
deferred tax
has been recognized for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the
Company’s subsidiaries established in mainland China. As of June 30, 2024 and 2023, the taxable temporary differences for unrecognized
deferred tax
liabilities related to investments in foreign subsidiaries were $35,439,209 and $23,459,996, respectively. The amount of
unrecognized deferred tax liabilities
for temporary differences related to investments in foreign subsidiaries is not determined because
such a determination is not practicable.
Uncertain tax positions
The Company evaluates
each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures
the unrecognized benefits associated with the tax positions. It is possible that the amount of unrecognized benefit will further change
in the next 12 months;
however, an estimate of the range of the possible change cannot be made at this moment. Unrecognized tax benefits
were presented in “other non-current
liabilities” in the consolidated balance sheets. As of June 30, 2024, 2023 and 2022,
the Company had unrecognized tax benefits of $2,780,674, $2,442,085
and $3,095,554, respectively, if ultimately recognized, will impact
the effective tax rate. The Company has presented unrecognized tax benefits of
$2,649,114, $1,924,305 and $2,497,005 on a net basis with
deferred tax assets relating to tax losses carry forward, $21,209, $21,256 and $446,490 of which a
full valuation allowance would otherwise
be recorded as of June 30, 2024, 2023 and 2022. The Company recorded interests of $368,123 and zero penalties
related to potential underpaid
income tax expenses for the year ended June 30, 2024 and interests of $313,305 and zero penalties for the year ended June 30,
2023, $36,363
interests and zero penalties for the year ended June 30, 2022, respectively.
A reconciliation of
the beginning and ending amount of unrecognized tax benefit was as follows:
2024
2023
2022
Balance at July 1
2,442,085
3,095,554
1,333,608
Increase
518,179
934,563
2,132,154
Decrease
(172,682)
(1,386,797)
(267,622)
Foreign currency translation adjustment
(6,908)
(201,235)
(102,586)
Balance at June 30
2,780,674
2,442,085
3,095,554
As of June 30, 2024, the open tax years for mainland
China ranges from calendar year 2019 to calendar year 2023.
F-41
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 14 – TAXES - continued
(b) Tax Payables
The Company’s tax payables consist of the following:
As of June 30,
2024
2023
VAT payable
761,457
654,799
Corporate income tax payable
146,030
417,445
Withholding tax payable
326,183
343,753
Disability insurance fund payable
1,035,935
1,011,958
Other tax payables
82,010
75,420
Total tax payables
2,351,615
2,503,375
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Commitments
As of June 30, 2024, the Company has no outstanding
commitments other than the operating lease payments (Note 9).
Contingencies
From time to time, the Company is subject to legal
proceedings, investigations, and claims incidental to the conduct of its business. The Company is
currently not involved in any legal
or administrative proceedings that may have a material adverse impact on the Company’s business, financial position,
results of
operations or cash flows.
F-42
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 16 – EARNINGS PER SHARE
The following table sets forth the computation
of basic and diluted earnings (losses) per share for the periods indicated:
For the year ended June 30,
2024
2023
2022
Basic earnings (losses) per share calculation:
Numerator:
Net (loss) income attributable to common shares
(2,329,965)
192,529
4,455,428
Denominator:
Weighted average common shares outstanding
25,213,012
23,153,976
20,924,683
Basic earnings (losses) per share attributable to common shares
(0.09)
0.01
0.21
Diluted earnings (losses) per share calculation:
Numerator:
Net (loss) income attributable to common shares for calculating diluted earnings (losses) per share
(2,329,965)
192,529
4,455,428
Denominator:
Weighted average common shares outstanding
25,213,012
23,153,976
20,924,683
Weighted average common shares equivalents:
Effects of dilutive securities
Warrants
-
-
-
Share options
-
-
-
RSUs
-
-
132,380
Shares used in computing diluted earnings (losses) per share attributable to common shares
25,213,012
23,153,976
21,057,063
Diluted earnings (losses) per share attributable to common shares
(0.09)
0.01
0.21
For the years ended June 30, 2024 and 2023, the
effects of all warrants, options and RSU were excluded from the computation of diluted (loss) earnings per
share as their effects would
be anti-dilutive. For the year ended June 30, 2022, the effects of warrants and options were excluded from the computation of
diluted
earnings per share as their effect would be anti-dilutive.
F-43
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 17 – WARRANTS
On March 3, 2021, the Company issued 2,666,666
warrants to with certain accredited investors concurrently with the private placement transaction (Note
19). Each warrant is to purchase
one common share of the Company at $6.0 per share and can be exercised prior to the termination date which is September
3, 2026. During
year ended June 30, 2024, no warrants were exercised. As of June 30, 2024 and 2023, 2,666,666 warrants were issued and outstanding.
NOTE 18 – SHARE-BASED PAYMENT
a)
The 2017 Stock Incentive Plan (the “2017 Plan”)
In November 2017, the Company’s shareholders
and Board of Directors (“Board”) approved the 2017 Plan. The 2017 Plan provides for discretionary grants
of, among others,
RSU, stock options, stock awards and stock unit awards to key employees and directors of the Company. The purpose of the 2017 Plan is
to recognize contributions made to the Company by such individuals and to provide them with additional incentive to achieve the objectives
of the Company.
The Board authorized up to 2,210,000 shares for grants under the terms of the 2017 Plan. The grants under the 2017 Plan
generally have a maximum
contractual term of ten years from the date of grant. The terms of individual agreements for various grants under
the 2017 Plan will be determined by the
Board (or its Compensation Committee) and may contain both service and performance conditions.
b)
2019 Equity Incentive Plan (the “2019 Plan”)
In April 2019, the Company’s shareholders
and Board approved the 2019 Plan. The 2019 Plan provides for discretionary grants of, among others, stock
options, stock awards and stock
unit awards to key employees and directors of the Company. The purpose of the 2019 Plan is to recognize contributions
made to the Company
by such individuals and to provide them with additional incentive to achieve the objectives of the Company. The Board authorized up
to
2,220,000 shares for grants under the terms of the 2019 Plan. No award was granted under the 2019 Plan.
c)
2020 Equity Incentive Plan (the “2020 Plan”)
In April 2020, the Company’s shareholders
and Board approved the 2020 Plan. The 2020 Plan is to cancel the rest of authorized shares not granted under the
2017 and 2019 Plan. The
2020 Plan provides for discretionary grants of, among others, stock options, stock awards and stock unit awards to key employees
and directors
of the Company. The purpose of the 2020 Plan is to recognize contributions made to the Company by such individuals and to provide them
with
additional incentive to achieve the objectives of the Company. The Board authorized up to 11,011,663 shares for grants under the
2020 Plan. The grants
under the 2020 Plan generally have a maximum contractual term of five years from the date of grant. The terms of
individual agreements for various grants
under the 2020 Plan will be determined by the Board (or its Compensation Committee) and may contain
both service and performance conditions.
F-44
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 18 – SHARE-BASED PAYMENT - continued
Stock Options - continued
In March 2023, the Company’s
shareholders and Board approved the 2023 Plan. The 2023 Plan is to cancel the rest of authorized shares not granted under
the 2017,
2019 and 2020 Plan. The 2023 Plan provides for discretionary grants of, among others, stock options, stock awards and stock unit
awards to key
employees and directors of the Company. The purpose of the 2023 Plan is to recognize contributions made to the Company
by such individuals and to
provide them with additional incentive to achieve the objectives of the Company. The Board authorized up
to 20,000,000 shares for grants under the 2023
Plan. The grants under the 2023 Plan generally have a maximum contractual term of
five years from the date of grant. The terms of individual agreements for
various grants under the 2023 Plan will be determined by
the Board (or its Compensation Committee) and may contain both service and performance
conditions.
Stock Options
On August 31, 2021, the Company granted an aggregate
of 2,790,300 stock options to key employees and senior executives under the 2020 plan. 200,000
stock options granted to the employees
contains service condition, and 2,590,300 stock options granted to the employees and directors contains additional
performance condition
that the share numbers that will be vested is based on the performance appraisal of the grantees for the year 2022. The stock options
are valid for a period of 5 years from the grant date and vest 25% per year in equal annual installments at the end of each anniversary
over a four-year period,
with the first 25% vesting on August 31, 2022 and the second, third and fourth 25% vest on August 31, 2023, 2024
and 2025, respectively.
On January 31, 2022, the Company granted an aggregate
of 1,300,000 stock options to key employees and senior executives under the 2020 plan. The stock
options contain service condition only.
The stock options are valid for a period of 5 years from the grant date and vest 25% each year in equal annual
installments at the end
of each anniversary over a four-year period, with the first 25% vesting on January 31, 2023 and the second, third and fourth 25% vest
on January 31, 2024, 2025 and 2026, respectively.
On November 14,2022, the Company granted an aggregate
of 1,023,531 stock options to key employees and senior executives under the 2020 plan. The
stock options contain service condition only.
The stock options are valid for a period of 5 years from the grant date and vest 25% each year in equal annual
installments at the end
of each anniversary over a four-year period, with the first 25% vesting on November 14,2023, and the second, third and fourth 25%
vest
on November 14, 2024, 2025 and 2026, respectively.
On August 16, 2023, the Company granted an aggregate
of 1,535,000 stock options to key employees and senior executives under the 2020 plan. The stock
options contain service condition only.
The stock options are valid for a period of 5 years from the grant date and vest 25% each year in equal annual
installments at the end
of each anniversary over a four-year period, with the first 25% vesting on August 16, 2024 and the second, third and fourth 25% vest
on
August 16, 2025, 2026 and 2027, respectively.
The options granted to employees are accounted
for as equity awards and measured at their grant date fair value using binomial lattice model. The Company
recognizes the compensation
expenses over the service requisite periods using the accelerated method. Share-based compensation cost of $1,186,806,
$1,000,105 and
$1,196,971 were recognized for the years ended June 30, 2024, 2023 and 2022, respectively. The weighted-average grant-date fair value
per
share of options granted was $0.46 for senior executives and $0.44 for key employees during the year ended June 30, 2024, $0.58 for
senior executives and
$0.57 for key employees during the year ended June 30, 2023, and $1.13 for senior executives and $1.01 for key employees
during the year ended June 30,
2022, respectively.
F-45
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 18 – SHARE-BASED PAYMENT - continued
Stock Options - continued
The assumptions used to value the Company’s stock options grants
were as follows:
2024
2023
2022
Expected volatility
42%
43%
40%
Risk-free interest rate
4.42%
4.00%
0.71~1.62%
Exercise multiples
2.2~2.8
2.2~2.8
2.2~2.8
Expected dividend yield
0%
0%
0%
Forfeited rates
12~30%
16~23%
12~19%
Fair market value per common share
0.98
1.135
1.92~3.15
Expected volatilities are based on historical
volatilities of the similar public companies’ common shares over the respective expected term of the share-based
awards. Risk-free
interest rate is based on U.S. Treasury zero-coupon issues with maturity terms similar to the expected term on the share-based awards.
The
exercise multiples are the share price multiples upon which the employees are likely to exercise share options. Fair market value
per common share is the
market value of the Company’s stocks on the grant date. The shares of common stock to be issued and/or sold
upon the exercise of stock options are made
available from authorized and unissued common stock.
The following table sets forth the summary of stock options activities:
Number of
stock options
Weighted
Average
Exercise Price
Weighted
Average
Grant-date
Fair Value
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Outstanding as of July 1, 2023
5,225,362
2.22
1.08
2.8
years
356,642
Granted
1,535,000
0.80
0.45
Exercised
(41,500)
0.80
0.57
-
Forfeited or expired
(346,435)
1.41
0.71
-
Outstanding as of June 30, 2024
6,372,427
1.93
0.92
2.3 years
175,494
Outstanding and exercisable as of June 30, 2024
2,628,115
2.48
1.13
18,727
Vested and expected to vest as of June 30, 2024
5,293,215
2.06
0.22
2.3 years
125,998
F-46
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 18 – SHARE-BASED PAYMENT - continued
Stock Options - continued
The aggregate intrinsic value in the table above
represents the difference between the closing stock price on the last trading day in fiscal 2024 and the
options’ respective exercise
price. Total intrinsic value of options exercised for the year ended June 30, 2024,2023 and 2022 was nil, nil and $1,125,
respectively.
The total fair value of options vested during the years ended June 30, 2024, 2023 and 2022 was $1,098,566, $1,152,356 and $505,295,
respectively.
As of June 30, 2024, there was $506,804 of unrecognized
compensation cost, adjusted for estimated forfeitures based on historical data, related to non-vested
stock options granted to the Company’s
employees and directors. Total unrecognized compensation cost is expected to be recognized over a period of 1.37
years as of June 30,
2024. Total unrecognized compensation cost may be adjusted for future changes in estimated forfeitures.
Restricted Share Units
During the year ended June 30, 2022, the Company
granted 2,519,600 RSUs to key employees under the 2020 Plan. The RSUs granted to the employees
fully vest on specified dates within four
years.
During the year ended June 30, 2023, the Company
granted 1,161,000 RSUs to key employees under the 2020 Plan. The RSUs granted to the employees
fully vest on grant date.
During the year ended June 30, 2024, the Company
granted 1,934,000 RSUs to key employees under the 2023 Plan. The RSUs granted to the employees
fully vest on grant date.
The fair value of the RSU is the fair value of
the Company’s ordinary shares at their respective grant dates.
The Company recognizes the compensation expenses
over the service requisite periods using the accelerated method. Share-based compensation cost of
$1,981,210, $1,478,190 and $5,987,891
was recognized for the years ended June 30, 2024, 2023 and 2022, respectively.
F-47
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 18 – SHARE-BASED PAYMENT - continued
Restricted Share Units - continued
The following table sets forth the summary of RSUs activities:
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Outstanding as of July 1, 2023
103,900
3.07
Granted
1,934,000
0.98
Vested
(1,977,300)
1.03
Forfeited or expired
-
-
Outstanding as of June 30, 2024
60,600
3.02
As of June 30, 2024, there was $43,812 of unrecognized
compensation cost, adjusted for estimated forfeitures based on historical data, related to non-vested,
service-based RSUs granted to the
Company’s employees and directors. The RSUs are expected to be recognized over a weighted-average period of 0.9
years. The total
fair value of the restricted share units vested was $1,935,396, $3,870,449 and $4,617,882 during the years ended June 30, 2024, 2023 and
2022, respectively. The weighted-average grant-date fair value per share of RSUs granted was $0.98, $1.14 and $2.52 during the years ended
June 30, 2024,
2023 and 2022, respectively.
The following table summarizes the total share-based
compensation expense recognized by the Company:
2024
2023
2022
Cost of revenues
11,467
16,212
36,906
Selling and marketing expenses
275,562
129,060
165,209
General and administrative expenses
2,880,987
2,333,023
6,982,747
Total
3,168,016
2,478,295
7,184,862
F-48
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 19 – SHAREHOLDERS’ EQUITY
Common shares
On February 23, 2021, the Company entered into
an agreement with Maxim Group LLC (“Maxim”) that Maxim would serve as a Placement Agent for the
Company in connection with
the proposed offering of registered securities of the Company, including the Company’s common shares. On February 28, 2021,
the
Company entered into a securities purchase agreement (“SPA”) with certain accredited investors. According to the SPA, the
Company agreed to sell
2,666,666 of the Company’s common shares and issue unregistered warrants to purchase up to an additional
2,666,666 common shares in the concurrent
private placement transaction. On March 3, 2021, the Company issued 2,666,666 common shares
at $6.00 per share to those investors, with a par value of
$0.0001 per share, and issued 2,666,666 warrants, generating total gross proceeds
of $15,999,996. Net proceeds from the transaction after issuance cost of
$1,317,119 were $14,682,877 which was allocated to common shares
and warrants issued on their relative fair value basis of $11,131,829 and $3,551,048,
respectively.
Dividend
On November 22, 2023 the Company announced a cash
dividend of $0.1 per common share with an aggregate amount of $2.56 million. The dividend was
paid in full in December 2023.
On January 10, 2023 the Company announced a cash
dividend of $0.05 per common share with an aggregate amount of $1.18 million. The dividend was paid
in full in January 2023.
No dividend was declared during the years ended
June 30, 2022.
Statutory reserve and restricted net assets
The Company’s subsidiaries located in mainland
China are required to make appropriations to certain reserve funds, comprising the statutory surplus reserve
and the discretionary surplus
reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of mainland
China (“PRC
GAAP”). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in
accordance
with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the discretionary
surplus reserve are made at the
discretion of the Board of Directors. The Company allocated $196,276, $284,952 and $857,801 to statutory
reserves during the years ended June 30, 2024,
2023 and 2022, respectively, in accordance with PRC GAAP.
China Company laws and regulations permit payments
of dividends by the Company’s subsidiaries incorporated in mainland China only out of their retained
earnings, if any, as determined
in accordance with mainland China accounting standards and regulations. In addition, the Company’s subsidiaries
incorporated in
mainland China are required to annually appropriate 10% of their net income to the statutory reserve prior to payment of any dividends,
unless the reserve has reached 50% of their respective registered capital. Furthermore, registered share capital and capital reserve accounts
are also restricted
from distribution. As a result of the restrictions described above and elsewhere under China Company laws and regulations,
the Company’s subsidiaries
incorporated in mainland China are restricted in their ability to transfer a portion of their net assets
to the Company in the form of dividends payments, loans
or advances. Amounts of net assets restricted amounted to $26,494,945 and $23,549,698
as of June 30, 2024 and 2023, respectively. Except for the above or
disclosed elsewhere, there is no other restriction on the use of proceeds
generated by the Company’s subsidiaries to satisfy any obligations of the Company.
F-49
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 19 – SHAREHOLDERS’ EQUITY (continued)
Accumulated other comprehensive (loss)/income
The components of accumulated other comprehensive
income (loss) were as follows:
Foreign
currency
translation
income (loss)
Balance at June 30, 2022
(550,248)
Current-period other comprehensive loss
(3,532,507)
Other comprehensive loss attribute to noncontrolling interests
92,161
Balance at June 30, 2023
(3,990,594)
Current-period other comprehensive loss
(355,386)
Other comprehensive loss attribute to noncontrolling interests
78
Balance at June 30, 2024
(4,345,902)
There was nil tax expense or benefit recognized
related to the changes of each component of accumulated other comprehensive (loss)/income for the years
ended June 30, 2024, 2023 and
2022.
NOTE 20 – NONCONTROLLING INTERESTS
In May 2021, Growth Ring, entered into an agreement
with MCT to purchase MCT’s 53.33% equity interest in MSCT. The purchase consideration was
$205,711. The transaction was accounted
for as an asset acquisition and the carrying amount of the noncontrolling interests was $121,807 (Note 3).
On April 19 2023, Growth Ring and Brightech (BRD)
Ltd. (BVI) incorporated JAJI Global Incorporation (Cayman Islands) (“JAJI Global”). Growth Ring
held an 60% equity interest
in JAJI Global and Brightech (BRD) Ltd.(BVI) held the remaining 40% equity interest.
F-50
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 21 – SEGMENT INFORMATION
The Company follows ASC Topic 280, Segment
Reporting, which requires that companies to disclose segment data based on how the chief operating
decision maker (“CODM”)
makes decision about allocating resources to each segment and evaluating their performances. The Company’s CODM has been
identified
as the Chief Executive Officer. The Company historically had one single operating and reportable segment, IT services, and after the acquisition
of
CAE, the Company has two operating and reportable segments, consisting of IT services and academic education service.
The Company presents segment information after
elimination of inter-company transactions. In general, revenue, cost of revenue and operating expenses are
directly attributable to each
segment. The CODM does not evaluate the performance of segments using asset information.
The table below provides a summary of the Group’s operating segment
operating results for the year ended June 30, 2024:
For the year ended June 30, 2024
IT services
Academic
education
services
Intersegment
eliminations
Total
Total revenues
141,818,338
1,042,832
(48,444)
142,812,726
Total operating costs and expenses
(144,347,079)
(1,013,029)
8,967 (145,351,141)
(Loss) income from operations
(2,528,741)
29,803
(39,477)
(2,538,415)
(Loss) income before income taxes and share of income in equity method
investments
(1,828,186)
24,298
(39,477)
(1,843,365)
The following table presents revenues by the service lines for the
years ended June 30, 2024, 2023 and 2022:
For the year ended June 30,
2024
2023
2022
Revenue:
IT consulting service
136,844,784
144,286,502
144,092,811
Customized IT solution service
3,147,593
4,554,200
6,738,118
Other
1,825,961
1,515,837
1,191,452
IT services subtotal
141,818,338
150,356,539
152,022,381
Revenue:
Academic education service
1,042,832
-
-
Inter-segment*
(48,444)
-
-
Total revenue
142,812,726
150,356,539
152,022,381
The Company’s operations are primarily based
in China, where the Company derives a substantial portion of their revenues. The following table presents
revenues generated in domestic
and overseas markets for the years ended June 30, 2024, 2023 and 2022.
For the year ended June 30,
2024
2023
2022
Mainland China
120,510,430
134,185,815
137,915,276
Singapore
10,987,527
8,733,344
9,559,951
Hong Kong
6,245,523
4,311,182
3,365,491
United States
4,367,813
2,779,313
883,478
Japan
566,410
254,601
137,053
Philippines
100,278
-
-
Malaysia
26,233
92,284
161,132
India
8,512
-
-
Total
142,812,726
150,356,539
152,022,381
F-51
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed balance sheets
As of June 30,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
4,262,968
1,044,647
Amounts due from subsidiaries
36,169,086
24,717,918
Prepayments, deposits and other assets, net
53,707
37,919
Total Current Assets
40,485,761
25,800,484
Non-Current assets:
Investments in subsidiaries
46,861,460
46,369,097
Total Assets
87,347,221
72,169,581
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Other payable
1,688
32
Amounts due to subsidiaries
24,836,295
7,588,546
Total Current Liabilities
24,837,983
7,588,578
Total Liabilities
24,837,983
7,588,578
Shareholders’ Equity
Common shares, $0.0001 par value, 100,000,000 shares authorized; 25,640,056 shares issued and outstanding as of
June 30, 2024; 23,650,122 shares issued and outstanding as of June 30, 2023
2,564
2,365
Additional paid-in capital
61,351,200
58,183,383
Retained earnings
5,501,376
10,385,849
Accumulated other comprehensive loss
(4,345,902)
(3,990,594)
Total Shareholders’ Equity
62,509,238
64,581,003
Total Liabilities and Shareholders’ Equity
87,347,221
72,169,581
F-52
CLPS
INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Amounts in U.S. dollars (“$”), except
for number of shares)
NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
- continued
Condensed statements of comprehensive (loss)/ income
For the year ended June 30,
2024
2023
2022
General and administrative expenses
(3,325,805)
(3,308,445)
(7,640,065)
Share of profit in subsidiaries, net (Note a)
428,620
3,023,065
12,060,619
Other income
567,220
477,909
34,874
(Loss) income before income tax
(2,329,965)
192,529
4,455,428
Provision for income tax
-
-
-
Net (loss) income
(2,329,965)
192,529
4,455,428
Other comprehensive income
-
-
-
Foreign currency translation loss
(355,308)
(3,440,346)
(1,780,331)
Comprehensive (loss) income
(2,685,273)
(3,247,817)
2,675,097
Condensed statements of cash flows
For the year ended June 30,
2024
2023
2022
Net cash provided by (used in) operating activities
5,780,974
1,412,346
(20,091,683)
Net cash (used in) provided by financing activities
(2,554,508)
(404,150)
7,395,038
Effect of exchange rate changes on cash
(8,145)
(79,450)
(162,861)
Net increase (decrease) in cash and cash equivalents
3,218,321
928,746
(12,859,506)
Cash and cash equivalents, at the beginning of the year
1,044,647
115,901
12,975,407
Cash, cash equivalents at the end of the year
4,262,968
1,044,647
115,901
(a) Basis of presentation
In the Company-only financial statements, the
Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries
since inception.
The Company records its investment in its subsidiaries
under the equity method of accounting as prescribed in ASC 323. Such investments are presented on
the balance sheets as “Investments
in subsidiaries” and share of the subsidiaries’ profit or loss are shown as “Share of profit in subsidiaries, net”
on the
statements of comprehensive (loss) income.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with U.S. GAAP have been condensed or
omitted and as such, these Company-only
financial statements should be read in conjunction with the Company’s consolidated financial statements.
F-53
ITEM 19. EXHIBITS
The financial statements are filed as part of this
Annual Report beginning on page F-1.
Exhibit No.
Description
1.1
Form of Underwriting Agreement (2).
2
Description of Securities registered under Section 12 of the Exchange Act (4)
3.1
Memorandum and Articles of Association (1).
4.1
Specimen Share Certificate (1).
10.1
2023 Equity Incentive Plan(6)
10.2
Form Independent Director Agreement (1).
10.3
Employment Agreement between the Company and Xiao Feng Yang (1).
10.4
Employment Agreement between the Company and Raymond Ming Hui Lin (1).
10.5
Employment Agreement between the Company and Rui Yang (3).
10.6
Employment Agreement between the Company and Li Li (5).
10.7
ANZ Global Services and Operations (Chengdu) Company Limited Agreement (1).
10.8
Master Lease Agreement - Shanghai Pudong Software Park Co., Ltd.
10.9
Master Lease Agreement - Shanghai Pudong Software Park Co., Ltd.
10.10
Master Lease Agreement - Dalian High-Tech Park
10.11
Master Lease Agreement - Guangzhou Fengxing Plaza-A20F
10.12
Master Lease Agreement - Guangzhou Fengxing Plaza-A21F
10.13
Form of Framework Contract for Subcontracting (1).
10.14
Form Warrant Agreement (2).
10.15
Form Lockup Agreement (2).
10.16
Escrow Indemnification Agreement (2).
10.17
Credit Agreement with Bank of Shanghai Pudong Development Bank Co. Ltd-5 million
10.18
Credit Agreement with Bank of Shanghai Pudong Development Bank Co. Ltd-15 million
10.19
Credit Agreement with Bank of Shanghai Pudong Development Bank Co. Ltd-18 million
10.20
Credit Agreement with China Merchants Bank Co., Ltd.-10 million
10.21
Accounts Receivable Financing- HSBC Bank (China) Limited- 10 million
10.22
Credit Agreement with HSBC Bank (China) Limited- 10 million
10.23
Credit Agreement with Bank of Communication Co., Ltd.-10 million
10.24
Credit Agreement with Bank of Communication Co., Ltd.-10 million
10.25
Credit Agreement with Industrial and Commercial Bank of China Limited- 19.9 million
10.26
Credit Agreement with Industrial Bank Co., Ltd.- 10 million
11.1
Insider Trading Policy
12.1
Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act,
as amended.
12.2
Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act,
as amended.
13.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
14.1
Code of Conduct and Ethics (1).
21.1
List of Subsidiaries of the Registrant.
23.1
Consent of Ernst & Young Hua Ming LLP.
97.1
Clawback Policy
99.1
Charter of the Audit Committee (1).
99.2
Charter of the Compensation Committee (1).
99.3
Charter of the Nominating Committee (1).
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
(1) Previously filed as part of the registration statement filed with the SEC on March 27, 2018 and incorporated by reference herein.
(2) Previously filed with the SEC as exhibit to Form F-1/A filed on May 18, 2018 and incorporated by reference herein.
(3) Previously filed as an exhibit to Form 6-K filed with the SEC on November 4, 2019 and incorporated by reference herein.
(4) Previously filed with the SEC on Form 8-A 12B on May 22, 2018 and incorporated by reference herein.
(5) Previously filed with the SEC as an exhibit to Form 20-F on October 22, 2020 and incorporated by reference herein.
(6) Previously filed as part of the registration statement filed with the SEC on May 12, 2023 and incorporated by reference herein.
122
SIGNATURES
The
Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
CLPS Incorporation
October 18, 2024
By:
/s/ Raymond Ming Hui Lin
Name: Raymond Ming Hui Lin
Title:
Chief Executive Officer
(Principal Executive Officer)
October 18, 2024
By:
/s/ Rui Yang
Name: Rui Yang
Title:
Chief Financial Officer
(Principal Financial and Accounting Officer)
123
Exhibit 10.8
Rental Contract for Shanghai Pudong Software
Park Guo Shoujing Park
Contract No: ZL (N) 20230061
Both parties to this contract:
Party A (Lessor): Shanghai Pudong Software Park
Co., Ltd.
Party B (Lessee):Shanghai Chenqin Information
Technology Services Co., Ltd.
According to Contract Law of the People’s
Republic of China and Regulations of Shanghai Municipality on House Leasing, both parties conclude the
contract on the basis of equality, voluntariness, fairness, honesty and credibility, for consenting that Party B should lease the house
that Party A can lease
according to law.
Section 1.
1-1
The house which is rented to Party B by Party A is located in Room 18101/18102/18103/18104, Building 17, Guo Shoujing Road No.498, Zhang Jiang
High Tech Park, Pudong, Shanghai (hereinafter referred to as “the House”). The building area of the House is 914.62 square meters. The House should
be used for research and development and office. The structure of the House is reinforced concrete structure. The plan of the house is shown in Annex I
of this contract.
1-2
Party A establishes a leasing relationship with Party B as the real estate owner of the House. Party A has told Party B and Party B has fully known that
the House has been mortgaged before the contract is signed.
1-3
The following (if any) is shown in Annex II and/or supplementary agreements of the Contract: the scope of use, conditions and requirements of public
or shared parts of the House, the existing decoration of the House, ancillary facilities and equipment status, and the contents, standards, related matters
of the decoration and additional facilities which Party A allows Party B to do in writing. Both parties agree that all attachments and supplementary
agreements should be a basis for acceptance of housing delivery and return when the Contract is terminated or released.
1-4
When the Contract is signed, the House has accepted and used by Party B, and Party B confirm that the House can fit the purpose and acquirement of
rental at the beginning of the tenancy term. On the basis of Party B’s occupancy of the House, Party A does not have to perform any further duty to
deliver the House to Party B.
2. Rental Purposes
2-1
Party B has fully known the House’s properties and uses and Party B promises to Party A that the House will only be used for research and
development and office and Party B will abide by the state and the city regulations on the use of housing and property management.
2-2
Party B promises that the above-mentioned purpose of the use will not be changed during the rental term unless such change gets Party A’s written
consent and is approved by the relevant departments according to relative regulations.
3. Lease Term
3-1
the lease term of the house starts from September 16, 2023 (hereinafter referred to as the lease commencement date) to September 15,
2026
(hereinafter referred to as the lease expiration date).
3-2
The delivery date of the house is September 16,
2023.
3-3
Party A shall notify Party B of the acceptance and handover of the house at least one day in advance and no later than the delivery date. Party B shall
send a representative to jointly accept the house with Party A and / or the property management company entrusted by Party A at the time notified by
Party A.After the acceptance, Party B shall sign the written House acceptance handover certificate to show that Party A has delivered the house to
Party B.
If both parties check that the house and its ancillary facilities do not meet the delivery standards agreed in this contract, Party A shall correct them
within 3 days or within a reasonable period agreed by both parties to meet the delivery standards, and notify Party B and Party A to jointly accept the
house again. After the re acceptance, Party B shall sign the written House acceptance handover letter to show that Party A has delivered the house to
Party B.
If Party A fails to deliver the house to Party B as of the lease commencement date of Article 31, Party A shall extend the lease commencement date of
Party B, and the new lease commencement date shall be calculated from the actual delivery date.From the lease date of Article 3.1, if the delivery of
the house is delayed for more than 10 working days due to Party A, Party A shall pay Party B 10% of the daily rent of the house as liquidated damages
for each delayed delivery day from the first working day after the lease date of Article 3.1, and postpone Party B's lease date. The new lease date
shall be calculated from the actual delivery date.If the starting date of rent is postponed according to this paragraph, the starting date of rent shall be
postponed accordingly.If the aforesaid breach of contract by Party A lasts for more than 30 days, Party B has the right to terminate this contract.
3-4
Party B shall handle the relevant handover procedures
of the leased house no later than the delivery date. Party B's delay in handling the
handover procedures will not affect the
rent payable by Party B from the date of rent payment and other expenses borne by Party B.If the relevant
handover procedures are not
completed within 30 days after the delivery date agreed in the contract due to Party B, Party A has the right to terminate
the contract.
4. Rent and Payment Methods
4-1
Party A and Party B agree that the rental
unit price of the house is calculated according to the construction area per square meter per day, and Party A
will issue a valid
invoice after receiving Party B’s monthly rent. Within the lease term agreed in this Contract,Since October 16, 2023 Until the
rent
deadline it’s the rental period.
Within the
lease term in this contract,Rent-free period from September 16, 2023 to October 15,2023
Within the lease
term in this contract,Rent-free period from September 16, 2024 to October 15,2024
Within the lease
term in this contract,Rent-free period from September 16, 2025 to October 15,2025
From October 16st,2023
to December 15st ,2024, the unit rental price is RMB 4.08 yuan
From October 16st,2024
to December 15st ,2025, the unit rental price is RMB 4.16 yuan
From October 16st,2025
to December 15st ,2026, the unit rental price is RMB 4.24 yuan
(The above unit rental prices are
tax-inclusive prices)
2
4-2
Party B should pay the rent for the first month no later than the rent date. The days for calculating the rent for the first mouth is started form the rent
date to the last day of the mouth. The monthly rent will be calculated and paid according to the calendar days of the month (the monthly rent
calculation formula is: housing construction area ╳ unit rental price ╳ the calendar days of the month. The monthly rental amount is rounded to one
decimal place). Party B should pay the rent to Party A before the 10th of each month (in case of national legal holidays postponed to the next working
day). The last month’s rent should be calculated from the first day of last month to the terminal day. If the days of the last month are less than 10, the
last month’s rent should be paid before the terminal date. If the days of the last month are not less than 10, the last month’s rent should be paid before
the10th day of the month (in case of national legal holidays postponed to the next working day). Party A should issue the corresponding rental invoice
to Party B within 3 working days after receiving the rent of the month.
4-3
Party A should issue the corresponding rental invoice to Party B within 3 working days after receiving the rent of the month. In the term of the
Contract, if the invoice type or tax rate changes due to the change of taxation policies of the state and government, Party B agrees to adjust the price of
rent and deposit according to the latest tax rate during the remaining lease. At that time, Party A will give Party B a formal notice, and both Parties
should sign up supplementary agreements.
4-4
Party B pays the rent to Party A’s following account by check or transfer:
Shanghai Pudong Software Park Co., Ltd.
1001194909004601783
ICBC Shanghai Zhangjiang sub branch
4-5
The rent is denominated and settled in RMB. In any case that the rent needs to be denominated and settled in other currency (the currency should be
accepted by Chinese banks and convertible into RMB), the actual amount of RMB exchanged by the bank designated by Party A shall prevail.
Relevant fees due to the payment (such as bank charges) should be borne by Party B.
4-6
Party A may entrust a property management company to assist in collecting the rent.
5. Rental Deposit and Other Fees
5-1
Both Parties agree that Party B shall pay rental deposit to Party A within 5 working days after signing the Contract. The amount of the deposit is
equivalent to the rent for the three months (90 days) of the highest unit price within the lease term, which is RMB349,019 yuan. Party A shall issue a
receipt to Party B after receiving the deposit. If Party B fails to pay the lease deposit in full to Party A in accordance with the provisions of this
contract, Party B shall pay Party A late payment fee of 0.03% of the outstanding amount per day, until the full payment is completed. If Party B delays
or fails to pay more than 15 working days, Party A has the right to rescind the contract.
3
During the term of this contract,
Party B shall, due to breach of contract, pay liquidated damages and/or damages to Party A in accordance with the
provisions of this contract,
and Party B shall separately pay Party A liquidated damages and/or damages, and shall not have the right to request Party A
to deduct
from the above deposit. Party A shall have the right (without any obligation) to deduct such liquidated damages and / or damages from
Party
B’s rental deposit and notify Party B in writing of the amount of the deduction and margin supplement. Party B should pay Party
A to complement the
margin within 5 working days after accepting the notice from Party A.
Within 10 working days after the termination
of the lease, Party A will refund Party B the balance of deposit to offset the fees (with no interest) which
Party B should bear under
the Contract (including but not limited to the monthly rent payable by Party B, property management fees, energy
consumption, Party B’s
liquidated damages and / or compensation for damages). However, if Party B uses the House for the registration of Party B’s
residence,
Party B shall, within 30 days from the date of the termination of the lease, complete the cancellation or alteration registration, and
deliver the
copy of the registration approval to Party A for record. Party A shall return the lease deposit to Party B according to the
above term after that.
5-2
Besides the house rent and property management fees, Party B shall bear the costs of energy consumption (electricity, water and gas), communication
expenses, rental fees for equipment and facilities incurred for its own use. Party A shall install separate meter for Party B’s energy consumption and
collect the fees from Party B according to the meter reading before transferring it to the offices of utilities. Party A may entrust property management
companies to assist in collecting the above fees.
5-3
Both parties agree that the property management company entrusted by Party A (hereinafter referred to as “the management company”) is responsible
for the property management of the House. At the time of signing the Contract, the management company is Shanghai Puyuan Property Management
Co., Ltd., which will be responsible for the property equipment operation, daily management and services of the House. Party B shall pay the property
management fee. Party B shall sign the Property Management Agreement with the property management company prior to the transfer of the House.
Property management fee and payment method of the House shall be implemented in accordance with the Property Management Agreement signed by
Party B and the property management company.
4
6. Housing Requirements and Maintenance Responsibilities
6-1
During the rental term, Party A promises that the House and its ancillary public facilities would be in normal usable and safe condition. If Party B finds
that there is any damage or malfunction of the House or its ancillary public facilities (other than Party B’s decoration and equipment), Party B shall
notice Party A and / or the management company to repair. Party A and / or the management company shall conduct inspection or repair in 48 hours
after receiving the written notice from Party B and repair it within the period agreed on by both parties or within a reasonable period. If Party A shall
assume the responsibility for maintenance but Party A fails to repair it overdue, Party B may take the maintenance for it and reasonable maintenance
expenses shall be borne by Party A.
6-2
During the rental term, Party B shall fair use and take good care of the House and its affiliated public facilities, and take various preventive measures to
make the House safe from rain, wind or other natural causes. Party B shall assume maintenance responsibility for the improper or unreasonable use of
Party B which results in the damage or failure of the House and its affiliated public facilities. If Party B refuses to assume responsibility for
maintenance, Party A can take the maintenance on behalf of Party B, and reasonable maintenance costs borne by Party B. The maintenance of non-
public facilities which is owned by Party B can be entrusted to the property management companies, and maintenance costs borne by Party B.
6-3
Party B shall strictly follow the applicable laws, regulations, rules and regulations of China and use the House in accordance with the contractual
purposes, especially not to use the House in any unreasonable or unethical way. Party B will not use the House in any way that invalidates or increases
the risk of insurance. Party B shall ensure that the business activities engaged in using the House have obtained the business license issued by the
government administration for industry and commerce and guarantee that legal registration and permission shall be kept throughout the lease period.
6-4
During the rental term, Party A reserves the right to publish or authorize others to advertise, improve or add public facilities in other proper places
where is not exclusively for Party B. Party A shall not affect Party B’s normal use of the House and Party B’s Normal business.
5
6-5
Party B agrees to guarantee that Party A and / or Party A’s personnel shall be exempt from Party B’s personal injury and / or property damage, and
Party A and Party A’s personnel shall also be exempt from the third party’s claims and litigation caused by Party B.
7. Decoration and Accretion
7-1
Party B shall be responsible for the second decoration of the House. Party B’s decoration plan (including marking on the building facade or roof or
other public parts of the House) shall be subject to Party A’s approval and Party A’s written consent. Party B shall not, without prior written consent of
Party A, carry out any unauthorized activities or allow any other person to carry out any unauthorized alteration or addition of the House and its
decoration, ancillary facilities and equipment (including but not limited to trunk lines, drainage, firefighting, indoor and outdoor appearances and
existing installations). If such decoration needs the approval of the government department, Party B shall obtain the approval before construction.
7-2
During renovating the House, Party B shall not damage the building’s facade or carry out any internal structural alterations that may affect the service
life and safety of the House, including but not limited to the demolition and alteration of the bearing beam walls. If Party B needs to change the
structure of the house or modify the ancillary facilities and equipment of the house, etc., in addition to the written consent of Party A, Party B shall pay
the structural restoration fee deposit in accordance with the “Relevant Charges for Second Renovation of Leased Office of Shanghai Pudong Software
Park”, otherwise Party B shall not carry out construction.
7-3
During the rental term, the decoration belongs to Party B, and its responsibility for maintenance is also borne by Party B, unless the Parties agree
otherwise. After the expiry of the rental term (including any early termination of the Contract attributable to Party B), Party B is obliged to remove the
decoration extras and restore the house to the pre-lease status (except for natural losses). If Party B does not move on schedule, Party A can take the
behalf of the removal, and the cost borne by Party B or deducted the cost from the deposit unless Party A agrees that Party B shall retain decoration
remnants when returning the house.
6
7-4
Party A’s written consent to the decoration of Party B shall not be construed as Party A’s obligation or responsibility to Party B’s decoration and its
consequences. Party B shall guarantee that its decoration and other facilities for its own addition are safe and will not cause any potential safety hazard
for the House or its users. Party B shall assume complete legal, technical and economic responsibility for its own decoration and its consequences.
7-5
Party A shall have the right to request Party B immediately to take all necessary measures to solve such safety problems if Party A finds any potential
safety hazard caused by Party B’s decoration and attachment actions during and after the lease and whether or not Party A agrees to such decoration
and attachment plan, until Party A unilaterally lift the lease. Party B entrusts the contractor to renovate the house. If it is not the cause of Party A,
which violates the laws and regulations of China, and the relevant provisions of construction, fire control and safety management, or causes property
damage, Party B and the contractor shall take the responsibility.
8. Enter and Check
8-1
During the lease, in order to ensure that the house and its ancillary facilities are properly accessible and safe, Party A and / or the management
company shall have the right to send staff to enter the house for reasonable inspection, maintenance and repair, but Party A and / or the management
company shall notify Party B at least 1 working day in advance (except: emergency situation and situation that Party A cannot be foreseen or
controlled). Party B should be cooperated with inspection, maintenance and repair, but Party A should minimize the impact on the use of the House by
Party B.
8-2
If Party B renounces the right of renewal, or terminates this contract prematurely according to the Contract, or Party A and Party B fail to agree on
whether to renew or not, Party B agrees that Party A has the right to accompany the interested subsequent tenants to visit the House within the time
agreed upon by both parties within 6 months prior to the termination, but Party A should give advanced notice to Party B.
7
9. Sublet, Mix, Transfer and Exchange
9-1
Without the prior written consent of Party A, Party B shall not sublet part or whole of the House to any third party in any form (including but not
limited to contracting, pooling affiliates, establishing affiliates, etc.) during the rental term, or mixed-use the House with any third party, or transfer the
House to others for rent, or exchange with others.
9-2
If Party B sublets part or whole of the House to any third party during the rental term, or uses it in combination with any third party, or transfers the
House to others for rent, or exchanges with other people’s rented houses in accordance with a separate written agreement between Party A and Party B,
Party B shall still be liable for the behavior of actual user of the House and the consequences during the rental term.
10. Priority Renewal Rights
10-1 If the lease of the Contract expires and Party B needs to continue leasing the House, Party B shall submit a written request for renewal to Party A at
least four months before the expiry of the rental term of the Contract, and re-sign the rental contract with the consent of Party A. Under the same
conditions, Party B shall enjoy the priority of renewal of the whole of the House, except as otherwise stipulated by laws and regulations. If Party B
submits to Party A only a written request for renewal of the part of the House, Party B will not enjoy the priority of renewal. If Party B lately requests
for the renewal of a written request, it shall be deemed that Party B renounces the priority of renewal.
10-2 After Party A agrees with Party B’s renewal and renewal conditions, both parties shall conclude a rental contract for the renewal of the House 3 months
before the expiry date of the Contract. If Party B fails to sign the renewal contract with Party A overdue, it shall be deemed that Party B renounces the
priority of renewal. The renewal rent is determined according to the renewal contract.
11. Return
11-1 Party B shall return the House to Party A no later than the expiry date of the lease or the date on which the Contract is terminated prematurely.
11-2 Before Party B returns the House to Party A, Party B shall clean the House so that the House is in good condition and can be rented. The House which
is returned by Party B shall be in conformity with the condition when the house was delivered (that is, it meets the requirements of Annex II and / or
other supplementary agreements). When the House is returned, it should be checked by Party A or / and the property management company entrusted
by Party A and the expenses should be settled.
8
11-3 Party B may retain the status quo of the House’s decoration if it has the written consent of Party A (permit that Party B may produce some natural wear
and tear due to normal use) and move out of the House (hereinafter referred to as “move out of the House”), otherwise, it should be reinstated. If Party
A shall agree in writing before Party B can retain the status quo of the House’s decoration, Party A shall have no obligation to make any compensation
or compensation for Party B’s construction or renovation of the House and its decoration and facilities. If the Contract is terminated early due to Party
A’s reason or because Party A breaches the Contract, Party B has no obligation to restore the status quo ante, and the House will be returned according
to the current status.
11-4 If Party B fails to return the house to Party A without the
written consent of Party A or does not reach an agreement in writing with Party A on
renewing the term, Party B shall pay the overdue
liquidated damages of the House which is 3 times the rent to Party A, and shall bear all the energy,
equipment, property management fees
and all other expenses stipulated in the Contract during the period of occupation of the House. In addition, if
Party B fails to return
the house to Party A 15 days after the expiry date of the lease or the early termination date of the Contract, Party A has the right
to release the house after written notice to Party B, Party A can (but does not have the obligation to) deposit it locally or expeditiously
and Party A has
the right to collect the custody fee and removal fee from Party B in respect of the objects and has the right to sell,
transfer, discard or other ways which
Party A deems it appropriate, and use the proceeds (if any) for any payment that Party B owes Party
A and for any loss. In case of insufficient payment
and compensation, Party A shall have the right to recover the balance from Party
B.
11-5 When Party A evicts Party B, Party B shall bear the relocation
expenses (if any) for thousands of items left in the house by Party B, and Party A.Party
A may (but is not obliged to) store the goods
in situ or elsewhere. After the storage is completed, Party A shall serve a notice to Party B to inform it of
the storage of the
goods. Party B shall collect the property by itself within 15 days from the date of service of the notice. If Party B fails
to collect the
property within the time limit, it shall be deemed that Party B has given up the ownership of all the returned property,
and Party A shall handle it. Party
A has the right to charge Party B the storage fee, which is 50% of the daily rent/day. After
the 15th day expires, Party A has the right to sell, transfer,
discard or dispose of these items in any other way as it thinks fit, and
pay any money owed by Party B to Party A in thousands and compensate Party A
for its losses (if any) with the proceeds of disposal. If
the payment and compensation are insufficient, Party A has the right to recover the difference
from Party B Unless otherwise agreed by
both parties, B posted by Party A shall be deemed as the date of delivery.
11-6 When Party A dismisses Party B, it will adopt ways including
but not limited to hiring a notary office, recording the whole process by itself and
making Party B.The list of goods, notarized materials,
videos and other evidence materials will be kept by Party A for reference and verification within
3 years from the time when Party A
returns to Party B.
11-7 Both
Party A and Party B agree to deduct all the expenses incurred in the process of repaying and keeping from the lease deposit, but the
deduction of
such expenses does not mean that either party gives up the right to claim damages and liquidated damages for breach of contract
according to its rights
and obligations under the contract.
12. Exemption for Party A
12-1 During the rental term, when Party B occupies the House and its ancillary facilities, public facilities, if Party B causes any loss of property, damage and
personal injury caused by any of the following circumstances, Party B hereby agree, not because of Party A’s intention or gross negligence, Party A
does not bear any responsibility:
(1)
Any loss or damage due to expropriation, acquisition, confiscation, nationalization or any force majeure caused by state or government agencies;
9
(2)
Any loss or damage caused by theft, robbery and other criminal cases;
(3)
No water, electricity, telephone, fax, air-conditioning and other services to the House at any time or any public facilities in the House, including
the planned maintenance and inspection of public facilities by a third party entrusted by Party A, are not operated and it is not due to Party A’s
reasons;
(4)
Party B’s losses and damages caused by other lessees or third parties;
(5)
Party B’s losses and damages which is not caused by Party A’s intentional or gross negligence (Party A and / or the security guards and
watchman’s security services provided to the House do not constitute Party A’s liability to the House, personnel, and property).
13. Breach of the Contract and Liability for Breach
of Contract
13-1 Party A’s default
(1)
Party A shall compensate for the loss of Party B due to Party A’s transfer of property right caused by Party A’s setting up a new mortgage to the
House during the rental term as stipulated in this contract.
(2)
During the rental term, Party A fails to perform the repair and maintenance responsibilities as stipulated in the Contract in time, resulting in
damage to the House or property, or personal injury to Party B’s personnel, sub-contractors, agents, employees, and decorators due to the
structural problems of the House, Party A should be responsible for compensation.
(3)
During the rental term, except the exempt
situation regulated by the Contract, laws or regulations, if Party A decides to terminate this contract or
take the House back early
without authorization, Party A should give a written notice to Party B 6 months early. In this case, in addition to
returning the
deposit to Party B, Party A should also pay liquidated damages which is amount to the monthly rent at that time to Party B. If Party
A informs Party B 3 months early but less than 6 months, Party A should pay liquidated damages which is twice the monthly rent at
that time to
Party B. If Party A does not inform Party B 3 months early, Party A should pay liquidated damages which is triple the
monthly rent at that time
to Party B.
10
13-2 Party B’s default
(1)
If Party B overdue payment of rent, deposit, equipment rental fee, energy consumption fee, property management fee or other relevant expenses
payable, Party B shall pay overdue fine which is 0.03% of the amount of overdue payment per day. If overdue 30 days, Party A has the right to
interrupt the water, electricity and other energy supply, until Party B pays all the expenses. And Party B should bear the cost of re-connection.
(2)
If Party B fails to obtain the written consent of Party A to renovates the House or additional facilities beyond the written consent of Party A,
Party A has the right to request Party B to restore the original state of the House. Party B shall be responsible for indemnification if Party B
causes irreparable damage to the House or Party A suffers losses (including but not limited to fines, damages, etc.) due to the aforesaid acts of
Party B.
(3)
Party B or any person expressly or implicitly authorized by Party B to enter the House or parking space shall be regarded as Party B’s act. If such
act causes damage or loss of personal or property to Party A or building, Party B shall jointly and severally liable for compensation.
(4)
During the rental term, except the exempt situation regulated by the Contract, if Party B decides to terminate this contract early without
authorization and Party B gives a written notice to Party A 3 months early, Party B should pay liquidated damages which is amount to the
monthly rent at that time to Party A. If Party B does not inform Party A 3 months early, Party B should pay liquidated damages which is triple
the monthly rent at that time to Party A. Party A may deduct the above liquidated damages from the remaining balance of the rental deposit that
Party B has already paid, and the insufficient part will be delivered separately by Party B.
Retirement refers to the behavior
that Party B decides to terminate the lease relationship early for its own reasons, limited to a written statement.
(5)
If Party B registers the House as its domicile, and Party B fails to complete the registration of alteration or cancellation within 30 days from the
date of termination of the tenancy or provide the copy of certificate of registration to Party A for the record, Party B shall pay Party A liquidated
damages which is amount to the monthly rent at that time.
11
(6)
Party A has right to request Party B to compensate Party A for the losses suffered thereby, if Party B takes the following actions:
(1)
Intentional or negligent act of Party B and its employees and contractors on any part of the building or the House;
(2)
Party B violates or fails to comply with any applicable provisions of the Contract;
(3)
Party B, its employees and other acts of the contractor will affect the normal operation and management of the building by Party A and the
property management company unless Party B provides reasonable explanations within 24 hours after receiving the written notice from Party
A.
14. The Force Majeure
14-1 If either the Property or any part of the Building is destroyed or is not suitable for research and development and office during the lease period due to
Force Majeure, either party shall be entitled to notify the other in writing of the termination of the Contract, and neither party shall pursue the default
responsibility. The Contract is terminated from the day when notice is given by either party. Party A should return Party B the remaining rental deposit,
rental after the force majeure, and other expenses that Party B has prepaid within 10 working days from the date of termination of the Contract after
deducting the relevant expenses according to Clause 13 of the Contract without interest, as long as Party B pays all the expenses payable by Party B
before the force majeure which is regulated by the Contract and the supplementary agreements.
14-2 The party suffering from force majeure shall, within 15 days after the occurrence of such events, notify the other party of the specific circumstances of
the force majeure in written form, and provide supporting documents to prove the existence and duration of the force majeure event (including the
documents of the competent government department, if applicable). If the party suffering from force majeure fails to notify the other party in
accordance with the above provisions and provide appropriate proof, the party shall not ask for exemption from its responsibilities on the basis of its
inability to perform relevant obligations. In addition, the party suffering from force majeure should take all necessary measures to reduce the loss,
otherwise it should bear the responsibility for the expanded loss.
14-3 The above “force majeure” means any unforeseen event beyond the reasonable control of one party and which is unavoidable despite reasonable care is
given by the party, including but not limited to, earthquake, typhoon, plague, flood, fire, storms, tidal waves or other natural disasters, declared or
undeclared war, riots and so on.
15. Terminate the Contract
15-1 Both Parties agree that one party may be written notice to the other party to terminate the Contract under the following situations, and the party
breaching the Contract shall pay liquidated damages which is triple the monthly rent at that time to the other party. If the party breaching the Contract
also cause damages to the other party, and if the liquidated damages are insufficient to meet the damages, the balance still needs to be made up.
12
(1)
Party A fails to deliver the House on time and still cannot deliver the House 30 days after the written notice from Party B;
(2)
The house delivered by Party A does not meet the contract stipulated in Annex Ⅱ of the Contract, resulting in the failure to realize the purpose of
the lease; or the House delivered by Party A is defective and endangers the safety of Party B;
(3)
Party B fails to obtain the written consent of Party A to change the use of the House;
(4)
Party B causes damage to the main structure of the House or other irreparable damage;
(5)
Party B, without the written consent of Party A and the approval of the relevant department, arbitrarily changed the nature of the production and
use involved in the property planning;
(6)
Party B fails to obtain the written consent of Party A and permission from the safety production supervision, fire control and other relevant
departments to add or modify special equipment or to produce, manage, transport, store, use or dispose of hazardous chemicals;
(7)
Party B renders part or all of the House to any third party without authorization, or uses it in combination with any third party, or transfers the
House to others for rent or exchanges with other people’s houses;
(8)
Party B has not paid the rent over 30 days, and still cannot pay the rent 30 days after the written notice from Party A.
15-2 Due to the breach of item (8) of the preceding paragraph, the Party A has the right to retain all the articles in the House until Party B pays all the
money (including the liquidated damages) to Party A.
15-3 Both Parties agree that the Contract is terminated under the following situations, and neither of them should be responsible for the termination.
(1)
The land use rights within the occupied area of the House are recovered early according to law;
(2)
The House is requisitioned according to law because of public interests;
(3)
The House is included in the scope of the permit for house demolition due to urban construction;
(4)
The House is damaged, lost or has been identified as a dangerous house;
(5)
Party A has informed Party B that the mortgage has been set before the rental, and is now being disposed of.
13
16. Statements and Guarantees
a)
Party A hereby states and guarantees as follows:
(1)
Party A has all the necessary authorizations to formally and effectively sign and perform the Contract and possess all the necessary powers and
capabilities to lease the House to Party B in accordance with applicable laws.
(2)
Party A’s signing and performance of the Contract shall not constitute a violation of the applicable law or any contract signed by Party A with
any third party.
(3)
Party A guarantees that the House has been built and in good condition in accordance with applicable laws (including but not limited to safety
and health related laws and regulations) and has legal ownership over it.
b)
Party B hereby states and guarantees as follows:
(1)
Party B has all the necessary authorizations to formally and effectively sign and perform the Contract.
(2)
Party B has legal business qualification. During the renewal of the Contract, Party B will engage in business activities in accordance with the
scope of its business license, and its business activities must comply with the relevant provisions of national laws and regulations.
(3)
Party B promises not to disclose any information involved in the Contract to any third party, including but not limited to the rental price. If Party
B’s behavior leaks any of above mentioned information, Party A reserves the right to retroactively indemnify Party B.
17. Safe Production
17-1 Party B shall strictly comply with the safety management code of the park including the Notice on Enterprise Safety Management in Shanghai Pudong
Software Park (see Annex Ⅲ for details) and shall be fully responsible for its own safety management. Party B shall immediately inform Party A in an
effective manner once a safety accident has occurred, and provide a written report after the incident, while trying its best to avoid or reduce the
casualties or property damage. If the circumstances of the accident are serious and have caused or may cause casualties, Party B shall also directly
report to the relevant government department in accordance with the law.
14
17-2 During the rental term of the Contract, Party A shall have the right to recourse to Party B and terminate the Contract if Party B produces safety
accident in the area of Shanghai Pudong Software Park. If the safety accidents cause loss of Party A, Party B should compensate Party A.
17-3 Party B’s safety records shall be used as a reference for Party B’s priority rights such as renewal and extension of lease (if any).
18. Other Terms
18-1 The Contract takes effect immediately after both parties have signed and sealed the contract.
18-2 The unaccomplished matters of the Contract may be concluded by the supplementary agreements or terms between Party A and Party B. The
supplementary agreement, the terms and the supplements to the Contract are an integral part of the Contract. The written words in the Contract and its
supplementary terms, agreements and the space in the appendix have the same effect as the printed language.
18-3 When both parties sign the Contract, they shall clearly understand their respective rights, obligations and responsibilities and are willing to fulfill their
obligations strictly according to the Contract. If one party violates the Contract, the other party is entitled to claim according to the Contract.
18-4 Party A and Party B shall settle their disputes through negotiation during the performance of the Contract. If they fail to reach a consensus through
negotiation, both parties agree to choose the following method (2) to settle in accordance with the laws of the People’s Republic of China:
(1)
submitted to China International Economic and Trade Arbitration Commission Shanghai Branch for arbitration;
(2)
bring a lawsuit to the people’s court where the House is located.
18-5 The Contract has four copies with the Annex, and Party A, Party B, the business department, the tax department each hold a copy. All of them have the
same effect.
18-6 All fees and taxes related to the registration of the Contract (including but not limited to stamp duty) should be borne by both parties in accordance
with the regulations of the People’s Republic of China and Shanghai.
18-7 Party B is obliged to cooperate with Party A to complete all forms of non-profitable research activities for the purpose of industry research, including
but not limited to questionnaires, interviews with business executives, and collection of economic data. Party A will not disclose any information or
data provided by Party B for other purpose other than industry research and will not disclose any trade secrets to any third party which is not related to
industrial research.
18-8 Party B confirms that Party A has fully explained and explained the relevant terms of this Contract to Party B, and Party B accepts and accepts all the
terms of this Contract, which are concluded by the parties through friendly negotiation.
15
Annex I
Plan of the House
16
Annex II
the existing decoration of the House, ancillary
facilities and equipment status, and the decoration and
additional facilities which Party A allows Party B to do in writing
Status of delivery, housing delivery standards:
1. The public
part is well decorated(Including atrium, lobby, public corridor, toilet).
2. (Office
area)Interior wall paint white, mineral wool board ceiling, lighting installed, cement floor.
17
Annex III
Notice of Shanghai Pudong Software Park Park Enterprise
Security Management
According to Production Safety Law of the People’s
Republic of China, Regulations on the Reporting, Investigation and Handling of Work Safety Accidents,
Regulations on Production Safety
of Shanghai, for further strengthen the security management of Shanghai Pudong Software Park, effectively protect the life
of the park
personnel and property safety, we will inform about the safety management in the park as follows:
1.
Safety Management Responsibilities of Companies in the Park
The company in the park should be
responsible for the work of safety management, including the area that the company leased, in the process of
working, employee’s
safety management during working or work-related experiences, and take the responsibility.
1.
The park enterprise assigns the safety commissioner as the first safety liaison and is in charge of the safety work in the leased area and liaises
with Shanghai Pudong Software Park Co., Ltd. (hereinafter referred to as “Pu soft”). If there is a change of position in the safety commissioner,
the job successor automatically becomes the first safety liaison or the park shall assign another person and informed in writing to Pu Soft.
2.
Strictly abide by the laws, regulations and rules related to safety and possess the qualifications and conditions for safety production required for
the operation of the business and industry.
3.
Pursuant to the written approval by Pu soft company, if a company can sublease or sublet the office, it shall conclude a safety management
agreement with the sub-tenant on the basis of the contents of this circular with a clear emphasis on safety responsibilities and management
requirements.
2.
Safety Requirements of Daily Operation
1.
Establish safety management rules and systems with safety responsibility system as the core. Strengthen safety education and management of
suppliers. Enhance daily education and training of employees in safety work. Provide safety management personnel and equipment. In
accordance with the relevant regulations and establish safety standards emergency rescue and evacuation plan.
2.
The renovations within the scope of renter and equipment installation should comply with the relevant provisions, norms and standards of safety
and fire safety. According to national and local regulations, construction and equipment installation needs to be reviewed and accepted.
3.
The facilities and equipment must pass inspection, tests and acceptance, and should be operated by trained and qualified people. Those people
who are engaged in special operations must have the appropriate qualifications. The equipment and operations personnel should be reviewed
annually in accordance with related regulations.
18
4.
Don’t produce, store toxic, harmful, flammable, explosive materials.
5.
Loading and unloading of goods in the designated area, do a good job of on-site safety supervision and support.
6.
It is strictly forbidden to lodge staff in the office area of Shanghai Pudong Software Park.
7.
The risk of accidents or insecurity should be self-examination and timely rectification. Cooperate with Pu soft company and the property
management unit for safety inspection and rectification.
3.
Requirements of Fire Safety
1.
Actively involved in the fire drill and cooperate with Pu soft company and property management units.
2.
Equip fire extinguisher in line with the provisions in their own rented area. Set in line with the provisions of the requirements, identify the
obvious emergency evacuation diagram. Always keep the evacuation routes and entrances and exits open.
3.
Smoking is strictly forbidden in non-smoking areas. It is forbidden to use open flame in violation of regulation.
4.
It is forbidden to block, close, occupy the evacuation routes and entrances and exits.
4.
Requirements of Security and Traffic Safety
1.
Improve staff’s awareness of personal safety, property safety and traffic safety. Properly store their valuables such as cash and securities, and set
up more reliable safety precautions to prevent theft.
2.
The motor vehicles owned by their employees or their employees’ relatives shall strictly follow the traffic lights’ instruction and traffic signs’
instruction to drive. Parking in the line with norms and regulations.
If any unexpected incident or accident occurs,
including but not limited to safety production, anti-crime, traffic or public security, it shall be reported to Pu
soft as soon as possible.
In the case of emergencies, it shall be reported directly to the police, fire department, rescue department and other departments
immediately,
afterwards be reported to Pu soft company.(contact:400-676-1818,61821818)
19
Lessor (Party A):
Lessee (Party B):
Shanghai Pudong Software Park Co., Ltd.Shanghai Chenqin Information Technology Services Co.,Ltd.
legal representative:
legal representative:
Address:
Address:
Guo Shoujing Road No.498, Zhang Jiang High Tech Park, Pudong, Shanghai
Contact number:
Contact number:
Boyun Road No.2, Pudong, Shanghai
Postcode:
Postcode:
201213
Phone:
Phone:
61821818
Delegate Agent:
Delegate Agent:
Signature and seal:
Signature and seal:
Date of contracting: September 5, 2023
Date of contracting:
Place of contract:
Place of contract:
Pudong New Area, Shanghai, China
Pudong New Area, Shanghai, China
20
Exhibit 10.9
Rental Contract for Shanghai Pudong Software
Park Guo Shoujing Park
NO:ZL(R)20230108
Both parties to this contract:
Party A (Lessor): Shanghai Pudong Software Park
Co., Ltd.
Party B (Lessee): CLPS Shanghai Co., Ltd.
According to Contract Law of the People’s
Republic of China and Regulations of Shanghai Municipality on House Leasing, both parties conclude the
contract on the basis of equality, voluntariness, fairness, honesty and credibility, for consenting that Party B should lease the house
that Party A can lease
according to law.
Section 1.
1-1
The house which is rented to Party B by Party A is located in Room 18201/18202/18203/18204/18205/18206/18207/18208, Building 17, Guo
Shoujing Road No.498, Zhang Jiang High Tech Park, Pudong, Shanghai (hereinafter referred to as “the House”). The building area of the House is
1259.94 square meters. The House should be used for research and development and office. The structure of the House is reinforced concrete
structure. The plan of the house is shown in Annex I (of this contract).
1-2
Party A establishes a leasing relationship with Party B as the real estate owner of the House. Party A has told Party B and Party B has fully known that
the House has been mortgaged before the contract is signed.
1-3
The following (if any) is shown in Annex II and/or supplementary agreements of the Contract: the scope of use, conditions and requirements of public
or shared parts of the House, the existing decoration of the House, ancillary facilities and equipment status, and the contents, standards, related matters
of the decoration and additional facilities which Party A allows Party B to do in writing. Both parties agree that all attachments and supplementary
agreements should be a basis for acceptance of housing delivery and return when the Contract is terminated or released.
1-4
When the Contract is signed, the House has accepted and used by Party B, and Party B confirm that the House can fit the purpose and acquirement of
rental at the beginning of the tenancy term. On the basis of Party B’s occupancy of the House, Party A does not have to perform any further duty to
deliver the House to Party B.
2. Rental Purposes
2-1
Party B has fully known the House’s properties and uses and Party B promises to Party A that the House will only be used for research and
development and office and Party B will abide by the state and the city regulations on the use of housing and property management.
2-2
Party B promises that the above-mentioned purpose of the use will not be changed during the rental term unless such change gets Party A’s written
consent and is approved by the relevant departments according to relative regulations.
3. Renewal Term
3-1
The Contract is a renewal contract based on the original contract (No. ZL(R)20210069) which was signed for renting the House.
3-2
The renewal term is from July 1st, 2024 (hereinafter referred to as “lease date”) to September 15th, 2026 (hereinafter referred to as “terminal date”).
4. Rent and Payment Methods
4-1
Both Parties agree that the unit rental
price is counted according to the daily construction area per square meter. The rent will be counted from July
1st, 2021
(hereinafter referred to as “rent date”) to terminal date.
From July 1st, 2024 to June 30th,
2025, the unit rental price is RMB 4.16
From July 1st, 2025 to September 15th,
2026, the unit rental price is RMB 4.24
(The above unit rental prices are
tax-inclusive prices)
4-2
Party B should pay the rent for the first month no later than the rent date. The days for calculating the rent for the first mouth is started form the rent
date to the last day of the mouth. The monthly rent will be calculated and paid according to the calendar days of the month (the monthly rent
calculation formula is: housing construction area ╳ unit rental price ╳ the calendar days of the month. The monthly rental amount is rounded to one
decimal place). Party B should pay the rent to Party A before the 10th of each month (in case of national legal holidays postponed to the next working
day). The last month’s rent should be calculated from the first day of last month to the terminal day. If the days of the last month are less than 10, the
last month’s rent should be paid before the terminal date. If the days of the last month are not less than 10, the last month’s rent should be paid before
the10th day of the month (in case of national legal holidays postponed to the next working day). Party A should issue the corresponding rental invoice
to Party B within 3 working days after receiving the rent of the month.
2
4-3
Party A should issue the corresponding rental invoice to Party B within 3 working days after receiving the rent of the month. In the term of the
Contract, if the invoice type or tax rate changes due to the change of taxation policies of the state and government, Party B agrees to adjust the price of
rent and deposit according to the latest tax rate during the remaining lease. At that time, Party A will give Party B a formal notice, and both Parties
should sign up supplementary agreements.
4-4
Party B pays the rent to Party A’s following account by check or transfer:
Shanghai Pudong Software Park Co., Ltd.
1001194909004601783
ICBC Shanghai Zhangjiang sub branch
4-5
The rent is denominated and settled in RMB. In any case that the rent needs to be denominated and settled in other currency (the currency should be
accepted by Chinese banks and convertible into RMB), the actual amount of RMB exchanged by the bank designated by Party A shall prevail.
Relevant fees due to the payment (such as bank charges) should be borne by Party B.
4-6
Party A may entrust a property management company to assist in collecting the rent.
5. Rental Deposit and Other Fees
5-1
Both Parties agree that Party B shall pay rental deposit to Party A within 5 working days after signing the Contract. The amount of the deposit is
equivalent to the rent for the three months (90 days) of the highest unit price within the lease term, which is RMB 480,793. Party B has paid RMB
462,650 for rental deposit under the original contract, and it will be automatically converted to the deposit under the Contract after the Contract
becomes effective. The margin of the deposit is RMB 18,143, and Party B shall pay it to Party A within 5 working days after signing the Contract.
Party A shall issue a receipt to Party B after receiving the deposit. If Party B fails to pay the lease deposit in full to Party A in accordance with the
provisions of this contract, Party B shall pay Party A late payment fee of 0.03% of the outstanding amount per day, until the full payment is
completed. If Party B delays or fails to pay more than 15 working days, Party A has the right to rescind the contract.
3
During the term of this contract,
Party B shall, due to breach of contract, pay liquidated damages and/or damages to Party A in accordance with the
provisions of this contract,
and Party B shall separately pay Party A liquidated damages and/or damages, and shall not have the right to request Party
A to deduct
from the above deposit. Party A shall have the right (without any obligation) to deduct such liquidated damages and / or damages from
Party B’s rental deposit and notify Party B in writing of the amount of the deduction and margin supplement. Party B should pay Party
A to
complement the margin within 5 working days after accepting the notice from Party A.
Within 10 working days after the termination
of the lease, Party A will refund Party B the balance of deposit to offset the fees (with no interest) which
Party B should bear under
the Contract (including but not limited to the monthly rent payable by Party B, property management fees, energy
consumption, Party B’s
liquidated damages and / or compensation for damages). However, if Party B uses the House for the registration of Party B’s
residence,
Party B shall, within 30 days from the date of the termination of the lease, complete the cancellation or alteration registration, and
deliver
the copy of the registration approval to Party A for record. Party A shall return the lease deposit to Party B according to the
above term after that.
5-2
Besides the house rent and property management fees, Party B shall bear the costs of energy consumption (electricity, water and gas), communication
expenses, rental fees for equipment and facilities incurred for its own use. Party A shall install separate meter for Party B’s energy consumption and
collect the fees from Party B according to the meter reading before transferring it to the offices of utilities. Party A may entrust property management
companies to assist in collecting the above fees.
5-3
Both parties agree that the property management company entrusted by Party A (hereinafter referred to as “the management company”) is responsible
for the property management of the House. At the time of signing the Contract, the management company is Shanghai Puyuan Property Management
Co., Ltd., which will be responsible for the property equipment operation, daily management and services of the House. Party B shall pay the property
management fee. Party B shall sign the Property Management Agreement with the property management company prior to the transfer of the House.
Property management fee and payment method of the House shall be implemented in accordance with the Property Management Agreement signed by
Party B and the property management company.
6. Housing Requirements and Maintenance Responsibilities
6-1
During the rental term, Party A promises that the House and its ancillary public facilities would be in normal usable and safe condition. If Party B
finds that there is any damage or malfunction of the House or its ancillary public facilities (other than Party B’s decoration and equipment), Party B
shall notice Party A and / or the management company to repair. Party A and / or the management company shall conduct inspection or repair in 48
hours after receiving the written notice from Party B and repair it within the period agreed on by both parties or within a reasonable period. If Party A
shall assume the responsibility for maintenance but Party A fails to repair it overdue, Party B may take the maintenance for it and reasonable
maintenance expenses shall be borne by Party A.
6-2
During the rental term, Party B shall fair use and take good care of the House and its affiliated public facilities, and take various preventive measures
to make the House safe from rain, wind or other natural causes. Party B shall assume maintenance responsibility for the improper or unreasonable use
of Party B which results in the damage or failure of the House and its affiliated public facilities. If Party B refuses to assume responsibility for
maintenance, Party A can take the maintenance on behalf of Party B, and reasonable maintenance costs borne by Party B. The maintenance of non-
public facilities which is owned by Party B can be entrusted to the property management companies, and maintenance costs borne by Party B.
4
6-3
Party B shall strictly follow the applicable laws, regulations, rules and regulations of China and use the House in accordance with the contractual
purposes, especially not to use the House in any unreasonable or unethical way. Party B will not use the House in any way that invalidates or increases
the risk of insurance. Party B shall ensure that the business activities engaged in using the House have obtained the business license issued by the
government administration for industry and commerce and guarantee that legal registration and permission shall be kept throughout the lease period.
6-4
During the rental term, Party A reserves the right to publish or authorize others to advertise, improve or add public facilities in other proper places
where is not exclusively for Party B. Party A shall not affect Party B’s normal use of the House and Party B’s Normal business.
6-5
Party B agrees to guarantee that Party A and / or Party A’s personnel shall be exempt from Party B’s personal injury and / or property damage, and
Party A and Party A’s personnel shall also be exempt from the third party’s claims and litigation caused by Party B.
7. Decoration and Accretion
7-1
Party B shall be responsible for the second decoration of the House. Party B’s decoration plan (including marking on the building facade or roof or
other public parts of the House) shall be subject to Party A’s approval and Party A’s written consent. Party B shall not, without prior written consent of
Party A, carry out any unauthorized activities or allow any other person to carry out any unauthorized alteration or addition of the House and its
decoration, ancillary facilities and equipment (including but not limited to trunk lines, drainage, firefighting, indoor and outdoor appearances and
existing installations). If such decoration needs the approval of the government department, Party B shall obtain the approval before construction.
7-2
During renovating the House, Party B shall not damage the building’s facade or carry out any internal structural alterations that may affect the service
life and safety of the House, including but not limited to the demolition and alteration of the bearing beam walls. If Party B needs to change the
structure of the house or modify the ancillary facilities and equipment of the house, etc., in addition to the written consent of Party A, Party B shall
pay the structural restoration fee deposit in accordance with the “Relevant Charges for Second Renovation of Leased Office of Shanghai Pudong
Software Park”, otherwise Party B shall not carry out construction.
7-3
During the rental term, the decoration belongs to Party B, and its responsibility for maintenance is also borne by Party B, unless the Parties agree
otherwise. After the expiry of the rental term (including any early termination of the Contract attributable to Party B), Party B is obliged to remove the
decoration extras and restore the house to the pre-lease status (except for natural losses). If Party B does not move on schedule, Party A can take the
behalf of the removal, and the cost borne by Party B or deducted the cost from the deposit unless Party A agrees that Party B shall retain decoration
remnants when returning the house.
5
7-4
Party A’s written consent to the decoration of Party B shall not be construed as Party A’s obligation or responsibility to Party B’s decoration and its
consequences. Party B shall guarantee that its decoration and other facilities for its own addition are safe and will not cause any potential safety
hazard for the House or its users. Party B shall assume complete legal, technical and economic responsibility for its own decoration and its
consequences.
7-5
Party A shall have the right to request Party B immediately to take all necessary measures to solve such safety problems if Party A finds any potential
safety hazard caused by Party B’s decoration and attachment actions during and after the lease and whether or not Party A agrees to such decoration
and attachment plan, until Party A unilaterally lift the lease. Party B entrusts the contractor to renovate the house. If it is not the cause of Party A,
which violates the laws and regulations of China, and the relevant provisions of construction, fire control and safety management, or causes property
damage, Party B and the contractor shall take the responsibility.
8. Enter and Check
8-1
During the lease, in order to ensure that the house and its ancillary facilities are properly accessible and safe, Party A and / or the management
company shall have the right to send staff to enter the house for reasonable inspection, maintenance and repair, but Party A and / or the management
company shall notify Party B at least 1 working day in advance (except: emergency situation and situation that Party A cannot be foreseen or
controlled). Party B should be cooperated with inspection, maintenance and repair, but Party A should minimize the impact on the use of the House by
Party B.
8-2
If Party B renounces the right of renewal, or terminates this contract prematurely according to the Contract, or Party A and Party B fail to agree on
whether to renew or not, Party B agrees that Party A has the right to accompany the interested subsequent tenants to visit the House within the time
agreed upon by both parties within 6 months prior to the termination, but Party A should give advanced notice to Party B.
9. Sublet, Mix, Transfer and Exchange
9-1
Without the prior written consent of Party A, Party B shall not sublet part or whole of the House to any third party in any form (including but not
limited to contracting, pooling affiliates, establishing affiliates, etc.) during the rental term, or mixed-use the House with any third party, or transfer the
House to others for rent, or exchange with others.
9-2
If Party B sublets part or whole of the House to any third party during the rental term, or uses it in combination with any third party, or transfers the
House to others for rent, or exchanges with other people’s rented houses in accordance with a separate written agreement between Party A and Party
B, Party B shall still be liable for the behavior of actual user of the House and the consequences during the rental term.
6
10. Priority Renewal Rights
10-1
If the lease of the Contract expires and Party B needs to continue leasing the House, Party B shall submit a written request for renewal to Party A at
least four months before the expiry of the rental term of the Contract, and re-sign the rental contract with the consent of Party A. Under the same
conditions, Party B shall enjoy the priority of renewal of the whole of the House, except as otherwise stipulated by laws and regulations. If Party B
submits to Party A only a written request for renewal of the part of the House, Party B will not enjoy the priority of renewal. If Party B lately requests
for the renewal of a written request, it shall be deemed that Party B renounces the priority of renewal.
10-2
After Party A agrees with Party B’s renewal and renewal conditions, both parties shall conclude a rental contract for the renewal of the House 3
months before the expiry date of the Contract. If Party B fails to sign the renewal contract with Party A overdue, it shall be deemed that Party B
renounces the priority of renewal. The renewal rent is determined according to the renewal contract.
11. Return
11-1
Party B shall return the House to Party A no later than the expiry date of the lease or the date on which the Contract is terminated prematurely.
11-2
Before Party B returns the House to Party A, Party B shall clean the House so that the House is in good condition and can be rented. The House which
is returned by Party B shall be in conformity with the condition when the house was delivered (that is, it meets the requirements of Annex II and / or
other supplementary agreements). When the House is returned, it should be checked by Party A or / and the property management company entrusted
by Party A and the expenses should be settled.
11-3
Party B may retain the status quo of the House’s decoration if it has the written consent of Party A (permit that Party B may produce some natural
wear and tear due to normal use) and move out of the House (hereinafter referred to as “move out of the House”), otherwise, it should be reinstated. If
Party A shall agree in writing before Party B can retain the status quo of the House’s decoration, Party A shall have no obligation to make any
compensation or compensation for Party B’s construction or renovation of the House and its decoration and facilities. If the Contract is terminated
early due to Party A’s reason or because Party A breaches the Contract, Party B has no obligation to restore the status quo ante, and the House will be
returned according to the current status.
7
11-4
If Party B fails to return the house to Party A without the written consent of Party A or does not reach an agreement in writing with Party A on
renewing the term, Party B shall pay the overdue liquidated damages of the House which is 3 times the rent to Party A, and shall bear all the energy,
equipment, property management fees and all other expenses stipulated in the Contract during the period of occupation of the House. In addition, if
Party B fails to return the house to Party A 15 days after the expiry date of the lease or the early termination date of the Contract, Party A has the right
to release the house after written notice to Party B, Party A can (but does not have the obligation to) deposit it locally or expeditiously and Party A has
the right to collect the custody fee and removal fee from Party B in respect of the objects and has the right to sell, transfer, discard or other ways
which Party A deems it appropriate, and use the proceeds (if any) for any payment that Party B owes Party A and for any loss. In case of insufficient
payment and compensation, Party A shall have the right to recover the balance from Party B.
11-5
When Party A returns the items left by Party B in the house, the relocation costs (if any) shall be borne by Party B. Party A may (but is not obligated
to) store them in place or elsewhere. After the storage is completed, Party A shall serve a notice to Party B to inform them of the storage of the items.
Party B shall collect the items on its own within 15 days from the date of receipt of the notice. Failure to collect them within the time limit shall be
deemed as Party B giving up ownership of all the returned items, which shall be handled by Party A. The first party has the right to charge the second
party a storage fee for such items, which is 50% of the daily rent per day. After 15 days, the first party has the right to sell, transfer, discard or dispose
of such items in any other way it deems appropriate, and use the proceeds of disposal (if any) to repay any amount owed by the second party to the
first party and compensate for the first party’s losses (if any). If the payment and compensation are insufficient, the first party has the right to recover
the difference from the second party. Unless otherwise agreed by both parties, the date of mailing by Party A shall be deemed as the date of delivery.
11-6
When Party A returns Party B, it will adopt methods including but not limited to hiring a notary office, recording the entire process on its own, and
creating a list of Party B’s items. Notarization materials, video recordings, and other evidence materials will be kept by Party A for three years from
the date of Party A’s return for reference and verification.
11-7
Both parties agree to deduct all expenses incurred during the clearance and storage process from the lease deposit, but the deduction of such expenses
does not mean that either party waives their right to claim damages and liquidated damages for breach of contract based on their rights and obligations
under the contract.
12. Exemption for Party A
12-1
During the rental term, when Party B occupies the House and its ancillary facilities, public facilities, if Party B causes any loss of property, damage
and personal injury caused by any of the following circumstances, Party B hereby agree, not because of Party A’s intention or gross negligence, Party
A does not bear any responsibility:
(1)
Any loss or damage due to expropriation, acquisition, confiscation, nationalization or any force majeure caused by state or government agencies;
8
(2)
Any loss or damage caused by theft, robbery and other criminal cases;
(3)
No water, electricity, telephone, fax, air-conditioning and other services to the House at any time or any public facilities in the House, including
the planned maintenance and inspection of public facilities by a third party entrusted by Party A, are not operated and it is not due to Party A’s
reasons;
(4)
Party B’s losses and damages caused by other lessees or third parties;
(5)
Party B’s losses and damages which is not caused by Party A’s intentional or gross negligence (Party A and / or the security guards and
watchman’s security services provided to the House do not constitute Party A’s liability to the House, personnel, and property).
13. Breach of the Contract and Liability for Breach
of Contract
13-1
Party A’s default
(1)
Party A shall compensate for the loss of Party B due to Party A’s transfer of property right caused by Party A’s setting up a new mortgage to the
House during the rental term as stipulated in this contract.
(2)
During the rental term, Party A fails to perform the repair and maintenance responsibilities as stipulated in the Contract in time, resulting in
damage to the House or property, or personal injury to Party B’s personnel, sub-contractors, agents, employees, and decorators due to the
structural problems of the House, Party A should be responsible for compensation.
(3)
During the rental term, except the exempt situation regulated by the Contract, laws or regulations, if Party A decides to terminate this contract or
take the House back early without authorization, Party A should give a written notice to Party B 6 months early. In this case, in addition to
returning the deposit to Party B, Party A should also pay liquidated damages which is amount to the monthly rent at that time to Party B. If Party
A informs Party B 3 months early but less than 6 months, Party A should pay liquidated damages which is twice the monthly rent at that time to
Party B. If Party A does not inform Party B 3 months early, Party A should pay liquidated damages which is triple the monthly rent at that time
to Party B.
13-2
Party B’s default
(1)
If Party B overdue payment of rent, deposit, equipment rental fee, energy consumption fee, property management fee or other relevant expenses
payable, Party B shall pay overdue fine which is 0.3% of the amount of overdue payment per day. If overdue 30 days, Party A has the right to
interrupt the water, electricity and other energy supply, until Party B pays all the expenses. And Party B should bear the cost of re-connection.
9
(2)
If Party B fails to obtain the written consent of Party A to renovates the House or additional facilities beyond the written consent of Party A,
Party A has the right to request Party B to restore the original state of the House. Party B shall be responsible for indemnification if Party B
causes irreparable damage to the House or Party A suffers losses (including but not limited to fines, damages, etc.) due to the aforesaid acts of
Party B.
(3)
Party B or any person expressly or implicitly authorized by Party B to enter the House or parking space shall be regarded as Party B’s act. If such
act causes damage or loss of personal or property to Party A or building, Party B shall jointly and severally liable for compensation.
(4)
During the rental term, except the exempt situation regulated by the Contract, if Party B decides to terminate this contract early without
authorization and Party B gives a written notice to Party A 3 months early, Party B should pay liquidated damages which is amount to the
monthly rent at that time to Party A. If Party B does not inform Party A 3 months early, Party B should pay liquidated damages which is triple
the monthly rent at that time to Party A. Party A may deduct the above liquidated damages from the remaining balance of the rental deposit that
Party B has already paid, and the insufficient part will be delivered separately by Party B.
Termination of lease refers to the
act of Party B terminating the lease relationship in advance due to its own reasons, limited to a written
statement.
(5)
If Party B registers the House as its domicile, and Party B fails to complete the registration of alteration or cancellation within 30 days from the
date of termination of the tenancy or provide the copy of certificate of registration to Party A for the record, Party B shall pay Party A liquidated
damages which is amount to the monthly rent at that time.
(6)
Party A has right to request Party B to compensate Party A for the losses suffered thereby, if Party B takes the following actions:
(a)
Intentional or negligent act of Party B and its employees and contractors on any part of the building or the House;
(b)
Party B violates or fails to comply with any applicable provisions of the Contract;
(c)
Party B, its employees and other acts of the contractor will affect the normal operation and management of the building by Party A and the
property management company unless Party B provides reasonable explanations within 24 hours after receiving the written notice from
Party A.
10
14. The Force Majeure
14-1
If either the Property or any part of the Building is destroyed or is not suitable for research and development and office during the lease period due to
Force Majeure, either party shall be entitled to notify the other in writing of the termination of the Contract, and neither party shall pursue the default
responsibility. The Contract is terminated from the day when notice is given by either party. Party A should return Party B the remaining rental
deposit, rental after the force majeure, and other expenses that Party B has prepaid within 10 working days from the date of termination of the
Contract after deducting the relevant expenses according to Clause 13 of the Contract without interest, as long as Party B pays all the expenses
payable by Party B before the force majeure which is regulated by the Contract and the supplementary agreements.
14-2
The party suffering from force majeure shall, within 15 days after the occurrence of such event, notify the other party in writing of the specific
circumstances of the force majeure event and provide supporting documents to prove the existence and continuation of the force majeure event
(including government regulatory documents, if applicable) in case of telecommunications interruption until the restoration of telecommunications. If
the party suffering from force majeure fails to notify the other party in accordance with the above provisions and provide appropriate proof, that party
shall not request exemption from its responsibilities based on its inability to fulfill relevant obligations. In addition, the party affected by force
majeure shall take all necessary measures to minimize losses, otherwise it shall be held responsible for the expanded losses.
14-3
The above “force majeure” means any unforeseen event beyond the reasonable control of one party and which is unavoidable despite reasonable care
is given by the party, including but not limited to, earthquake, typhoon, plague, flood, fire, storms, tidal waves or other natural disasters, declared or
undeclared war, riots and so on.
15. Terminate the Contract
15-1
Both Parties agree that one party may be written notice to the other party to terminate the Contract under the following situations, and the party
breaching the Contract shall pay liquidated damages which is triple the monthly rent at that time to the other party. If the party breaching the Contract
also cause damages to the other party, and if the liquidated damages are insufficient to meet the damages, the balance still needs to be made up.
(1)
Party A fails to deliver the House on time and still cannot deliver the House 30 days after the written notice from Party B;
(2)
The house delivered by Party A does not meet the contract stipulated in Annex Ⅱ of the Contract, resulting in the failure to realize the purpose of
the lease; or the House delivered by Party A is defective and endangers the safety of Party B;
(3)
Party B fails to obtain the written consent of Party A to change the use of the House;
(4)
Party B causes damage to the main structure of the House or other irreparable damage;
11
(5)
Party B, without the written consent of Party A and the approval of the relevant department, arbitrarily changed the nature of the production and
use involved in the property planning;
(6)
Party B fails to obtain the written consent of Party A and permission from the safety production supervision, fire control and other relevant
departments to add or modify special equipment or to produce, manage, transport, store, use or dispose of hazardous chemicals;
(7)
Party B renders part or all of the House to any third party without authorization, or uses it in combination with any third party, or transfers the
House to others for rent or exchanges with other people’s houses;
(8)
Party B has not paid the rent over 30 days, and still cannot pay the rent 30 days after the written notice from Party A.
15-2
Due to the breach of item (8) of the preceding paragraph, the Party A has the right to retain all the articles in the House until Party B pays all the
money (including the liquidated damages) to Party A.
15-3
Both Parties agree that the Contract is terminated under the following situations, and neither of them should be responsible for the termination.
(1)
The land use rights within the occupied area of the House are recovered early according to law;
(2)
The House is requisitioned according to law because of public interests;
(3)
The House is included in the scope of the permit for house demolition due to urban construction;
(4)
The House is damaged, lost or has been identified as a dangerous house;
(5)
Party A has informed Party B that the mortgage has been set before the rental, and is now being disposed of.
16. Statements and Guarantees
a)
Party A hereby states and guarantees as follows:
(1)
Party A has all the necessary authorizations to formally and effectively sign and perform the Contract and possess all the necessary powers and
capabilities to lease the House to Party B in accordance with applicable laws.
12
(2)
Party A’s signing and performance of the Contract shall not constitute a violation of the applicable law or any contract signed by Party A with
any third party.
(3)
Party A guarantees that the House has been built and in good condition in accordance with applicable laws (including but not limited to safety
and health related laws and regulations) and has legal ownership over it.
b)
Party B hereby states and guarantees as follows:
(1)
Party B has all the necessary authorizations to formally and effectively sign and perform the Contract.
(2)
Party B has legal business qualification. During the renewal of the Contract, Party B will engage in business activities in accordance with the
scope of its business license, and its business activities must comply with the relevant provisions of national laws and regulations.
(3)
Party B promises not to disclose any information involved in the Contract to any third party, including but not limited to the rental price. If Party
B’s behavior leaks any of above mentioned information, Party A reserves the right to retroactively indemnify Party B.
17. Safe Production
17-1
Party B shall strictly comply with the safety management code of the park including the Notice on Enterprise Safety Management in Shanghai Pudong
Software Park (see Annex Ⅲ for details) and shall be fully responsible for its own safety management. Party B shall immediately inform Party A in an
effective manner once a safety accident has occurred, and provide a written report after the incident, while trying its best to avoid or reduce the
casualties or property damage. If the circumstances of the accident are serious and have caused or may cause casualties, Party B shall also directly
report to the relevant government department in accordance with the law.
17-2
During the rental term of the Contract, Party A shall have the right to recourse to Party B and terminate the Contract if Party B produces safety
accident in the area of Shanghai Pudong Software Park. If the safety accidents cause loss of Party A, Party B should compensate Party A.
17-3
Party B’s safety records shall be used as a reference for Party B’s priority rights such as renewal and extension of lease (if any).
18. Other Terms
18-1
The Contract takes effect immediately after both parties have signed and sealed the contract.
18-2
The unaccomplished matters of the Contract may be concluded by the supplementary agreements or terms between Party A and Party B. The
supplementary agreement, the terms and the supplements to the Contract are an integral part of the Contract. The written words in the Contract and its
supplementary terms, agreements and the space in the appendix have the same effect as the printed language.
13
18-3
When both parties sign the Contract, they shall clearly understand their respective rights, obligations and responsibilities and are willing to fulfill their
obligations strictly according to the Contract. If one party violates the Contract, the other party is entitled to claim according to the Contract.
18-4
Party A and Party B shall settle their disputes through negotiation during the performance of the Contract. If they fail to reach a consensus through
negotiation, both parties agree to choose the following method (2) to settle in accordance with the laws of the People’s Republic of China:
(1)
submitted to China International Economic and Trade Arbitration Commission Shanghai Branch for arbitration; arbitration shall be conducted in
accordance with the current effective arbitration rules of the Shanghai International Economic and Trade Arbitration Commission at the time of
the arbitration application
(2)
bring a lawsuit to the people’s court where the House is located.
18-5
The Contract has four copies with the Annex, and Party A, Party B, the business department, the tax department each hold a copy. All of them have
the same effect.
18-6
All fees and taxes related to the registration of the Contract (including but not limited to stamp duty) should be borne by both parties in accordance
with the regulations of the People’s Republic of China and Shanghai.
18-7
Party B is obliged to cooperate with Party A to complete all forms of non-profitable research activities for the purpose of industry research, including
but not limited to questionnaires, interviews with business executives, and collection of economic data. Party A will not disclose any information or
data provided by Party B for other purpose other than industry research and will not disclose any trade secrets to any third party which is not related to
industrial research. 18-8 Party B confirms that party A has fully explained and interpreted the relevant terms of this contract to party B; Party B
acknowledges and accepts all the terms of this contract, which have been reached through friendly negotiations between the two parties.
(There is no text following.)
14
Annex I
The floor plan of the House
Annex II
the existing decoration of the House, ancillary
facilities and equipment status, and the decoration and additional facilities which Party A allows Party B to do
in writing
Current situation of house delivery, house
delivery standards:
1. Fine decoration of common areas
(including the entrance hall, lobby, public corridors, and bathrooms);
2. The indoor (office area) walls
are painted white, the mineral wool board ceiling is suspended, the lighting fixtures are installed, and the cement floor is
installed.
Annex III
Notice of Shanghai Pudong Software Park Park Enterprise
Security Management
According to Production Safety Law of the People’s
Republic of China, Regulations on the Reporting, Investigation and Handling of Work Safety Accidents,
Regulations on Production Safety
of Shanghai, for further strengthen the security management of Shanghai Pudong Software Park, effectively protect the life
of the park
personnel and property safety, we will inform about the safety management in the park as follows:
1.
Safety Management Responsibilities of Companies in the Park
The company in the park should be
responsible for the work of safety management, including the area that the company leased, in the process of
working, employee’s
safety management during working or work-related experiences, and take the responsibility.
(1)
The park enterprise assigns the safety commissioner as the first safety liaison and is in charge of the safety work in the leased area and liaises
with Shanghai Pudong Software Park Co., Ltd. (hereinafter referred to as “Pu soft”). If there is a change of position in the safety commissioner,
the job successor automatically becomes the first safety liaison or the park shall assign another person and informed in writing to Pu Soft.
(2)
Strictly abide by the laws, regulations and rules related to safety and possess the qualifications and conditions for safety production required for
the operation of the business and industry.
(3)
Pursuant to the written approval by Pu soft company, if a company can sublease or sublet the office, it shall conclude a safety management
agreement with the sub-tenant on the basis of the contents of this circular with a clear emphasis on safety responsibilities and management
requirements.
15
2.
Safety Requirements of Daily Operation
(1)
Establish safety management rules and systems with safety responsibility system as the core. Strengthen safety education and management of
suppliers. Enhance daily education and training of employees in safety work. Provide safety management personnel and equipment. In
accordance with the relevant regulations and establish safety standards emergency rescue and evacuation plan.
(2)
The renovations within the scope of renter and equipment installation should comply with the relevant provisions, norms and standards of safety
and fire safety. According to national and local regulations, construction and equipment installation needs to be reviewed and accepted.
(3)
The facilities and equipment must pass inspection, tests and acceptance, and should be operated by trained and qualified people. Those people
who are engaged in special operations must have the appropriate qualifications. The equipment and operations personnel should be reviewed
annually in accordance with related regulations.
(4)
Don’t produce, store toxic, harmful, flammable, explosive materials.
(5)
Loading and unloading of goods in the designated area, do a good job of on-site safety supervision and support.
(6)
It is strictly forbidden to lodge staff in the office area of Shanghai Pudong Software Park.
(7)
The risk of accidents or insecurity should be self-examination and timely rectification. Cooperate with Pu soft company and the property
management unit for safety inspection and rectification.
3.
Requirements of Fire Safety
(1)
Actively involved in the fire drill and cooperate with Pu soft company and property management units.
(2)
Equip fire extinguisher in line with the provisions in their own rented area. Set in line with the provisions of the requirements, identify the
obvious emergency evacuation diagram. Always keep the evacuation routes and entrances and exits open.
(3)
Smoking is strictly forbidden in non-smoking areas. It is forbidden to use open flame in violation of regulation.
(4)
It is forbidden to block, close, occupy the evacuation routes and entrances and exits.
16
4.
Requirements of Security and Traffic Safety
(1)
Improve staff’s awareness of personal safety, property safety and traffic safety. Properly store their valuables such as cash and securities, and set
up more reliable safety precautions to prevent theft.
(2)
The motor vehicles owned by their employees or their employees’ relatives shall strictly follow the traffic lights’ instruction and traffic signs’
instruction to drive. Parking in the line with norms and regulations.
Once an emergency or safety accident is discovered
or occurs, including but not limited to safety production, fire protection, traffic or public security
situations, it should be reported
to Pudong software Company as soon as possible. If the situation is particularly urgent, it can also be directly reported to the
public
security, fire protection, emergency and other departments, and then immediately reported to Pudong software Company (contact information:
400-
676-1818 or 61821818).
Lessor (Party A):
Lessee (Party B):
Shanghai Pudong Software Park Co., Ltd.
CLPS Shanghai Co., Ltd.
Legal representative:
Legal representative:
Address:
Address:
No 498, Guoshoujing Road, Pudong District, Shanghai,China
Contact address:
Contact address:
No 2, Boyun Road, Pudong District, Shanghai,China
Zip code:
Zip code:
Phone:
Phone:
61821818
Agent:
Agent:
Signature and seal:
Signature and seal:
Sign date:n
Sign date:
2023-9-5
Contracting place:
Contracting place:
Pudong, Shanghai
Pudong, Shanghai
17
Exhibit 10.10
Housing lease Contract
(Office space project)
Date of contract. Year Month Day
Party A: 【Dalian
Software Park Rong Yuan Development Co.
】
Registered office.【Room
202H, 2/F, Jinhuai Building, No. 33 Hongchuan East Road, Dalian Hi-Tech Industrial Park, Liaoning Province】
Tel.【0411-84756943】
Fax 【116023】 Postcode. 【
】
Party B: 【CLPS
Dalian Co., Ltd. 】
Registered office.【Room
#01-01/02/03/04, 1st Floor, No. 1, Huixian Park, Qixianling, Dalian Hi-Tech Industrial Park, Liaoning Province, China】
Tel.【13898687842】
Fax 【 】 Postcode.【
】
The two parties, A and B, in
accordance with the laws and regulations in force in the People’s Republic of China, enter into this contract after friendly
consultation
regarding the lease of Party A’s premises by Party B.
Chapter 1 Leasehold
1. Basic overview of the house
1.1 Party B voluntarily leases the premises owned
by Party A (hereinafter referred to as “the premises”), the basic overview of which is set out in the “Basic
Information
Sheet of the Contract” attached to this contract; Party A guarantees that the facilities provided are in good condition.
1.2 Party A guarantees that the property right
of the house is clear and free from disputes. In case of any property right disputes or other debts related to Party
A, Party A shall
be responsible for clearing them up; Party A shall be responsible for compensating for any losses caused to Party B.
2. Use of the house
2.1 The premises rented by Party B shall be used
only for the purpose of conducting business in the relevant industry as agreed in the “Basic Information
Form of the Contract”
annexed to the Contract, and shall not be used for other purposes without the written consent of Party A. Party B shall not sublet or
sublet the premises in whole or in part to a third party or exchange the premises with a third party.
1
2.2 Party B shall apply for and bear the costs
of all approvals, licences and other permits required for the operation of its business in the premises. Party B
guarantees that all business
activities undertaken by it in the premises will obtain all business permits and other formalities issued by the government
administration
for industry and commerce, and that it will maintain legal registration and permits throughout the lease period.
3. Handover of the house
3.1 Conditions of handover of the house
The conditions of handover
of the house are detailed in the Basic Information Sheet of the contract annexed to the contract and are subject to the actual
conditions
at the time of handover.
Party B confirms that it has
inspected the house on site before signing this contract, and has fully understood and approved of the current state of the
interior and
exterior of the house, its designed use and the then condition of its ancillary facilities and ancillary properties, and has no objection
to them.
3.2 Check-in handover process
3.2.1 Party B shall send an application for occupation
to Party A at least 2 working days before the commencement date of the lease as agreed in the contract,
and Party A shall arrange personnel
to hand over the leased premises together with Party B in accordance with the handover conditions upon receipt of the
application, and
the handover shall be completed before the commencement date of the lease; if Party B fails to make any payment as agreed before the
occupation, Party A shall have the right to refuse to go through the occupation procedures to deliver the premises to it and shall not
be liable for any breach
of contract.
3.2.2 When there is no objection to the handover,
the representatives of A and B shall sign and confirm on the Notice of Occupancy respectively, and the
handover of the house key or access
card shall be carried out after the signature (in case
of renewal of the tenancy agreement, the two parties shall no longer
handle the handover process of occupancy, and the handover shall
prevail at the initial occupancy).
3.2.3 If the handover is actually used by you
or is not completed by the Lease Commencement Date for your reasons, the handover will be deemed to be
complete, i.e. the Premises will
be deemed to meet the necessary standards and to have been delivered to you in good order on the Lease Commencement
Date and the Lease
Term will commence.
2
3.3 Check-out acceptance process
3.3.1 When withdrawing from the premises, Party
B shall submit an application for withdrawal to Party A within the time limit required by Party A 7 days
prior to the expiry of the lease
term or early termination of the contract, and Party A shall arrange personnel to inspect and hand over the premises together
with Party
B before the expiry of the lease term or early withdrawal date in accordance with the handover conditions stipulated in Clause 3.1 of
this contract.
3.3.2 Party B shall ensure that the original decoration
(including the ceiling) and facilities of the Premises are intact (except for natural damage) and that the
condition of the room is restored
to its original condition as agreed in the original condition restoration standards in the Contract Basic Information Form
attached to
this Agreement. In the event of any other damage or interruption to our rental, Party B shall compensate Party A for all losses, including
but not
limited to the occupation fee of the premises during the restoration period, liquidated damages, agency fees or other losses incurred
as a result of the delay in
delivery of the premises by Party A to the new tenant. The costs required for restoration shall be paid by
Party B at its own expense or, if entrusted to Party A
for completion, the relevant costs shall be paid to Party A.
If Party B fails to return
the premises to Party A as agreed in this contract, Party A shall have the right to restore the premises to its original condition at
its own expense and all costs arising therefrom shall be borne by Party B. Party A shall also have the right not to remove but to retain
some or all of the
improvements made by Party B and the aforesaid facilities and equipment owned by Party B. In such case, Party B shall
be deemed to have relinquished its
ownership of such improvements, facilities and equipment and Party B shall not be entitled to claim
any compensation or indemnity in respect of such
improvements, facilities and equipment retained by Party A. You shall not be entitled
to claim any compensation or indemnity in respect of such
improvements, facilities and equipment retained by us.
3.3.3 When Party B withdraws from the premises,
all fees payable must be settled; if Party B has registered for business and industry in the rented premises,
Party B shall change the
address of the business and industry registration to another place within 10 days after the termination of this contract and report the
approval or certificate from the relevant government authorities to Party A for backup.
3.3.4 After acceptance, all keys or access cards
of the rooms will be returned to Party A after the representatives of Party A and Party B respectively sign and
confirm on the Notice
of Check-out.
3
Chapter 2 Term of Lease
4.1 Lease term
4.1.1 The term of the lease is detailed in the
Basic Information Sheet of the Contract annexed hereto.
4.1.2 If Party B does not move in on time for
reasons other than Party A’s handover, the lease term shall commence on the contractual commencement date.
4.1.3 If Party A transfers the premises during
the lease period, it shall give Party B two months’ notice
in advance and guarantee the continued performance
of this contract. Party B shall have the right of first refusal under the same conditions,
but Party B shall have no right of first refusal if Party A transfers the
whole building (where Party B leases the premises). If Party
B exercises its right of first refusal, it shall give a written reply within five days from the date of
receipt of the notice, failing
which it shall be deemed to have waived its right of first refusal.
4.2 Lease renewals
4.2.1 If Party B needs to continue to lease the
premises after the expiry of the lease term, it shall submit an application for renewal of the lease to Party A in
writing two
months before the expiry of the lease term; if Party B fails to notify Party A on time, Party A shall have the right to deal with it
in accordance
with Party B’s non-renewal of the lease.
4.2.2 Party A shall reply to Party B’s application
for lease renewal within 10 working days upon receipt of such application. Upon mutual agreement, Party B
shall sign a lease renewal
contract one month before the expiry of the lease; if the contract
is not signed on time, Party A shall have the right to deal with it in
accordance with Party B’s non-renewal of the lease.
4.2.3 The parties agree that if the renewal of
the lease is agreed, the parties may sign the Annexed Basic Information Form only and this contract shall
continue to be valid during
the renewal period; matters relating to the payment of fees during the renewal period and any amendments to this contract may be
added
to the Basic Information Form with the corresponding terms and conditions, which shall take precedence over the terms of this contract.
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4.2.4 If Party B does not intend to renew the
lease, or if the parties fail to sign a renewal contract within one
month before the expiry of the lease term, Party
A shall have the right to enter into an intention or contract to lease the Leased
Premises with a third party, and shall have the right to carry out the leasing of
the Leased Premises to Party B. Party B may, at any
reasonable time upon prior notice, allow the new lessee or user of the Leased Premises to survey the site
and carry out the necessary
inspection of the premises, and Party B shall You shall co-operate.
4.3 Surrender of rent
4.3.1 Upon expiry, termination or early termination
of the contract, Party B shall move out of the premises as scheduled and in accordance with the agreed
standard. If Party B fails to
move out of the premises on time, Party A may grant a grace period of three
working days; if Party B still fails to move out
within the grace period, Party B shall pay double the rent and the occupation
fee of the property fee standard according to the actual number of days of stay,
and Party A may take any measures to exercise the ownership
and right to use the leased premises, and has the right to replace the keys of the leased
premises and prohibit Party B and its associated
third parties from re-entering the leased premises; for For the renovation of the leased premises and the
articles, equipment and facilities
left by Party B and its associated third parties, they are deemed to have been abandoned by Party B and Party A has the right
to dispose
of them by itself, and Party B shall not claim any rights and incur any costs against Party A as a result. The costs incurred (including
but not
limited to attorney’s fees, construction costs for restoration of the original condition, relocation costs, clearance costs,
auction costs, storage costs, etc.) shall
be borne by Party B. If the proceeds from the disposal are not sufficient to cover the costs
payable by Party B, Party A shall have the right of recourse against
Party B.
4.3.2 Upon expiry, cancellation or early termination
of the contract, both parties shall go through the procedures for handing over and acceptance of the rent
and settlement of expenses in
accordance with the requirements of this contract; the date when the premises are inspected and accepted by Party A and the
Notice of
Withdrawal is issued shall be the official withdrawal date of Party B.
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Chapter 3: Rental and other fees and payment
methods
5. Rent, property management fees and other
fees and payment methods
5.1 Rates for rent, etc.
Party A is a general taxpayer.
The amount and method of payment of rent, property management fees and other charges are detailed in the Annex “Basic
Information
Sheet of the Contract” and the prices stated therein are all tax inclusive.
5.2 Performance bond
5.2.1 The standard and amount of payment of the
performance deposit are set out in the Annex “Basic Information Sheet of the Contract”. Party B shall pay
the deposit to Party
A together with the first installment of rent and property management fee; Party A shall issue a receipt for receipt for Party B upon
receipt of the performance deposit.
5.2.2 In the case of a renewal contract, Party
B has paid the corresponding performance deposit. If there is no change in the rent and property charges, Party
B may not pay the performance
deposit; if there is a change in the rent and property charges, the renewal contract will be executed as agreed.
5.2.3 The performance bond is a security deposit
delivered by Party B to guarantee the performance of Party B’s obligations under this Agreement. Party A
shall have the right not to apply
it against the rent, property charges, liquidated damages and any other expenses (including but not limited to losses incurred
by Party
A or third parties as a result of Party B) owed by Party B. Party A shall have the right to choose to recover the relevant outstanding
amount and
liquidated damages directly from Party B. If Party A adopts to set off all or part of the performance bond against the amount
owed by Party B to Party A,
Party B shall make payment to Party A within 5 working days upon receipt of Party A’s notice to re-fill the
original amount of the performance bond, and if
the performance bond is insufficient to set off, Party A shall have the right to continue
to recover the outstanding portion from Party B, or else bear the
liability for default in respect of overdue fees in accordance with
Clause 11.1 of this Agreement.
5.2.4 Upon expiry of the lease term or early termination
of the contract, Party B shall pay all the fees payable under this contract and complete the check-out
and acceptance process as agreed
in this contract, and Party A shall return the performance deposit to Party B without interest within 30 days from the date
Party A takes
over the leased premises and accepts the premises. In case of late return, Party A shall pay to Party B a late payment of 0.1% of the
total
performance deposit on a daily basis.
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5.3 Payment methods
5.3.1 Rent and property management fees
5.3.1.1 Party B shall pay the rent and property
management fee to Party A’s account as agreed in the Basic Information Form of the Contract.
5.3.1.2 If there is any change to the account
number specified by us, we shall notify you in writing at least 14 days in advance of the next payment date; you
shall not be liable for
any failure to receive payment on time as a result of our failure to properly comply with the aforesaid notification obligations.
5.3.2 Water and electricity charges in the leased
area
5.3.2.1 Water and electricity charges in the leased
area shall be collected by Party A on behalf of Party B according to the actual occurrence of Party B. The
property management company
hired by Party A shall issue an itemized breakdown to Party B. The meter will be read on the 20th of each month and the bill
will be paid
by the 20th of the following month.
5.3.2.2 In the event that the government adjusts
the water and electricity tariff during the lease period, the adjusted standard will be implemented according to
the corresponding range.
Party A shall give written notice of the adjusted standard to Party B. The adjusted water and electricity tariffs shall take effect in
the
month in which Party A gives written notice.
5.3.2.3 Charges in the event of a meter failure
are based on the average of the water and electricity bills for each month from one month prior to the failure to
four months prior to
the failure.
5.3.2.4 Costs incurred for the use of air-conditioning,
heating, etc., required outside the contracted hours shall be as agreed in the Contract Annex “Basic
Information Sheet for Contracts”.
5.3.3 Communication fee: To be paid by Party B
to the relevant communication operation service provider.
5.3.4 Taxes: All kinds of taxes and fees incurred
as a result of this contract shall be handled by both parties in accordance with the relevant provisions of the
tax law of the People’s
Republic of China.
5.4 During the lease period, Party A may reasonably
adjust the property management fee due to changes in government policies, the market and other reasons
and the increase or decrease of
property service content, but shall negotiate with Party B on the standard of the property management fee.
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Chapter 4 Property
Services and Asset Maintenance
6. Contents of property services
6.1 During the lease period, Party A or the property
management company entrusted by Party A shall be responsible for the property service work of the
house, and the contents of the property
service are detailed in the Annex of the contract “Contract Basic Information Form”.
6.2 During the term of the lease, Party B is responsible
for the cleaning and the fire and security work in the leased premises as well as the property work
which is not part of the above property
services.
6.3 During the lease period, Party B shall manage
the contents of the premises by itself.
7. Property Covenants
7.1 During the lease period, we are obliged to
coordinate the relationship between Party B and the property management company responsible for the
management of the common areas.
7.2 Upon occupation, Party B shall provide the
property management company engaged by Party A with the contact numbers of three main contacts for
backup in case of emergency or other
situations.
7.3 During the lease period, for the sake of safety,
when Party B needs to move office furniture and computers and other items out of the building, it should
register with Party A’s property
management department in advance.
7.4 Party A shall have the right to change the
name of the building in which the leased premises are located (hereinafter referred to as “the Building”) as
necessary, provided
that Party B is notified in writing or by public notice 30 days in advance.
7.5 A unified standard signage system will be
set up in the lobby of the main entrance of the building. When Party B moves in, Party A will provide Party B
with the production and
installation of the signage once free of charge (limited to Party B’s first move-in), and the name of the signage will be limited to the
name and room number recorded in this contract; without Party A’s written consent, Party B shall not post, set up or hang LOGO, drape
or other signage
outside its leased area and conduct related You shall not post, install, hang logos, drapes or other signs or conduct
related promotional activities outside the
leased area without our written consent.
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7.6 In order to ensure the safety of electricity
consumption, a 10-hour power outage will be carried out once every two years for the building’s electricity
equipment in accordance with
the Electricity Law, and Party A will notify Party B 60 calendar days before the day of the power outage.
7.7 In order to ensure the normal operation of
the air conditioning, there will be 15 days of equipment maintenance days each year during the winter-summer
and summer-winter switchover
periods, during which the operation of the building’s air conditioning system will cease; Party A will notify Party B 7
calendar days
in advance.
7.8 During the lease period, Party B should pay
attention to property and personal safety, and Party B is the first responsible person and the ultimate
responsibility bearer of fire
safety. All responsibilities for personal injuries or fire accidents not due to Party A shall be borne by Party B; Party B shall
compensate
for any losses caused to Party A.
8. Maintenance and repair of the house
8.1 Party A shall be responsible for the maintenance
and repair of natural damage to the house and ancillary facilities. Party A’s responsibility for the
maintenance of the house shall be
limited to the original structure of the house, the power supply lines and the common parts of the house without alteration
by Party B.
8.2 The maintenance obligations and the maintenance
costs of the parts decorated and renovated by Party B, the equipment and facilities and property added
by Party B shall be borne by Party
B. Party B shall ensure that they are in a suitable and safe condition and shall not endanger the personal and property
safety of the
rented premises, the building and other users.
8.3 During the lease period, Party B shall promptly
notify Party A or the property management company of any damage or malfunction to the premises and
ancillary facilities, and Party A shall
not be liable for any loss caused to Party A as a result of untimely notification by Party B.
8.4 Party A shall, upon receipt of the above notice,
carry out maintenance after judging the responsibility according to the actual situation; if the damage or
fault is within the scope of
Party B’s maintenance responsibility or if it is within the scope of Party A’s maintenance but caused by Party B’s improper use or
intentional
damage, Party B shall carry out timely repair and notify Party A or the property management company; if Party B refuses to carry out repair
within three calendar days upon receipt of Party A’s supervisory notice, Party A may carry out repair on behalf of Party B at Party B
shall bear the cost.
8.5 The party responsible for maintenance shall
compensate the other party for direct economic loss if delayed maintenance or improper maintenance causes
damage to the other party.
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9. Renovation and alteration of the house
9.1 In addition to the provisions of this Contract,
if Party B needs to install additional ancillary facilities and equipment, it shall obtain prior written consent
from Party A and, if
it is required to report to the relevant authorities for approval, it shall also submit to the relevant authorities for approval before
proceeding.
9.2 With the written consent of Party A and the
approval of the relevant government authorities (if required), Party B may carry out secondary decoration of
the premises according to
its business needs, but shall comply with Party A’s regulations on secondary decoration and relevant national regulations and bear
all
costs incurred in the decoration (including the costs of alteration and increase of fire-fighting facilities, etc.), while Party A has
the right to supervise the
decoration process of Party B. Party A has the right to stop Party B from violating the national regulations
and this contract, and to request Party B to
compensate for the losses caused to Party A as a result.
9.3 Party B shall be responsible for the fire-fighting
examination and inspection of the decoration of the rented area and shall not use the premises before
obtaining fire-fighting acceptance
and other formalities; if Party B carries out decoration or alteration without fire-fighting examination and inspection or
obtains other
formalities or uses the unexamined premises, all responsibilities arising therefrom shall be borne by Party B and Party B shall fully
compensate
for any losses caused to Party A.
9.4 The per capita floor area of the office area
before and after Party B’s renovation shall not be less than 10
square metres and the weight of the articles in
the area shall not exceed the floor load-bearing standard of 200
kilograms per square metre. If Party B violates the above standard, all consequences shall be
borne by Party B and Party B shall
fully compensate for any losses caused to Party A.
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9.5 In view of the different occupation times
of the tenants in this building, in order to ensure the working environment of the tenants who occupy the
building first, the decoration
period shall be specified by Party A or the property management company, and Party B and the decoration contractor shall apply
again in
special circumstances; Party B shall carry out the construction work in a manner consistent with this contract and the relevant property
management
regulations, and shall not use the common passageway of the floor or the area outside the scope of the tenancy as a pile of
building materials or tools without
the consent of Party A. The use of the common passageway and the area outside the leased area shall
not be used for stacking building materials or tools
without our consent.
10. Entry inspection and adjacency
10.1 Entry work checks
10.1.1 Party B agrees that Party A or the property
management company may enter the parts of the building leased by Party B for maintenance, sanitation,
burglary, disaster prevention, ambulance
or other management purposes or for the maintenance of adjacent tenants; normally, Party A shall give 24 hours’
notice to Party B.
10.1.2 Party A or the property management company
shall be accompanied by Party B’s personnel to enter the premises. In case of emergency and if Party B
cannot be contacted, Party A or
the property management company shall have the right to enter the premises to deal with the emergency and shall not be
liable for any
loss caused to Party B as a result, but shall explain the emergency to Party B afterwards.
10.1.3 In the event of the above, Party B shall
support and cooperate with the work of Party A or the property management company; Party A or the property
management company shall minimise
the impact on Party B.
10.2 Adjacency
10.2.1 Party B shall not do or tolerate any act
which may cause a nuisance or disturbance to us or to neighbouring occupiers.
10.2.2 If a dispute arises between Party B and
a neighbouring tenant, Party A shall be obliged to co-ordinate.
10.2.3 In the event of a dispute between adjacent
tenants caused by Party B, Party A shall have the right of recourse against Party B if the adjacent tenants
bring proceedings against
it and Party A is named as a defendant or third party and is held liable.
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10.2.4 If, during the term of the lease, any rectification
request is made by any government authority in respect of the renovation (including but not limited to
fire safety facilities) of the
adjoining unit of the Premises, Party B shall provide all necessary assistance and cooperation as required by Party A or the
property
company to comply with such rectification request; if Party B suffers any loss as a result, Party B shall, with the assistance of Party
A, negotiate
with the occupants of the adjoining unit to settle the compensation issue We shall not be liable in any way for such damages.
You shall not refuse or delay to
provide such assistance or cooperation on the ground that you have not yet reached agreement with the
occupants of the adjoining unit.
Chapter 5 Liability for breach of contract,
dispute resolution
11. Liability for breach of contract
11.1 Late Payment of Fees
11.1.1 During the lease period, if Party B fails
to pay the rent, property charges, utilities, performance bond or other relevant charges payable as agreed in the
contract, Party B shall
pay to Party A a late payment fee of 0.1% of the overdue charges for each day of delay without prejudice to other rights or remedies of
Party A. The late payment fee shall be calculated from the date on which each of the above charges is payable until Party B has paid all
the aforementioned
charges in full. The late payment period shall commence on the date on which each of the above fees is payable and
shall continue until all of the
aforementioned fees, principal, late payment and other related fees are paid.
11.1.2 Party B shall not move the assets in the
leased premises without Party A’s consent unless Party B has paid the rent and other charges in accordance
with the contract. If Party
B fails to pay the appropriate fees on time even after a reminder has been sent to it by Party A, Party B agrees that Party A may
take
the following remedial measures to protect Party A’s interests, namely
(1) Party A has the right to terminate the functions
of the premises rented by Party B, including but not limited to termination of the provision of water,
electricity, air-conditioning,
lift, access to the premises and other functions until Party B has paid in full in accordance with the contract, and all economic
losses
that may be incurred by Party B as a result shall be borne by Party B. Party B shall be responsible for all costs incurred in reconnecting
the above-
mentioned functions and shall pay the normal rent and property charges during the period of disconnection.
(2) Move all the assets in Party B’s house to
Party A’s asset pool and if Party B pays the full cost, Party A will return Party B’s assets; if Party B does not pay
the full cost within
fifteen days, Party A has the right to dispose of Party B’s assets.
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11.1.3 In the event that Party B defaults on the
payment of rent, property charges, utilities, performance bond or any other fees payable (not paid in full) for
more than 60 days in aggregate,
Party A shall have the right to unilaterally terminate the contract and repossess the Premises and Party B shall pay to Party A
all outstanding
amounts due under this contract (including outstanding fees and corresponding late payment fees) for the period of actual use of the Premises,
20% of the total rent and You shall also pay 20% of the total rent and property charges for the remaining tenancy period, and indemnify
us for any loss
suffered by us as a result (including but not limited to legal fees, court costs, rent, management and air-conditioning
fees and other costs that we could have
collected under this contract during the vacancy period, as well as the investment leasing costs
incurred in leasing the premises to a new tenant, etc.), and the
performance deposit received by us shall not be refunded.
11.2 Early termination of contract
During the term of the lease,
unless otherwise agreed herein, neither party may unilaterally terminate this contract without statutory or agreed reason.
Either party may unilaterally
terminate the contract if the following conditions are met and confirmed and agreed to by the other party: (1) a written
application is
made to the other party at least 90 days in advance; (2) liquidated damages are paid to the other party at 20% of the total rent and property
charges for the remaining tenancy period; (3) all costs incurred and agreed to be payable under this contract are settled before the date
of surrender.
The Parties further clarify
that the following two circumstances shall not be subject to this Clause 11.2: (1) if Party B needs to terminate this Agreement
early
due to expansion of the lease (i.e. leasing a larger area of premises in the development and management zone of Party A and a lease contract
has been
actually signed), Party A and Party B shall discuss the operation procedure separately; (2) if Party B needs to change the subject
of the lease and Party A
agrees in writing, Party A and Party B may jointly negotiate (2) If Party B needs to change the subject of the
lease and Party A agrees in writing, Party A and
Party B may mutually agree to terminate this contract early and assign the remaining
term and rights and obligations to the new subject of the lease, provided
that Party B proves that the new subject of the lease is an
associated company of Party B and provides an unlimited joint and several liability guarantee for
the continued performance of this lease
by the new subject of the lease.
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11.3 Other serious non-compliance
In the event of any serious
breach of contract by Party B as stipulated in the following clauses or other circumstances of termination as agreed in this
contract,
Party A shall have the right, in addition to exercising its rights under the law, to unilaterally terminate this contract and require
Party B to pay 20%
of the total rent and property charges for the remaining term of the lease, and to compensate Party A for any loss
suffered as a result (including but not
limited to legal fees, litigation costs, vacant premises (including but not limited to attorney’s
fees, court costs, rent, management and air-conditioning fees and
other costs that Party A could have collected under the provisions of
this contract during the period of vacancy, as well as the investment leasing costs
incurred in leasing the premises to a new tenant,
etc.) and the security deposit received by Party A shall not be refunded.
11.3.1 if Party B is 30 days overdue in the occupation
procedures from the commencement date of the lease (including failure to pay the down payment or
security deposit, failure to hand over
the premises to Party A, etc.).
11.3.2 if Party B demolishes or renovates the
Premises (including ancillary facilities) or changes the use of the Premises without the written consent of Party
A.
11.3.3 if Party B engages in any illegal or unlawful
activity in the premises.
11.3.4 if Party B’s conduct seriously violates
relevant national standards or regulations, causing serious impact on the environment of the Park or other
customers, or if Party A requests
Party B to rectify the situation within a specified period and Party B still fails to do so within the period limited by Party A.
11.3.5 without our written consent, Party B sublets
the premises, transfers the tenancy of the premises or exchanges the respective tenancy with others, or
increases or changes the registered
business in breach of contract.
11.3.6 Any other material breach of this Agreement
by Party B.
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11.4 Waiver of rights
Where Party A understands that
a breach of contract has occurred and accepts the rent, this shall not be deemed to be a waiver of Party A’s right to
pursue the breach.
If Party A waives any of its rights under the terms and conditions of this contract, such waiver shall only be made on the basis of Party
A’s
written seal and any payment of rent or other sums by Party B which is not in full, even if Party A accepts the payment in full, shall
not be deemed to be
Party A’s consent to Party B’s payment in reduced amount, nor shall it affect Party A’s right to recover the shortfall
in rent or arrears, nor its right to take
other measures as provided for in this contract or by law.
12. Applicable law and dispute resolution
12.1 The laws of the People’s Republic of China
shall apply to this Contract.
12.2 Disputes arising from the performance of
this contract shall be settled by friendly consultation between the parties; if consultation fails, both parties may
sue in the People’s
Court where the house is located.
Chapter 6 Other Agreements
13. Force majeure
13.1 Force majeure as referred to in this contract
refers to flood, typhoon of grade 8 or above, earthquake, war, change in government planning and other
events that are unforeseeable,
insurmountable and beyond the control of either party to the contract. The party proposing force majeure must inform the other
party 24
hours after the end of the force majeure and produce a documentary proof from the relevant local government department within 15 days
after the
occurrence of the force majeure.
13.2 In the event of a force majeure event causing
damage to the leased property which cannot be used normally, Party A shall repair the property as soon as
possible and shall be exempt
from paying rent during the repair period, and shall continue to calculate the rent after the leased property is restored to use, and
the validity of the contract shall be postponed accordingly; in the event of a force majeure event causing damage to the leased property
which cannot be
repaired, both parties shall have the right to terminate the contract without assuming any responsibility.
13.3 If force majeure ceases or its effects are
naturally removed, the contract shall continue to be performed from that date and its validity shall be extended
accordingly.
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13.4 The party who suffers an event of force majeure
shall take effective measures to prevent the extension of the damage, failing which it shall be liable for
the extended portion of the
damage.
14. Confidentiality
Neither party shall disclose
to third parties the contents of this contract and the trade secrets of the other party known to it in the course of the
conclusion and
performance of this contract, whether or not this contract is concluded and performed, and this clause shall survive the termination of
this
contract.
15. Notification
The usual form of notice to
be given by either party in fulfilling its obligations under this contract shall be in writing.
Notice given by one party to
the other in the course of the execution of this contract shall be deemed to be valid service of notice when served in writing
by hand,
courier, post (including registered or EMS), fax, e-mail or conspicuously posted at the door of the leased premises. The date of service
of the notice
shall be determined in accordance with the following principles.
(1) Dedicated, courier: delivery
is deemed to take place on the day it is handed over to a dedicated person or courier.
(2) By post: delivery is deemed
to take place on the third calendar day of dispatch by registered post or EMS.
3) Fax, e-mail: delivery is
deemed to occur at the same time as the fax machine or e-mail shows successful delivery.
(4) Posting at the door: service
is deemed to be effected by the third calendar day of posting.
From the date of actual delivery
to the date of completion of the surrender procedures, the address of the premises leased by Party B shall be Party B’s
contact address.
In the event that Party A’s relevant notice cannot be served directly to Party B (including and not limited to Party B’s whereabouts unknown
or refusal to accept), Party A shall be deemed to have served the notice if it is sent to such address by courier or EMS, and the date
of signature or refusal
shall be the date of service.
During the term of this contract,
if one party changes its contact address, telephone number, fax number or addressee in the Contract Basic Information
Form attached to
this contract, it shall notify the other party in writing within 3 days of the change, otherwise the responsibility and consequences of
any
resulting non-delivery or undeliverability shall be borne by that party.
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16. Declaration of the Parties
Both parties have full civil
capacity at the time of signing this contract, and both parties have fully negotiated and informed each other about the terms
and conditions
involving their respective rights and obligations and reached a consensus; both parties are willing to perform in accordance with the
agreement of this contract, and the party in breach is willing to accept the other party’s breach of contract to pursue.
17. Integrity of the contract
This contract and its annexes
are the final and complete contract between the parties in respect of the lease of the premises and supersede all previous or
contemporaneous
understandings and agreements reached between the parties in this regard. This contract shall not be amended without the written consent
of both parties; any matters not covered by this contract shall be settled by separate negotiations between Party A and Party B and a
supplementary
agreement shall be signed, which shall have the same legal effect as this contract.
18. In this contract, unless the context otherwise
requires, the following interpretation shall apply.
18.1 The numbering of entries in this contract
and their headings are for convenience of reference only and shall have no effect in the interpretation of this
contract.
18.2 The Annexes hereto shall be an integral part
hereof; references to “clauses”, “paragraphs” and “annexes” hereto shall be construed as clauses,
paragraphs
and annexes hereto. The term “this Contract” shall include the Annexes hereto and such modifications thereafter as the Parties
may from time to
time agree in writing.
18.3 references to “this Contract” or
any of its terms or to any other document shall be construed as including the version in force at that time as modified,
varied, updated
or supplemented.
18.4 The Chinese language shall be the dominant
language for the writing, interpretation and explanation of this contract; in the event of different
interpretations of the text in different
languages, the Chinese text of the contract shall prevail.
17
19. This contract is made in oneRampant One
copy to be executed by Party A II Party A and Party B II The contract shall take effect after it has
been signed or sealed by both parties.
20. The annexes to this contract include the
following: Annexes.[1. “Basic Information Form of the Contract”, 2. “Schedule of
Rental Property Fee
Payment”, 3. “Standard for Restoration of Original Condition”; if the content of the annexes is inconsistent
with the main contract, the content of the annexes
shall prevail in execution.]
IN WITNESS WHEREOF the parties have entered into
the following.
Party A: (seal)
Party B: (seal)
Legal representative/authorised representative:
Legal representative/authorized representative:
Head of Operations:
Head of Operations.
2021.11.12
18
Annexes.
Basic Contract Information
Form
Lessees
CLPS Dalian Co., Ltd.
Email
Contact
number
041182410800/13898687842
Postcode
Contact
address
Room #01-01/02/03/04, 1st Floor, No. 1, Huixian Park, Qixianling, Dalian Hi-Tech Industrial Park, Liaoning Province
Lease of
premises
5/F, #501-503/504-506/507,
30 Cuitao Street, High-tech
Park
Building area
1388.45 sqm
House
use
Business office use in software-related industries
Lease
term
2021-12-31 to 2024-12-30
Rental and other rates
Rental unit price
1.60RMB/calendar day*sqm, rent does not include electricity and communication costs.
Unit price of
property charges
RMB 1.00/calendar day*sqm
Unit price of
electricity
RMB1.05/kWh, and in case of government adjustment of electricity tariff during the lease period, the standard will be implemented
according to the corresponding adjusted range.
Unit price of water
RMB4.60/t, if the government adjusts the water price during the lease period, the standard will be implemented according to the
corresponding adjusted range.
Communication
Fee
Payable by Party B to the relevant communications operator
Water, electricity
and heating costs
outside Party B’s
leased area
Included in rent and property management fees
Secondary
renovation costs
Prior to the commencement of the renovation by
Party B, Party A will charge the following renovation management fees based on the
leased floor area of Party B.
Renovation deposit (refundable) RMB20/m2
, renovation management fee (non-refundable) RMB5/m2 , temporary electricity fee
(refundable) RMB5/m2 , temporary
water fee (non-refundable) RMB1/m2 .
Air conditioning
delay charges
Refrigeration: RMB300/hour
Heating: RMB100/hour
Car park
management fee
The car park charges of the building will apply.
Electricity
Capacity
Increase
Charges
If the demand for electricity in the leased room of Party B exceeds the design standard of the building, Party B may apply to Party A for
additional capacity at a charge of RMB300/KW, and Party B shall pay the additional capacity fee in one go before the construction of the
additional capacity. Party B’s capacity increase plan shall be approved by Party A before construction, and Party B shall be responsible for
the capacity increase construction and bear the construction cost.
19
Performance
bond
The total amount of rent and property charges for 90 calendar days shall be paid by Party B to Party A together with the down payment,
i.e. (in capital letters): Three hundred and twenty thousand, eight hundred and ninety-seven dollars and thirty cents (RMB324,897.30)
Rent and
property
management
fees
Total
amount
1. The total amount of rent and property management
fee payable (in capital letters) is: $3,956,527.11 (RMB 3,956,527.11)
2. Discount during the lease period: Three hundred
and eighty thousand, four hundred and thirty-five dollars and thirty cents (RMB
380,435.30)
3. The actual total amount of rent and property
management fees payable (in capital letters) is: $3,576,091.81 (RMB 3,576,091.81)
The total amount of rent (in capital letters)
is: Two Million Five Hundred and Fifty Thousand Three Hundred and Fifty Dollars and One
Cent (RMB 2,054,350.61)
The total amount of property charges (in capital
letters) is: One Million Five Hundred and Twenty Two Thousand Seven Hundred and
Forty One Yuan and Two Cents (RMB 1,521,741.20)
Rent and
property
management
fees
Payment
methods
Prepaid on a [every three months] payment cycle,
i.e.
1,
2021-11-18 before the payment (capital): one hundred and twenty-two thousand two hundred and ninety-five yuan and eighty cents
(¥
622,905.18 yuan);
The total amount of rent (in capital
letters) is one hundred and seventy-one thousand one hundred and ninety-nine yuan and four cents
(RMB 171,196.04);
The total
amount of property charges (in capital letters) is: one hundred and twenty-two thousand, one hundred and eighty-one yuan and
eighty
cents (RMB 126,811.84); the period of representation is: 2021-12-31 to 2022-03-27; the performance guarantee (in capital letters)
is: three hundred and twenty-two thousand, one hundred and eighty-nine yuan and three cents (RMB 324,897.30)
2. In addition to the first installment of rent
and property charges, Party B shall pay to Party A the rent and property charges for the next
payment cycle before the end of each payment
cycle, details of the payment schedule and fee rates are set out in the Schedule of Payment
of Rent and Property Charges in Annex II.
Party A shall provide Party B with a valid invoice
for the same amount within 15 calendar days after confirming receipt of the full rent
and property management fee for the respective representative
period. If Party B pays by telegraphic transfer, the time of
acknowledgement of receipt of the rent and property management fee shall
be the date when the bank issues the telegraphic transfer
voucher.
Account: Received by: CLPS Dalian Co.,
Ltd.
Bank of Account: ICBC Dalian
Friendship Square Sub-branch
Account number: 3400203419300134615
20
Existing facilities and finishes in the house
Central air conditioning
Good
Concrete floor
Good
Light fittings, switches, sockets
Good
Wall Wall
Emulsion paint and glass textures, good
Sky Shed
Good
Communication facilities
Voice and network access available
Property Services
1、
Security services: regular tour management of security in the outside areas of the building; 24-hour monitoring and management of
fire fighting and
surveillance facilities.
2、 Cleaning
services: daily cleaning of public areas outside the building and outside Party B’s leased area within the building; greening of public
areas;
disinfection and pest control inside and outside the building; external curtain wall cleaning.
3、 Maintenance
and repair: maintenance and management of public facilities and equipment in the building.
4、 Business
services: mail collection and delivery, newspaper subscriptions.
5、 Ancillary
services: heating services are provided from 8:00 am to 18:00 pm Monday to Friday during the heating period set by the government,
except
for statutory holidays, and central air-conditioning delivery and cooling services are provided from 8:00 am to 18:00 pm Monday to Friday
during the period from 15 May to 15 September each year.
6、 Other services: Party B enjoys the production
of the company name on the water sign in the hall during the lease period when it first moves in.
In-situ restoration standards
Refer to Annex III of this Agreement: Standards for Restoration to Original Condition
21
Remark
On the basis of compliance with the terms and
conditions of this contract, both parties hereby confirm the following additional concessions.
Party A has the right to
grant Party B corresponding concessions (including but not limited to renovation period, rent-free period, etc.)
according to its own
commercial judgment and operational needs. Party B shall not be entitled to any preferential terms granted by Party A. In
addition to
the liability for breach of contract as stipulated in Chapter 11 of this contract, Party B shall also pay to Party A the full amount of
the
preferential terms enjoyed before the termination of the contract.
On the basis of compliance with the terms and
conditions of this contract, both parties, after friendly consultation, agree to make the following
amendments and adjustments to the
contents of the contract.
The last sentence of Article
1.2 shall be amended to read: Party A shall be responsible for compensating for any damage caused to Party B. If
the contract cannot continue
to be performed, Party A shall pay Party B liquidated damages at 20% of the total rent and property charges for the
remaining term of
the lease.
The first paragraph of Article
3.3.2 shall be amended to read: Party B shall ensure that the original decoration (including the ceiling) and
facilities of the premises
are intact (except for natural damage). If at the end of the lease term Party B finds an interested tenant who agrees to
lease the premises
in accordance with the current state of the premises (i.e. the condition that has not been restored after renovation by Party B),
Party
B does not need to restore the premises to its original state and can directly handle the handover procedures with Party A and the third
party in accordance with the current state of the premises at that time, and the three parties will sign a separate agreement and agree
in such
agreement that the third party will restore the room to the condition as set out in Annex III to this contract, “Standards
for Restoration to
Original State”, upon surrender of the lease. Standards for Restoration to Original Condition”.
4.1.2 Add at the end of clause
4.1.2: If Party B is unable to move in on time due to Party A, the term of the lease shall be extended
accordingly. If Party B is late
in moving in for [15] days due to the aforesaid reasons, Party B shall have the right to unilaterally terminate this
contract and request
Party A to return all the rent and property management fees paid by Party B and pay Party B liquidated damages at the rate
of 0.1% per
day on the basis of such fees, with the liquidated damages being calculated from the date of actual payment of such fees by Party B to
Party A to the date of actual return of such fees by Party A to Party B. The liquidated damages shall be calculated from the date of actual
payment
of such fees by Party B to the date of actual return of such fees by Party A to Party B.
Article 4.2.2 is amended
to read: Party A shall reply to Party B’s application for renewal of the lease within 10 working days upon receipt of
the application,
and if both parties agree to renew the lease, both parties shall sign a renewal contract one month before the expiry of the lease.
Party
A shall sign a supplementary renewal contract with Party B as soon as possible.
The first sentence of Article
4.2.4 is amended to read: If Party B does not intend to renew the lease, or if for reasons attributable to Party B,
the parties fail to
sign a renewal contract one month before the expiry of the lease.
Article 7.8 is amended to
read: During the lease period, Party B shall pay attention to property and personal safety, Party B is the first
responsible person for
fire safety and the ultimate responsibility bearer, notwithstanding the foregoing agreement, Party A shall ensure that the
fire safety
facilities of the house itself meet the statutory safety standards, and any personal and property safety accident caused by the fault
of
Party B shall be borne by Party B itself, and any personal and property safety accident caused by the fault of Party A shall be borne
by Party A
itself. If both parties are at fault, they shall be held responsible according to their respective degrees of fault, and if
both parties are not at fault,
they shall be held responsible in accordance with the provisions of the law. Any loss caused to Party A
shall be compensated.
The first sentence of Article
9.4 should read: Party A proposes that Party B’s office area before and after renovation should be not less than
10 square metres of floor
space per person.
The date of service of the notice in the case
of article 15 (1) and (2) is amended to read: “Service is deemed to have taken place on the date of
signature by the addressee.
22
Annex II.
Rental Property Fee Payment Schedule
Payment
Payable
Duration of representation
Rent
Property
Fees payable
Projects
Period
Deadline
Start
Stop
payable
fees payable
Subtotal
Compliance Guarantee
1
2021-11-18 2021-12-31 2024-12-30
-
-
324,897.30
Rent Property Fee
1
2021-11-18 2021-12-31 2022-03-27 171,196.04 126,811.84 622,905.18
2
2022-03-01 2022-03-28 2022-06-27 171,195.87 126,811.76 298,007.63
3
2022-06-01 2022-06-28 2022-09-27 171,195.87 126,811.76 298,007.63
4
2022-09-01 2022-09-28 2022-12-27 171,195.87 126,811.76 298,007.63
5
2022-12-01 2022-12-28 2023-03-27 171,195.87 126,811.76 298,007.63
6
2023-03-01 2023-03-28 2023-06-27 171,195.87 126,811.76 298,007.63
7
2023-06-01 2023-06-28 2023-09-27 171,195.87 126,811.76 298,007.63
8
2023-09-01 2023-09-28 2023-12-27 171,195.87 126,811.76 298,007.63
9
2023-12-01 2023-12-28 2024-03-27 171,195.87 126,811.76 298,007.63
10
2024-03-01 2024-03-28 2024-06-27 171,195.87 126,811.76 298,007.63
11
2024-06-01 2024-06-28 2024-09-27 171,195.87 126,811.76 298,007.63
12
2024-09-01 2024-09-28 2024-12-30 171,195.87 126,811.76 298,007.63
Total
-
-
-
-
2,054,350.61 1,521,741.20 3,576,091.81
23
Annex III.
In-situ restoration standards
一、Civil, renovation component.
1.
Flooring: removal of carpets (floor coverings, flooring, partitions, etc.), removal of ground penetrations,
etc., restoration to concrete floors and
ensuring that the floors are level and free of glue stains.
2.
Walls: surface potholes and holes filled in, large white walls need to be treated as a whole and restored
to a white wall with a neat, even colour
and no run-off etc.
3.
Shed surface: flat keel, neat and undamaged mineral wool board (mineral wool board using the original
brand of the building or a brand of the
same grade).
4.
Other: doors and windows should be removed, and doors and windows should be opened, closed and locked
properly, and the glass should be
clean and tidy; changes to the building’s architecture and structure should be restored to the original
state of the building.
二、Electrical section.
1.
The grille lights that are displaced are restored to their original position in the building (with reference
to the original drawings of the building,
the replacement grille lights are restored to the original brand of the building or to a brand
of the same grade), the installation is smooth and the
fluorescent tubes are bright and neat.
2.
The hangers of the relocated grilles are secure, properly fixed and free from looseness and shaking.
3.
roof and wall strong and weak power lines finishing, to ensure that the lines are in the line groove,
line pipe, no exposed lines, line pipe, line
groove fixed well, across the earth wire connection is secure and reasonable.
4.
Ensure that the wiring in the distribution box is regular, the air switch is normal and tidy, and the
distribution box meets the requirements of the
building.
5.
Wall switches (relocated switches restored to the building’s original position) are in working order and
tidy.
三、Air conditioning section.
1.
Displacement of fan coils (ceiling-mounted multi-connector panels), restoration of air outlet positions
to the original position in the building
(refer to the original drawings of the building) and ensuring that the return air outlet filters
are clean.
2.
Displacement of the three-speed switch to its original position in the building (the replacement three-speed
switch is restored to the original
brand of the building or to a brand of the same grade) and to ensure that its various control switches
are in order and that the panel is tidy.
3.
The fan coil motor starts, stops and changes speed normally, without any unusual noise.
24
四、Firefighting section.
1.
Restore the building to its original position after spraying has been moved to meet fire protection requirements,
free from dirt and leaks.
2.
Modified fire protection pipework to meet fire protection requirements, with reasonable hanger configurations,
firm and free from leaks.
3.
The smoke sensor is relocated and restored to its original position in the building (the new additional
smoke sensor is removed and restored to
the original logic of the original fire mainframe in the building) to meet the fire protection
requirements, and the smoke signal and feedback is
normal.
4.
The layout of the room after restoration meets the requirements of the fire code.
Note: The above standard descriptions are subject
to the original drawings of the building if they are not exhaustive.
25
26
Exhibit 10.11
NO.
Guangzhou
Fengxing Plaza office lease contract
Lessor: Guangzhou Fengwei Decoration Engineering
Co., Ltd. (hereinafter referred to as Party A)
Address: 2807, No. 67, Tianhe East Road, Tianhe
District, Guangzhou
Tel: 020-38394333
Postal Code: 510620
Legal representative: Li Buyun
Lessee: CLPS Guangzhou Co., Ltd. (hereinafter
referred to as Party B)
Address: Unit 01-11, 20th floor, No. 67 Tianhe
East Road, Tianhe District, Guangzhou
Tel: 020-38068088
Postal Code: 510620
Legal representative: Yang Xiaofeng
Contact person and contact information:
Through friendly negotiation,
both parties hereby enter into this contract with respect to Party B’s lease of Party A’s premises for mutual compliance.
Article 1 Name, address and size of the premises.
Unit 01-11, 20th Floor, No. 67 Tianhe East
Road, Tianhe District, Guangzhou (hereinafter referred to as “the house”, see Annex 3 for details, the drawing is
for general
identification purposes only and does not show the size of the house). The house has a rented floor area of 2354.13 square meters.
Article 2 Usage
The house is rented to Party B for office use.
The name of Party B’s business in this house is CLPS Guangzhou Co., Ltd.,Its business scope is software and
information technology
services. If Party B needs to change the business operated in the house, if it involves the approval of the competent government
department
or go through the change procedures according to law, it must go through the change procedures in accordance with laws and regulations
and
notify Party A in writing within 3 days from the date of registration of the change.
Article 3 Lease Period
1. Party
B leases the house for a contract period of 40 months from the start date of the lease period, from October 15, 2023 to
February 14, 2027;Under the
premise that Party B has paid the first month’s rent, management fee and performance bond in full in
accordance with the provisions of this contract, Party A
and Party B shall jointly handle the handover procedures for the house one day
before the start date of the lease period, and Party A shall deliver the house to
Party B for use according to the lease contract on the
start date of the lease period.
2. During
the validity period of the lease contract, neither party may unilaterally cancel or terminate the lease contract, except in the circumstances
where the
contract can be terminated as stipulated by law and the lease contract.
Article 4 Rent
1. Party
B’s monthly rent for renting the house is RMB: 247,184.00 ，RMB 105 per square meter (rent does not include property
management fees, water,
electricity and other expenses). From the third year of tenancy, the monthly rent will increase by 5% per annum.
The specific rent is as follows.
Rental time
Rent (RMB/month)
October 15, 2023 to February 14, 2024
Rent-free period
February 15, 2024 to February 14, 2026
247,184.00
February 15, 2026 to February 14, 2027
259,543.00
2. The
house is paid according to the principle of first payment and then use, and the specific time of rent payment is as follows:
2.1、Party B shall pay
the first (monthly) rent after the expiration of the rent-free period within 3 working days before the date of the lease contract,
calculated
in RMB 247,184.00 yuan.
2.2、Before March
15, 2024, Party B shall pay Party A the rent from March 15, 2024 to March 31, 2024, calculated as RMB 135,553.00 yuan.
2.3、Party B shall pay
the next month’s rent to Party A before the end of each month (28-31), and Party A may implement it in accordance with the
provisions
of Article 8, Paragraph 2 of this contract.
3. Party
B’s rent can be delivered to Party A’s account by transfer:
Account name: Guangzhou Fengwei Decoration Engineering
Co., Ltd
Bank: China Merchants Bank Fengxing Sub-branch
Account number: 120906300410888
Article 5 Management Fees
1. Party
A entrusts Guangdong Fengwei Property Management Co., Ltd. (hereinafter referred to as the property management company) to be responsible
for
the property management of the building and the management of Party B’s leased housing, and Party B agrees to this. The specific content
of the property
management services provided by Guangdong Fengwei Property Management Co., Ltd. shall be subject to the “Preliminary
Property Management Service
Agreement” signed between Party B and Party B.
Property company address: the first floor of No.
23, Tianhe South 2nd Road, Tianhe District, Guangzhou
Property company telephone: 87518183
2
2. The
monthly management fee for the house is RMB58,853.00 (RMB58,853.00) RMB 25 per square metre. The property management company may
increase the management fee due to changes in government prices or the rise of the market price index, but the specific fees need to be
negotiated with Party
B and agreed by Party B, and the property management company shall provide Party B with relevant documents, materials
or policy provisions that affect the
change of management fees.
3. The
house is paid first and used later, and the specific time of management fee payment is as follows:
3.1 Party B shall pay the first (monthly)
management fee after the expiration of the rent-free period within 3 working days before the date of the lease
contract, calculated in
RMB 58,853.00.
3.2 Before March 15, 2024, Party
B shall pay Party A a management fee from March 15, 2024 to March 31, 2024, calculated in the amount of RMB
32,274.00
yuan (i.e. RMB 32,274.00).
3.3 According to the principle of first
payment and then use, Party B must pay the next month’s monthly management fee to the property management
company before the end of each
month (28-31), and the property management company can implement it in accordance with the provisions of Article 8,
paragraph 2 of this
contract.
4. Party
B’s management fee can be delivered to the property management company’s account in the form of transfer:
Account name: Guangdong Fengwei Property Management
Co., Ltd
Bank: ICBC Tianhe Sub-branch
Account number: 3602013419200318634
Article 6 Performance bond
1. Party B shall, within 3 working days before
the date of commencement of the lease contract (but no later than the start date of the lease period), pay Party
A the equivalent of two
months’ rent in the first year: RMB 494,368.00 and management fee (RMB 117,706.00), a total of RMB: 612,074.00 CNY
It can be
delivered to the account of Party A and the property management company in the form of transfer, and the performance bond cannot
be used against rent,
management fees and other expenses.
3
2. If Party B is late in paying the performance
bond, Party B shall pay liquidated damages to Party A at 0.2% of the amount of the outstanding performance
bond payable for each overdue
day, and Party A has the right not to deliver the house to Party B for use until Party B has paid all the performance bond and
liquidated
damages, and the lease period and rent-free period stipulated in paragraphs 1 and 2 of Article 3 of this contract shall not be extended
or changed
accordingly; If Party B fails to pay the performance bond in full within 15 working days after the deadline, Party A has the
right to rescind the contract, and
Party B shall pay Party A the rent of the unit from the date of payment of the performance bond to
the date of termination of the contract.
3. After the termination of the contract, Party
B will return the performance bond to Party B without interest within 30 working days after Party B pays the
rent and all expenses and
Party A confirms that the house is not damaged (refer to Article 10, Paragraph 5 of this contract).
Article 7 Other Expenses
1. During
the rent-free period, Party B does not need to pay the rent of the house to Party A, but must pay the management fee for the rent-free
period from
October 15, 2023 to February 14, 2024 (RMB 235,412.00) before handing over the site, and the utility fee during
the rent-free period shall be paid in
accordance with the provisions of paragraph 2 of this Article.
2. Self-water
and electricity bills and shared costs
Party B’s self-use and self-consumption of electricity
will be paid in accordance with the relevant regulations of the national government departments. The
property management company designated
by Party A shall collect and pay on behalf of the property management company, and the payment time shall be
subject to the notice of
the property management company. Party B shall bear the apportionment of the loss of self-consumption and electricity. The
calculation
method of self-consumption electricity sharing cost is 10% of Party B’s actual indoor electricity consumption. Self-consumption is apportioned
in
proportion to usage. The shared fee is paid together with the electricity and water bills for self-consumption at the time of payment.
3. Telephone
and network fees
The telephone and network shall be reported to
the telecommunications department by Party B. Party B’s FAX fee, IDD telephone fee, network fee and local
telephone fee shall be paid
by Party B every month according to the telephone bill of the Telecommunications Bureau.
4. Air
conditioning management regulations and costs
(1) Use of central air conditioning
1.1 Air conditioning in the office building is
available from 8:00 to 18:00 on Monday to Friday, 8:00 am to 12:00 pm on Saturday, and is closed on Saturday
afternoon, Sunday and public
holidays.
1.2 If Party B needs to apply to turn on the central
air conditioning on weekends/holidays, it needs to submit a written application to the property company
one working day in advance, and
after approval by the property company, Party B will pay the corresponding overtime air conditioning fee to the property
company before
turning on the central air conditioning, and the specific overtime air conditioning fee standard is detailed in the annex 《Fengxing
Plaza
Weekend/Holiday Overtime Air Conditioning Charging Standard.》
4
Note: Property company approval conditions: More
than 30% of the units in the building (calculated by floor area) apply for overtime before the central air
conditioning can be started.
(2) Split air conditioner installation and use
Without the written consent of Party A or the
property company, Party B is strictly prohibited from installing split air conditioning within the scope of the
rented house or using
the public area of the building.
Article 8 Rights and obligations of Party B
1. Party
B must abide by the relevant laws and regulations of the state, obey the building management regulations and relevant property management
regulations, and shall not have pollution and noise affecting the surrounding environment, otherwise all legal and economic responsibilities
arising therefrom
shall be borne by Party B. If there is any violation of criminal laws such as gambling, prostitution, drug use (trafficking),
etc., in addition to Party B’s own
legal and economic responsibility, Party A has the right to terminate the contract unconditionally,
but Party B needs to be notified at least 7 working days in
advance, and the performance bond paid by Party B will not be refunded.
2. Party
B shall pay Party A rent, management fee and other fees payable by Party B on time. If the payment is overdue, Party A or the property
management
company may exercise the following relevant rights and interests from Party B:
(A) If Party B has not paid the rent within the
due period for more than 5 days, a late fee of 2% of the total rent owed shall be added to the overdue time from
the 6th day onwards;
If Party B defaults on rent for more than 15 days, Party A has the right to unconditionally recover the house, and reserves the right
to
recover the fees payable from Party B, and Party B will not return the deposit paid as liquidated damages. (Overdue is less than one
month counted as one
month).
(B) If Party B fails to pay the management fee
and other fees within the time limit for more than 5 days, a late fee of 2% of the total amount of the
management fee and other fees owed
will be charged daily from the 6th day onwards according to the overdue time; If Party B defaults on any fee for 15
days, the property
management company has the right to stop supplying water, electricity, central air conditioning, telephone lines or other facilities in
the
building to the rented house of Party B, and Party B agrees that Party A or the property management company may take measures such
as locking the door,
and Party B shall bear all the consequences and losses arising therefrom.
3. During
the rental period, Party B must protect the internal equipment and other equipment of the house in good condition and tidy (except for
natural
depreciation and non-Party B’s responsibility), including but not limited to taking all appropriate measures to protect the interior
of the house from damage
before the storm arrives. Party A shall not be liable for any personal damage, property or other losses caused
by theft, flood, fire and other man-made events
or natural disasters caused by non-Party A’s reasons or damage to Party B’s own equipment
and facilities. In order to prevent the above risks, Party B shall
purchase corresponding insurance. The insured and beneficiaries of
the insurance shall include Party A.
5
4. Party
B shall not change the structure and use of the house without authorization, if Party B intentionally or negligently causes damage to
the house and
equipment, it shall be responsible for restoring the original state and compensating reasonable losses, and Party B shall
bear the cost of repairing the facilities
and equipment related to the central system of the building (including fire protection, air
conditioning, communications, security, elevators, etc.) in the house
due to Party B’s intentional or negligent damage.
5. If
Party B needs to decorate and partition the house when entering the site, it must obtain the consent of Party A or the property management
company in
writing in advance. Party B must report the fire protection construction audit to the Guangzhou Fire Protection Bureau by itself,
and go to the property
management company to handle the construction with the Guangzhou Fire Bureau’s audit opinion, and it must be accepted
by the fire control before it can be
put into use. If changes in the central system (including fire protection, air conditioning, etc.)
are involved, in order to ensure the safety of the central system
of the building, the professional unit must be responsible for the renovation
at the market price, and Party B shall bear the relevant costs of the
transformation.
6. Party
B shall bear the fire safety responsibility of the house during the lease period (including the decoration rent-free period), and if the
house is damaged
due to the fire caused by Party B, it shall also bear the liability for compensation to Party A. If the house is installed
or inspected for fire fighting facilities in
the future, Party B shall unconditionally obey and cooperate.
7. Do
not store and allow others to store weapons, ammunition, explosive and flammable and other prohibited dangerous substances in the premises;
No
illegal activities may be carried out inside the premises. Boxes, furniture, garbage, etc. shall not be stacked or left in elevators,
lobbies, stairs, passages and
other public places on each floor of the building to ensure the smooth flow of this place.
8. Responsible
for the hygiene of the interior of the house. If Party B receives a notice from the government department requesting sanitation work in
the
house, Party B must notify the property management company and implement it according to the notice. If Party B does not follow the
notice, so that Party A
suffers economic losses caused by this behavior, Party B must be responsible for compensation.
9. Party
B shall not change the lease purpose of the house without authorization, shall not sublease, sublease, or otherwise transfer the house
to a third party
for use, shall not provide guarantee to others in any form, or mortgage its lease use right (operation right) to others.
Otherwise, Party A has the right to take
back the house and confiscate the performance bond, and Party B shall bear all the responsibilities
arising therefrom.
6
Notwithstanding the foregoing, Party B may transfer
all or part of its rights and obligations under the lease contract to Party B’s affiliates (including but not
limited to any enterprise
that directly or indirectly controls Party B in any way, is directly or indirectly controlled by Party B in any way, or is directly or
indirectly under common control with Party B in any way) during the lease period and with 1 month’s written notice to Party A in advance.
However, Party B
shall notify Party A in writing in advance and provide Party A with documents and other legal documents proving its association
with Party B. The assignee
shall sign a new contract with Party A in accordance with the terms of the lease contract, and all costs arising
from the signing of the new lease contract shall
be borne by Party B or (including but not limited to the stamp duty borne by Party A
according to law).
10. If
any facilities in the building fail to operate normally due to circumstances beyond Party A’s control, such as interruption of the normal
supply of water,
electricity, air conditioning and elevators, Party A shall not be liable to compensate Party B for any losses, and at
the same time, the rent and other expenses
payable by Party B under the lease agreement shall not be affected by this, but Party A shall
do its best to repair and restore the normal supply of the above
facilities.
11. Party
B shall apply for and obtain all permits and approvals required by laws and regulations to carry out business activities. If Party B does
not submit
industrial and commercial, association or other registration documents to Party A when signing the lease contract (the specific
submission documents depend
on the nature of Party B’s organization), Party B shall report to the relevant government department within
3 months from the date of the start of the lease
period of the lease contract to obtain a business license or other registration documents,
and submit a copy of it verified by Party A to Party A for filing, and
the name displayed on such certificates shall be consistent with
Party B’s name or the name specified in Article 1, Paragraph 4 of this contract. During the
validity period of the lease contract, Party
B shall keep such certificates valid continuously.
12. Party
B shall abide by the property management of the building, and shall not open the windows on the glass curtain wall without the consent
of Party A
or the property management company.
13. Normal
office hours: Monday to Friday 8:00 to 18:00, Saturday 8:00 am to 12:00 pm; Other times and national statutory holidays are arranged as
abnormal hours. If Party B’s office hours change, it is necessary to notify the property management company in writing in advance, and
the overtime shall
not exceed 22:30 at the latest, and each overtime work shall go to the property management company in advance to complete
the registration procedures;
Party B shall pay the relevant fees for the additional operating expenses of public facilities and equipment
(such as public corridor lighting, elevators, etc.)
caused by overtime according to the charging standards of the property management
agreement in the early stage of the property management agreement of
the property company.
7
14. If
Party B does not handle the handover procedures of the house or accept the house in accordance with the provisions of Article 3, Paragraph
1 of this
contract, Party B shall be deemed to have received the house, and Party B shall pay rent to Party A and pay property management
fees and other expenses to
the property management company in accordance with the provisions of the lease contract, and the lease period
and rent-free period shall not be extended or
changed accordingly. If Party B fails to complete the handover procedures for the house
or accept the house within 30 days (including 30 days) after the
deadline, Party A has the right to rescind the contract, confiscate the
performance bond, and recover the amount due from Party B.
15. If
Party B’s decoration plan is reviewed and approved by Party A or the property company, there is no need to restore the original state
after the lease
expires.
Article 9 Rights and obligations of Party A
1. If
Party A fails to deliver the house within the time specified in the lease contract, if it is overdue within 15 working days (including
15 working days),
Party B has the right to choose (A) extend the lease period and rent-free period accordingly, or (B) require Party A
to pay liquidated damages to Party A (the
liquidated damages are calculated as 0.2% of the monthly rent of the leased unit to Party B
for every 1 day overdue). If the overdue period exceeds 15
working days, Party B has the right to cancel the contract, and Party A shall
return the performance bond paid by Party B and the first month’s rent to Party B
without interest within 15 working days after the cancellation
of the contract, and pay liquidated damages to Party B, and the liquidated damages shall be
calculated as 0.2% of the monthly rent of
the rental unit to Party B for every 1 day overdue. After Party A performs the above responsibilities, the
obligations, rights and responsibilities
of both parties in this situation shall be terminated.
2. Party
A is responsible for providing electricity, central air conditioning and other public facilities for Party B to use in the house; Responsible
for the
normal operation and maintenance of the central system facilities and equipment of the building (including fire, security, air
conditioning, communications,
electrical appliances and other systems).
3. Party
A guarantees that it is the legal lessor of the house, has the full authority, qualification and ability to sign the lease contract and
perform the
obligations of Party A in the lease contract, and that the unit does not have any possible property rights disputes that affect
Party B’s use of the house,
otherwise Party A shall bear the liability for breach of contract.
Party A or the person or organization agreed to
by it has the right to hold activities or publish advertisements in common places such as lobbies, elevator
halls, elevator cars, corridors,
etc. However, it cannot affect Party B to use the house as agreed in the lease contract.
4. During
the validity period of the lease contract, Party A may transfer or mortgage the building or the house to a third party without Party B’s
consent, and
Party B waives the right of first refusal to purchase the unit, provided that Party A shall notify Party B in writing within
15 days after the effective date of the
transfer. The change of owner caused by the transfer of the building and the house and the mortgage
of the building or the house do not affect the validity of
the lease contract, and the new owner inherits the rights and obligations of
Party A in the lease contract. Party A warrants that the transferee will be fully
aware of Party A’s rights and obligations under this
Contract, and the transferee shall agree in writing to assume all of Party A’s rights and obligations under
this Contract.
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5. Party
A and the property management company have the responsibility to assist and guide Party B to handle the secondary decoration construction
procedures, and supervise and manage the whole process of Party B’s secondary decoration according to the requirements of the Guangzhou
Fire
Department’s decoration audit opinion.
6. Party
B permits Party A to install, use and maintain plumbing and wiring through or in the house, and Party A has the right to enter the house
after giving
Party B reasonable advance notice (except for emergencies) for the purpose of carrying out inspections of the above conditions
and repairs deemed necessary.
7. Party
A shall not arbitrarily take back the house in advance. If it is withdrawn in advance, Party A shall return the performance bond paid
by Party B twice.
8. During
the lease period, Party A may demolish, modify or expand or add to the structure of the building where the leased house is located, including
but
not limited to the entrance, exit, elevator hall and other areas of the building where the house is located, but it cannot affect
Party B’s normal office, including
but not limited to equipment failure, office environment noise exceeding national standards, etc.,
if Party B’s employees complain about noise problems,
Party A shall solve them in time to ensure the normal office of Party B’s employees.
Party B shall not use this to cancel this contract or demand a reduction in
rent, management fees, etc.
9. Party
A guarantees that it has the right to entrust the property management services stipulated in this contract to Guangdong Fengwei Property
Management Co., Ltd.
Article 10 Termination of Contract and Return
of Leased Unit
1. If
the contract is terminated normally at the end of this contract and the two parties have not agreed to renew the lease by Party B or cancel
or terminate the
lease contract in advance, Party B shall go through the relevant procedures for termination of the contract with Party
A 15 days in advance, pay all fees and
remove all the property in the house on the date of the expiration of the lease (if the contract
is cancelled or terminated early, no later than 5 days from the
date of rescission or termination of the contract), and if it is returned
within the time limit, Party B shall pay Party A the house occupancy fee according to
the actual number of occupied days from the date
of overdue, (Occupancy fee rate: 200% of the last daily rent level before the termination of the contract),
property management
fee and other related expenses. At the same time, Party A has the right to take necessary measures to recover the house (including but
not limited to opening and replacing the door lock by itself, and disposing of the property in the unit according to Article 10, Paragraph
3 of the contract),
and Party B shall bear the costs and losses caused thereby.
2.If the lease period of the lease contract expires
and the two parties do not agree to renew the lease by Party B or the lease contract is cancelled or terminated
in advance, Party B shall
return the leased property in the state after renovation (but excluding the public part occupied by Party B’s special application), and
Party B has the right to dismantle its office furniture and equipment, but cannot dismantle the fixed decoration part (such as the interval
of decoration,
ceiling, floor, lighting, pipeline, etc.), and the original indoor fixed decoration belongs to Party A. If the structure
of the house is damaged, Party A has the
right to require Party B to make compensation (except for disasters, wars, and natural depreciation).
9
3. Party B shall remove all the furniture and
miscellaneous goods within 5 days from the date of expiration of the lease or the termination of the contract, and
the items that have
not been removed shall be deemed to be waived by Party B as giving up their ownership and all other rights and interests, and Party A
may dispose of such property by itself, and the value of such property and any of its rights and interests shall be deemed to be zero.
Party A’s disposal of such
property does not constitute an infringement on Party B or any third party, and Party B shall bear the costs
and losses suffered by Party A and any third party
as a result. During the above 5-day clean-up period, Party B shall not pay any rent
except for the energy fees, property management fees, and communication
fees payable by other third parties during the clean-up period.
4.If Party B needs to terminate the operation
before the expiration of the contract period for any reason, Party B shall notify Party A in writing one month in
advance, and after obtaining
the consent of Party A, it shall be handled in accordance with Paragraphs 1 and 2 of Article 10 of this contract, and the deposit
paid
by Party B shall belong to Party A.
5.After the termination of the lease contract,
Party B shall return the house to Party A in accordance with the following provisions before requesting the
refund of the performance
bond:
(1) Remove all of his belongings from the house;
(2) Check with Party A whether the equipment and
facilities delivered by Party A to Party B are in normal use (except normal wear and tear), and Party B
shall repair or compensate if
there is any damage;
(3) Give Party A the keys to the door of the house
and all the doors inside it;
(4) Settle rent, property management fees and
other expenses (including but not limited to water, electricity, communication fees, etc.);
(5) Both parties or Party A sign the confirmation
document for Party B’s return of the leased house.
Article 11 Renewal
1. Upon
the expiration of the lease contract, Party B may renew the contract with Party A first under the same conditions. If Party B renews the
lease, Party B
shall notify Party A in writing 3 months before the expiration of the lease period. Parties A and B shall negotiate to
sign a new lease contract, and if both
parties are unable to sign a new lease contract with only 1 month left before the expiration date
of the lease period, the lease will not be renewed.
10
2. Three
months before the expiration of the contract, if Party B does not propose to Party A in writing to renew the contract, Party B shall be
deemed to have
waived and the contract shall be terminated upon expiration. Party A may lead customers interested in the house to enter
the house for inspection at a
reasonable time and without affecting the normal operation of Party B, but Party A shall notify Party B
3 days in advance, and Party B shall cooperate.
Article 12 Force Majeure
During the lease period, if the house or the building
is damaged beyond repair or unsuitable for lease due to force majeure, natural disasters, war, riots, this
contract will be terminated
naturally, and Party A and Party B shall not be liable to each other, and after Party B pays all the expenses due, Party A will return
the performance bond paid by Party B to Party B within seven days without interest.
Article 13 Dispute Resolution
This contract shall be governed by the laws of
the People’s Republic of China, and all disputes arising from the performance of this contract shall be resolved
by both parties through
friendly negotiation as much as possible, and if the negotiation fails, it may be resolved by litigation in the court where the building
is
located, and the parties shall continue to perform this contract during the litigation.
Article 14 Miscellaneous
1. The
lease registration and filing fee, stamp duty and related fees levied by government departments of this contract shall be borne equally
by both parties
(if the government stipulates that one party shall bear the burden, it shall be handled according to the regulations).
2. During
the validity period of the lease contract, both parties and their employees and agents shall keep the terms of the lease contract confidential
and shall
not disclose or disclose the terms of the lease contract to any third party without the written consent of both parties A and
B.
3. Notices
and requests given by either party to this contract (including the property management company) to the other party must be sent in writing
to the
address indicated in this contract. Such notices or correspondence shall be delivered by hand or by facsimile or express mail.
If it is delivered by hand, it shall
be deemed to have been duly delivered upon delivery. If sent by facsimile, the notice is actually
received by the person receiving the fax. If it is delivered by
Speedpost, it will be deemed to have been delivered within 3 days after
dispatch by Speedpost. Any change of address must be notified in writing within
seven days.
4. During
the lease period, if Party A needs to adjust the collection of rent, management fees and other fees due to the adjustment of the enterprise
group
organization, within seven working days after Party A issues the corresponding written notice, Party A and Party B shall sign a
new supplementary
agreement on the adjustment of the above fees. The total cost of rent and management fee of the newly signed supplementary
agreement and the total cost of
rent and management fee of this contract shall be determined after consultation between the two parties.
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5. Party
B has clearly understood the content of the 《Interim Convention for Owners/Property Users of Fengxing Plaza Office Building》when
signing this
contract and is willing to comply with the relevant provisions, if the content of the above documents is contrary to this
contract, this contract shall prevail.
6. Both
parties agree to issue VAT invoices to Party B at the tax rate selected by Party A and the property management company.
7. The
lessor only issues an invoice for the payment of the month, and does not provide any procedures for replacing the bill.
8. If
Party B does not engage in business activities (such as operating without a license) or engages in illegal activities, suspected criminal
acts, etc. in
accordance with laws and regulations, Party A has the right to unilaterally terminate the contract, and Party B has no right
to demand the return of the
performance bond, that is, the performance bond is regarded as liquidated damages.
9. If
Party B and Party B’s staff violate the Regulations on Smoking Control in Public Places, the Regulations on Smoking Control in Guangzhou
and the
relevant provisions of this contract, that is, smoking or the existence of cigarette butts in public areas such as public corridors,
stairs, elevators, etc., and Party
B still fails to correct it after Party A issues three warnings, it shall be deemed that Party B has
seriously breached the contract, and Party A has the right to
unilaterally terminate the contract.
10. Party
A shall deliver the leased floor to Party B for use in accordance with the provisions of the lease contract, and Party A shall ensure
that the leased
floor meets the provisions of the “Letter of Intent for Lease” regarding the delivery status of the floor (Note:
except for the two glass gates and fire doors).
Article 15 If there are any unspecified matters
in this contract, a written supplementary agreement shall be made through consultation between the two
parties, and after the signing
and approval of both parties, the new supplementary agreement shall have the same legal effect as the original contract.
Article 16 This contract shall take effect after
being signed and sealed by the representatives of both parties, and shall expire after the expiration of the lease
period. The original
copy of this contract is in duplicate, two copies for Party A, two copies for Party B, and one copy for the street filing center.
Article 17 Before signing this contract, Party
B has carefully read all the terms of the contract and conducted full consultation and communication with Party
A. Party B fully and clearly
understands the meaning and legal consequences of each clause of the contract, and fully knows the rights and obligations of
both parties,
and Party B signs the contract on the basis of consensus and equality and voluntariness with Party A.
12
Contract Annex: This Contract Annexes have
the same legal effect as this Contract
Annex 1: A copy of Party A’s business license
Annex 2: A copy of Party B’s business license
Annex 3: The floor plan
Party A:
Party B:
Signature (representative):
Signature (representative):
ID Number:
ID Number:
Phone:
Phone:
Date of Signing:
Date of Signing:
13
Exhibit
10.12
NO.
Guangzhou
Fengxing Plaza office lease contract
Lessor: Guangzhou Fengwei Decoration Engineering
Co., Ltd. (hereinafter referred to as Party A)
Address: 2807, No. 67, Tianhe East Road, Tianhe
District, Guangzhou
Tel: 020-38394333 Postal Code: 510620
Legal representative: Li Buyun
Lessee: CLPS Guangzhou Co., Ltd. (hereinafter
referred to as Party B)
Address: Unit 01-11, 21th floor, No. 67 Tianhe
East Road, Tianhe District, Guangzhou
Tel: 020-38068088 Postal Code: 510620
Legal representative: Yang Xiaofeng
Contact person and contact information:__________________________
Through friendly negotiation,
both parties hereby enter into this contract with respect to Party B’s lease of Party A’s premises for mutual compliance.
Article 1 Name, address and size of the premises
Unit 01-11, 21th Floor, No. 67 Tianhe East
Road, Tianhe District, Guangzhou (hereinafter referred to as “the house”, see Annex 3 for details, the drawing is
for general
identification purposes only and does not show the size of the house). The house has a rented floor area of 2354.13 square meters.
Article 2 Usage
The house is rented to Party B for office use.
The name of Party B’s business in this house is CLPS Guangzhou Co., Ltd.,Its business scope is software and
information technology
services. If Party B needs to change the business operated in the house, if it involves the approval of the competent government
department
or go through the change procedures according to law, it must go through the change procedures in accordance with laws and regulations
and
notify Party A in writing within 3 days from the date of registration of the change.
Article 3 Lease Period
1. Party
B leases the house for a contract period of 40 months from the start date of the lease period, from September 1, 2023 to
December 31, 2026;Under
the premise that Party B has paid the first month’s rent, management fee and performance bond in full in
accordance with the provisions of this contract,
Party A and Party B shall jointly handle the handover procedures for the house one day
before the start date of the lease period, and Party A shall deliver the
house to Party B for use according to the lease contract on the
start date of the lease period.
2. During
the validity period of the lease contract, neither party may unilaterally cancel or terminate the lease contract, except in the circumstances
where the
contract can be terminated as stipulated by law and the lease contract.
Article 4 Rent
1. Party
B’s monthly rent for renting the house is RMB: 247,184.00 ，RMB 105 per square meter (rent does not include property
management fees, water,
electricity and other expenses). From the third year of tenancy, the monthly rent will increase by 5% per annum.
The specific rent is as follows.
Rental time
Rent (RMB/month)
September 1, 2023 to December 31, 2023
Rent-free period
January 1,2024 to December 31,2025
247,184.00
January 1, 2026 to December 31, 2026
259,543.00
2. The
house is paid according to the principle of first payment and then use, and the specific time of rent payment is as follows:
2.1 Party
B shall pay the first (monthly) rent after the expiration of the rent-free period within 3 working days before the date of the lease
contract,
calculated in RMB 247,184.00 yuan.
2.3 Party B shall pay
the next month’s rent to Party A before the end of each month (28-31), and Party A may implement it in accordance with the
provisions
of Article 8, Paragraph 2 of this contract.
3. Party
B’s rent can be delivered to Party A’s account by transfer:
Account name: Guangzhou Fengwei Decoration Engineering
Co., Ltd
Bank: China Merchants Bank Fengxing Sub-branch
Account number: 120906300410888
Article 5 Management Fees
1. Party
A entrusts Guangdong Fengwei Property Management Co., Ltd. (hereinafter referred to as the property management company) to be responsible
for
the property management of the building and the management of Party B’s leased housing, and Party B agrees to this. The specific content
of the property
management services provided by Guangdong Fengwei Property Management Co., Ltd. shall be subject to the “Preliminary
Property Management Service
Agreement” signed between Party B and Party B.
2
Property company address: the first floor of No.
23, Tianhe South 2nd Road, Tianhe District, Guangzhou
Property company telephone: 87518183
2. The
monthly management fee for the house is RMB58,853.00 (RMB58,853.00) RMB 25 per square metre. The property management company may
increase the management fee due to changes in government prices or the rise of the market price index, but the specific fees need to be
negotiated with Party
B and agreed by Party B, and the property management company shall provide Party B with relevant documents, materials
or policy provisions that affect the
change of management fees.
3. The
house is paid first and used later, and the specific time of management fee payment is as follows:
3.1 Party B shall pay the first (monthly)
management fee after the expiration of the rent-free period within 3 working days before the date of the lease
contract, calculated in
RMB 58,853.00.
3.3 According to the principle
of first payment and then use, Party B must pay the next month’s monthly management fee to the property management
company
before the end of each month (28-31), and the property management company can implement it in accordance with the provisions of
Article 8,
paragraph 2 of this contract.
4. Party
B’s management fee can be delivered to the property management company’s account in the form of transfer:
Account name: Guangdong Fengwei Property Management
Co., Ltd
Bank: ICBC Tianhe Sub-branch
Account number: 3602013419200318634
Article 6 Performance bond
1. Party B shall, within 3 working days before
the date of commencement of the lease contract (but no later than the start date of the lease period), pay Party
A the equivalent of two
months’ rent in the first year: RMB 494,368.00 and management fee (RMB 117,706.00), a total of RMB: 612,074.00 CNY
It can be
delivered to the account of Party A and the property management company in the form of transfer, and the performance bond cannot
be used against rent,
management fees and other expenses.
2. If Party B is late in paying the performance
bond, Party B shall pay liquidated damages to Party A at 0.2% of the amount of the outstanding performance
bond payable for each overdue
day, and Party A has the right not to deliver the house to Party B for use until Party B has paid all the performance bond and
liquidated
damages, and the lease period and rent-free period stipulated in paragraphs 1 and 2 of Article 3 of this contract shall not be extended
or changed
accordingly; If Party B fails to pay the performance bond in full within 15 working days after the deadline, Party A has the
right to rescind the contract, and
Party B shall pay Party A the rent of the unit from the date of payment of the performance bond to
the date of termination of the contract.
3
3. After the termination of the contract, Party
B will return the performance bond to Party B without interest within 30 working days after Party B pays the
rent and all expenses and
Party A confirms that the house is not damaged (refer to Article 10, Paragraph 5 of this contract).
Article 7 Other Expenses
1. During
the rent-free period, Party B does not need to pay the rent of the house to Party A, but must pay the management fee for the rent-free
period from
September 1, 2023 to December 31, 2023 (RMB 235,412.00) before handing over the site, and the utility fee during
the rent-free period shall be paid in
accordance with the provisions of paragraph 2 of this Article.
2. Self-water and electricity bills and
shared costs
Party B’s self-use and self-consumption of electricity will be paid in accordance with the relevant regulations of the
national government departments. The
property management company designated by Party A shall collect and pay on behalf of the
property management company, and the payment time shall be
subject to the notice of the property management company. Party B shall
bear the apportionment of the loss of self-consumption and electricity. The
calculation method of self-consumption electricity
sharing cost is 10% of Party B’s actual indoor electricity consumption. Self-consumption is apportioned in
proportion to usage. The
shared fee is paid together with the electricity and water bills for self-consumption at the time of payment.
3. Telephone and network fees
The telephone
and network shall be reported to the telecommunications department by Party B. Party B’s FAX fee, IDD telephone fee, network fee and
local
telephone fee shall be paid by Party B every month according to the telephone bill of the Telecommunications Bureau.
4. Air
conditioning management regulations and costs
(1) Use of central air conditioning
1.1 Air conditioning in the office building is
available from 8:00 to 18:00 on Monday to Friday, 8:00 am to 12:00 pm on Saturday, and is closed on Saturday
afternoon, Sunday and public
holidays.
1.2 If Party B needs to apply to turn on the central
air conditioning on weekends/holidays, it needs to submit a written application to the property company
one working day in advance, and
after approval by the property company, Party B will pay the corresponding overtime air conditioning fee to the property
company before
turning on the central air conditioning, and the specific overtime air conditioning fee standard is detailed in the annex 《Fengxing
Plaza
Weekend/Holiday Overtime Air Conditioning Charging Standard.》
Note: Property company approval conditions: More
than 30% of the units in the building (calculated by floor area) apply for overtime before the central air
conditioning can be started.
(2) Split air conditioner installation and use
Without the written consent of Party A or the
property company, Party B is strictly prohibited from installing split air conditioning within the scope of the
rented house or using
the public area of the building.
4
Article 8 Rights and obligations of Party B
1. Party B must abide by the relevant laws and
regulations of the state, obey the building management regulations and relevant property management
regulations, and shall not have pollution
and noise affecting the surrounding environment, otherwise all legal and economic responsibilities arising therefrom
shall be borne by
Party B. If there is any violation of criminal laws such as gambling, prostitution, drug use (trafficking), etc., in addition to Party
B’s own
legal and economic responsibility, Party A has the right to terminate the contract unconditionally, but Party B needs to be
notified at least 7 working days in
advance, and the performance bond paid by Party B will not be refunded.
2. Party B shall pay Party A rent, management
fee and other fees payable by Party B on time. If the payment is overdue, Party A or the property management
company may exercise the
following relevant rights and interests from Party B:
(A) If Party B has not paid the rent within the
due period for more than 5 days, a late fee of 2% of the total rent owed shall be added to the overdue time from
the 6th day onwards;
If Party B defaults on rent for more than 15 days, Party A has the right to unconditionally recover the house, and reserves the right
to
recover the fees payable from Party B, and Party B will not return the deposit paid as liquidated damages. (Overdue is less than one
month counted as one
month).
(B) If Party B fails to pay the management fee
and other fees within the time limit for more than 5 days, a late fee of 2% of the total amount of the
management fee and other fees
owed will be charged daily from the 6th day onwards according to the overdue time; If Party B defaults on any fee for 15
days, the property
management company has the right to stop supplying water, electricity, central air conditioning, telephone lines or other facilities
in the
building to the rented house of Party B, and Party B agrees that Party A or the property management company may take measures
such as locking the door,
and Party B shall bear all the consequences and losses arising therefrom.
3. During the rental period, Party B must protect
the internal equipment and other equipment of the house in good condition and tidy (except for natural
depreciation and non-Party B’s
responsibility), including but not limited to taking all appropriate measures to protect the interior of the house from damage
before
the storm arrives. Party A shall not be liable for any personal damage, property or other losses caused by theft, flood, fire and other
man-made events
or natural disasters caused by non-Party A’s reasons or damage to Party B’s own equipment and facilities. In order to
prevent the above risks, Party B shall
purchase corresponding insurance. The insured and beneficiaries of the insurance shall include
Party A.
4. Party B shall not change the structure and
use of the house without authorization, if Party B intentionally or negligently causes damage to the house and
equipment, it shall be
responsible for restoring the original state and compensating reasonable losses, and Party B shall bear the cost of repairing the facilities
and equipment related to the central system of the building (including fire protection, air conditioning, communications, security, elevators,
etc.) in the house
due to Party B’s intentional or negligent damage.
5. If Party B needs to decorate and partition
the house when entering the site, it must obtain the consent of Party A or the property management company in
writing in advance. Party
B must report the fire protection construction audit to the Guangzhou Fire Protection Bureau by itself, and go to the property
management
company to handle the construction with the Guangzhou Fire Bureau’s audit opinion, and it must be accepted by the fire control before
it can be
put into use. If changes in the central system (including fire protection, air conditioning, etc.) are involved, in order to
ensure the safety of the central system
of the building, the professional unit must be responsible for the renovation at the market price,
and Party B shall bear the relevant costs of the
transformation.
5
6. Party B shall bear the fire safety responsibility
of the house during the lease period (including the decoration rent-free period), and if the house is damaged
due to the fire caused
by Party B, it shall also bear the liability for compensation to Party A. If the house is installed or inspected for fire fighting facilities
in
the future, Party B shall unconditionally obey and cooperate.
7. Do not store and allow others to store weapons,
ammunition, explosive and flammable and other prohibited dangerous substances in the premises; No
illegal activities may be carried out
inside the premises. Boxes, furniture, garbage, etc. shall not be stacked or left in elevators, lobbies, stairs, passages and
other public
places on each floor of the building to ensure the smooth flow of this place.
8. Responsible for the hygiene of the interior
of the house. If Party B receives a notice from the government department requesting sanitation work in the
house, Party B must notify
the property management company and implement it according to the notice. If Party B does not follow the notice, so that Party A
suffers
economic losses caused by this behavior, Party B must be responsible for compensation.
9. Party B shall not change the lease purpose
of the house without authorization, shall not sublease, sublease, or otherwise transfer the house to a third party
for use, shall not
provide guarantee to others in any form, or mortgage its lease use right (operation right) to others. Otherwise, Party A has the right
to take
back the house and confiscate the performance bond, and Party B shall bear all the responsibilities arising therefrom.
Notwithstanding the foregoing, Party B may transfer
all or part of its rights and obligations under the lease contract to Party B’s affiliates (including but not
limited to any enterprise
that directly or indirectly controls Party B in any way, is directly or indirectly controlled by Party B in any way, or is directly or
indirectly under common control with Party B in any way) during the lease period and with 1 month’s written notice to Party A in advance.
However, Party B
shall notify Party A in writing in advance and provide Party A with documents and other legal documents proving its
association with Party B. The assignee
shall sign a new contract with Party A in accordance with the terms of the lease contract, and
all costs arising from the signing of the new lease contract shall
be borne by Party B or (including but not limited to the stamp duty
borne by Party A according to law).
10. If any facilities in the building fail to
operate normally due to circumstances beyond Party A’s control, such as interruption of the normal supply of water,
electricity, air
conditioning and elevators, Party A shall not be liable to compensate Party B for any losses, and at the same time, the rent and other
expenses
payable by Party B under the lease agreement shall not be affected by this, but Party A shall do its best to repair and restore
the normal supply of the above
facilities.
11. Party B shall apply for and obtain all permits
and approvals required by laws and regulations to carry out business activities. If Party B does not submit
industrial and commercial,
association or other registration documents to Party A when signing the lease contract (the specific submission documents depend
on the
nature of Party B’s organization), Party B shall report to the relevant government department within 3 months from the date of the start
of the lease
period of the lease contract to obtain a business license or other registration documents, and submit a copy of it verified
by Party A to Party A for filing, and
the name displayed on such certificates shall be consistent with Party B’s name or the name specified
in Article 1, Paragraph 4 of this contract. During the
validity period of the lease contract, Party B shall keep such certificates valid
continuously.
12. Party B shall abide by the property management
of the building, and shall not open the windows on the glass curtain wall without the consent of Party A
or the property management company.
6
13. Normal office hours: Monday to Friday 8:00
to 18:00, Saturday 8:00 am to 12:00 pm; Other times and national statutory holidays are arranged as
abnormal hours. If Party B’s office
hours change, it is necessary to notify the property management company in writing in advance, and the overtime shall
not exceed 22:30
at the latest, and each overtime work shall go to the property management company in advance to complete the registration procedures;
Party B shall pay the relevant fees for the additional operating expenses of public facilities and equipment (such as public corridor
lighting, elevators, etc.)
caused by overtime according to the charging standards of the property management agreement in the early stage
of the property management agreement of
the property company.
14. If Party B does not handle the handover procedures
of the house or accept the house in accordance with the provisions of Article 3, Paragraph 1 of this
contract, Party B shall be deemed
to have received the house, and Party B shall pay rent to Party A and pay property management fees and other expenses to
the property
management company in accordance with the provisions of the lease contract, and the lease period and rent-free period shall not be extended
or
changed accordingly. If Party B fails to complete the handover procedures for the house or accept the house within 30 days (including
30 days) after the
deadline, Party A has the right to rescind the contract, confiscate the performance bond, and recover the amount due
from Party B.
15. If Party B’s decoration plan is reviewed
and approved by Party A or the property company, there is no need to restore the original state after the lease
expires.
Article 9 Rights and obligations of Party A
1. If Party A fails to deliver the house within
the time specified in the lease contract, if it is overdue within 15 working days (including 15 working days),
Party B has the right
to choose (A) extend the lease period and rent-free period accordingly, or (B) require Party A to pay liquidated damages to Party A (the
liquidated damages are calculated as 0.2% of the monthly rent of the leased unit to Party B for every 1 day overdue). If the overdue
period exceeds 15
working days, Party B has the right to cancel the contract, and Party A shall return the performance bond paid by Party
B and the first month’s rent to Party B
without interest within 15 working days after the cancellation of the contract, and pay liquidated
damages to Party B, and the liquidated damages shall be
calculated as 0.2% of the monthly rent of the rental unit to Party B for every
1 day overdue. After Party A performs the above responsibilities, the
obligations, rights and responsibilities of both parties in this
situation shall be terminated.
2. Party A is responsible for providing electricity,
central air conditioning and other public facilities for Party B to use in the house; Responsible for the
normal operation and maintenance
of the central system facilities and equipment of the building (including fire, security, air conditioning, communications,
electrical
appliances and other systems).
3. Party A guarantees that it is the legal lessor
of the house, has the full authority, qualification and ability to sign the lease contract and perform the
obligations of Party A in
the lease contract, and that the unit does not have any possible property rights disputes that affect Party B’s use of the house,
otherwise
Party A shall bear the liability for breach of contract.
Party A or the person or organization agreed
to by it has the right to hold activities or publish advertisements in common places such as lobbies, elevator
halls, elevator cars,
corridors, etc. However, it cannot affect Party B to use the house as agreed in the lease contract.
7
4. During the validity period of the lease contract,
Party A may transfer or mortgage the building or the house to a third party without Party B’s consent, and
Party B waives the right of
first refusal to purchase the unit, provided that Party A shall notify Party B in writing within 15 days after the effective date of
the
transfer. The change of owner caused by the transfer of the building and the house and the mortgage of the building or the house
do not affect the validity of
the lease contract, and the new owner inherits the rights and obligations of Party A in the lease contract.
Party A warrants that the transferee will be fully
aware of Party A’s rights and obligations under this Contract, and the transferee
shall agree in writing to assume all of Party A’s rights and obligations under
this Contract.
5. Party A and the property management company
have the responsibility to assist and guide Party B to handle the secondary decoration construction
procedures, and supervise and manage
the whole process of Party B’s secondary decoration according to the requirements of the Guangzhou Fire
Department’s decoration audit
opinion.
6. Party B permits Party A to install, use and
maintain plumbing and wiring through or in the house, and Party A has the right to enter the house after giving
Party B reasonable advance
notice (except for emergencies) for the purpose of carrying out inspections of the above conditions and repairs deemed necessary.
7. Party A shall not arbitrarily take back the
house in advance. If it is withdrawn in advance, Party A shall return the performance bond paid by Party B twice.
8. During the lease period, Party A may demolish,
modify or expand or add to the structure of the building where the leased house is located, including but
not limited to the entrance,
exit, elevator hall and other areas of the building where the house is located, but it cannot affect Party B’s normal office, including
but not limited to equipment failure, office environment noise exceeding national standards, etc., if Party B’s employees complain about
noise problems,
Party A shall solve them in time to ensure the normal office of Party B’s employees. Party B shall not use this to cancel
this contract or demand a reduction in
rent, management fees, etc.
9. Party A guarantees that it has the right to
entrust the property management services stipulated in this contract to Guangdong Fengwei Property
Management Co., Ltd.
Article 10 Termination of Contract and Return
of Leased Unit
1. If the contract is terminated normally at
the end of this contract and the two parties have not agreed to renew the lease by Party B or cancel or terminate the
lease contract
in advance, Party B shall go through the relevant procedures for termination of the contract with Party A 15 days in advance, pay all
fees and
remove all the property in the house on the date of the expiration of the lease (if the contract is cancelled or terminated
early, no later than 5 days from the
date of rescission or termination of the contract), and if it is returned within the time limit,
Party B shall pay Party A the house occupancy fee according to
the actual number of occupied days from the date of overdue，(Occupancy
fee rate: 200% of the last daily rent level before the termination of the contract),
property management fee and other related expenses.
At the same time, Party A has the right to take necessary measures to recover the house (including but
not limited to opening and replacing
the door lock by itself, and disposing of the property in the unit according to Article 10, Paragraph 3 of the contract),
and Party B
shall bear the costs and losses caused thereby.
8
2.If the lease period of the lease contract expires
and the two parties do not agree to renew the lease by Party B or the lease contract is cancelled or terminated
in advance, Party B shall
return the leased property in the state after renovation (but excluding the public part occupied by Party B’s special application), and
Party B has the right to dismantle its office furniture and equipment, but cannot dismantle the fixed decoration part (such as the interval
of decoration,
ceiling, floor, lighting, pipeline, etc.), and the original indoor fixed decoration belongs to Party A. If the structure
of the house is damaged, Party A has the
right to require Party B to make compensation (except for disasters, wars, and natural depreciation).
3. Party B shall remove all the furniture and
miscellaneous goods within 5 days from the date of expiration of the lease or the termination of the contract, and
the items that have
not been removed shall be deemed to be waived by Party B as giving up their ownership and all other rights and interests, and Party A
may dispose of such property by itself, and the value of such property and any of its rights and interests shall be deemed to be zero.
Party A’s disposal of such
property does not constitute an infringement on Party B or any third party, and Party B shall bear the costs
and losses suffered by Party A and any third party
as a result. During the above 5-day clean-up period, Party B shall not pay any rent
except for the energy fees, property management fees, and communication
fees payable by other third parties during the clean-up period.
4. If Party B needs to terminate the
operation before the expiration of the contract period for any reason, Party B shall notify Party A in writing one month in
advance,
and after obtaining the consent of Party A, it shall be handled in accordance with Paragraphs 1 and 2 of Article 10 of this
contract, and the deposit
paid by Party B shall belong to Party A.
5. After the termination of the lease
contract, Party B shall return the house to Party A in accordance with the following provisions before requesting the
refund of the
performance bond:
(1) Remove all of his belongings from the house;
(2) Check with Party A whether the equipment
and facilities delivered by Party A to Party B are in normal use (except normal wear and tear), and Party B
shall repair or compensate
if there is any damage;
(3) Give Party A the keys to the door of the
house and all the doors inside it;
(4) Settle rent, property management fees and
other expenses (including but not limited to water, electricity, communication fees, etc.);
(5) Both parties or Party A sign the confirmation
document for Party B’s return of the leased house.
Article 11 Renewal
1. Upon the expiration of the lease contract,
Party B may renew the contract with Party A first under the same conditions. If Party B renews the lease, Party B
shall notify Party
A in writing 3 months before the expiration of the lease period. Parties A and B shall negotiate to sign a new lease contract, and if
both
parties are unable to sign a new lease contract with only 1 month left before the expiration date of the lease period, the lease
will not be renewed.
2. Three months before the expiration of the
contract, if Party B does not propose to Party A in writing to renew the contract, Party B shall be deemed to have
waived and the contract
shall be terminated upon expiration. Party A may lead customers interested in the house to enter the house for inspection at a
reasonable
time and without affecting the normal operation of Party B, but Party A shall notify Party B 3 days in advance, and Party B shall cooperate.
9
Article 12 Force Majeure
During the lease period, if the house or the
building is damaged beyond repair or unsuitable for lease due to force majeure, natural disasters, war, riots, this
contract will be
terminated naturally, and Party A and Party B shall not be liable to each other, and after Party B pays all the expenses due, Party A
will return
the performance bond paid by Party B to Party B within seven days without interest.
Article 13 Dispute Resolution
This contract shall be governed by the laws of
the People’s Republic of China, and all disputes arising from the performance of this contract shall be resolved
by both parties through
friendly negotiation as much as possible, and if the negotiation fails, it may be resolved by litigation in the court where the building
is
located, and the parties shall continue to perform this contract during the litigation.
Article 14 Miscellaneous
1. The lease registration and filing fee, stamp
duty and related fees levied by government departments of this contract shall be borne equally by both parties
(if the government stipulates
that one party shall bear the burden, it shall be handled according to the regulations).
2. During the validity period of the lease contract,
both parties and their employees and agents shall keep the terms of the lease contract confidential and shall
not disclose or disclose
the terms of the lease contract to any third party without the written consent of both parties A and B.
3. Notices and requests given by either party
to this contract (including the property management company) to the other party must be sent in writing to the
address indicated in this
contract. Such notices or correspondence shall be delivered by hand or by facsimile or express mail. If it is delivered by hand, it shall
be deemed to have been duly delivered upon delivery. If sent by facsimile, the notice is actually received by the person receiving the
fax. If it is delivered by
Speedpost, it will be deemed to have been delivered within 3 days after dispatch by Speedpost. Any change
of address must be notified in writing within
seven days.
4. During the lease period, if Party A needs
to adjust the collection of rent, management fees and other fees due to the adjustment of the enterprise group
organization, within seven
working days after Party A issues the corresponding written notice, Party A and Party B shall sign a new supplementary
agreement on the
adjustment of the above fees. The total cost of rent and management fee of the newly signed supplementary agreement and the total cost
of
rent and management fee of this contract shall be determined after consultation between the two parties.
5. Party B has clearly understood the content
of the 《Interim Convention for Owners/Property Users of Fengxing Plaza Office Building》when signing this
contract and is
willing to comply with the relevant provisions, if the content of the above documents is contrary to this contract, this contract shall
prevail.
6. Both parties agree to issue VAT invoices to
Party B at the tax rate selected by Party A and the property management company.
7. The lessor only issues an invoice for the
payment of the month, and does not provide any procedures for replacing the bill.
10
8. If Party B does not engage in business activities
(such as operating without a license) or engages in illegal activities, suspected criminal acts, etc. in
accordance with laws and regulations,
Party A has the right to unilaterally terminate the contract, and Party B has no right to demand the return of the
performance bond,
that is, the performance bond is regarded as liquidated damages.
9. If Party B and Party B’s staff violate the
Regulations on Smoking Control in Public Places, the Regulations on Smoking Control in Guangzhou and the
relevant provisions of this
contract, that is, smoking or the existence of cigarette butts in public areas such as public corridors, stairs, elevators, etc., and
Party
B still fails to correct it after Party A issues three warnings, it shall be deemed that Party B has seriously breached the contract,
and Party A has the right to
unilaterally terminate the contract.
10. Party A shall deliver the leased floor
to Party B for use in accordance with the provisions of the lease contract, and Party A shall ensure that the leased
floor meets the
provisions of the “Letter of Intent for Lease” regarding the delivery status of the floor (Note: except for the two glass gates
and fire doors).
Article 15 If there are any unspecified matters
in this contract, a written supplementary agreement shall be made through consultation between the two
parties, and after the signing
and approval of both parties, the new supplementary agreement shall have the same legal effect as the original contract.
Article 16 This contract shall take effect after
being signed and sealed by the representatives of both parties, and shall expire after the expiration of the lease
period. The original
copy of this contract is in duplicate, two copies for Party A, two copies for Party B, and one copy for the street filing center.
Article 17 Before signing this contract, Party
B has carefully read all the terms of the contract and conducted full consultation and communication with Party
A. Party B fully and
clearly understands the meaning and legal consequences of each clause of the contract, and fully knows the rights and obligations of
both parties, and Party B signs the contract on the basis of consensus and equality and voluntariness with Party A.
Contract Annex: This Contract Annexes
have the same legal effect as this Contract
Annex 1: A copy of Party A’s business license
Annex 2: A copy of Party B’s business license
Annex 3: The floor plan
Party A:
Party B:
Signature (representative):
Signature (representative):
ID Number:
ID Number:
Phone:
Phone:
Date of Signing:
Date of Signing:
11
Exhibit 10.17
Serial Number:
Working
Capital Loan Contract
Contract Version Number: SPDB 20 2109
Working Capital Loan Contract
Working Capital Loan Contract
Borrower:
CLPS Shanghai Co., Ltd.
Principal Business Address:
2F, Building
18, 498 Guoshoujing Road, Pudong, Shanghai, China
Contact Person:
Huanzhen Wu
Telephone:
15040094890
Fax:
/
Email:
lisa.wu@clpsglobal.com
Lender:
Shanghai Pudong Development Bank Co., Ltd.
Jinqiao
Branch
Principal Business Address:
509 Jingang Road, Pudong, Shanghai, China
Contact Person:
Lin Xie
Telephone:
021-58994702
Given that:
The Borrower applies to
the Lender for working capital loan due to capital turnover needs; after examination, the Lender agrees to grant the loan in
accordance
with the terms and conditions of this Contract. In order to clarify the rights and obligations of both parties, we hereby enter into this
Contract in
accordance with the relevant laws, regulations and rules of the People’s Republic of China.
Meanwhile, the Borrower
and the Lender confirm the following primary terms:
1.
(Please mark ü
in the appropriate box according to the situation, and mark x if you do not select)
☒
This Contract is signed as a subsidiary financing document of the Financing Line Agreement No. (hereinafter referred to as the Financing
Line
Agreement). After this Contract comes into effect, all its terms shall be incorporated into the Financing Line Agreement and become
its component parts (if
the Borrower has previously signed the Financing Line Agreement, this option shall be selected and the Financing
Line Agreement number shall be
indicated);
þ This contract is an independent credit document signed between the Borrower and the Lender (if the Borrower and the Lender have not signed a
Financing Line Agreement, this option should be selected);
2. (If the purpose of
the loan is to borrow new money to repay old loan or to renew the loan, you must mark ü
in the box)
☒
The guarantors are aware that the loan purpose of this contract is to repay the loan under the original contract name:
(Signed on:
Serial Number:
).
☆ 11054179
Page 1
ZEZAEBAA
Working Capital Loan Contract
Part I Commercial Terms
1. Loan types:
þ Short-term working capital loan ☒ Medium-term working capital loan
2. The loan amount under
this contract is RMB (currency) Five Million Yuan (in words).
3.
The specific purposes of the loan under this Contract are:
4. The loan term under this
Contract is (please mark ü in the following boxes, or mark x if you do not select):
☐ since
(date, month, year) to
(date, month, year);
☐
year(s) (or months) from the date of
first withdrawal.
The actual withdrawal date
and repayment date shall be subject to the date recorded on the IOU (loan certificate) issued by the Lender and the Borrower.
The last
repayment date shall not exceed the loan period agreed in this Contract. The IOU (loan certificate) is an integral part of this Contract.
5. The loan interest rate
under this Contract is (please mark ü in the following boxes, and mark x if you do not
select) :
þ
(1) RMB loan interest rate:
Each loan under this
contract shall be calculated based on the Loan Prime Rate (LPR) ☐ + ☐ - BPS announced by the National Interbank Funding
Center at the end of the day before the actual disbursement date of the loan. If the calculated interest rate is less than 0%, it
will be executed at 0%. (The
Loan Prime Rate is an annual interest rate, which can be found on the National Interbank Funding Center
and the website of the People’s Bank of China).
☆ 11054179
Page 2
ZEZAEBAA
Working Capital Loan Contract
After each loan under this Contract
is issued, if the Loan Prime Rate is adjusted during the loan period, the loan interest rate (please mark ü
in the box
below and mark x if you do not select):
☐ No adjustment, fixed
interest rate;
☒ The interest rate
will be adjusted starting from the interest rate adjustment date, based on the Loan Prime Rate (LPR) for the agreed period as stated
above announced by the National Interbank Funding Center at the end of the day before the interest rate adjustment date, and the
floating points and
calculation method of the interest rate agreed above remain unchanged. The specific interest rate adjustment
dates is as follows (please mark ü in the box
below, and mark ⅹ if you do not
select):
☒ The
interest rate is adjusted annually. The interest rate adjustment date is the corresponding day of the corresponding month of the
next calendar
year after the actual loan disbursement date. If there is no corresponding day in the corresponding month of the next
calendar year after the actual
loan disbursement date, the interest rate adjustment date is the last day of the corresponding month
of the next calendar year after the actual loan
disbursement date;
☒
The interest rate is adjusted annually, and the interest rate adjustment date is January 1 of each year;
☒ The
interest rate is adjusted according to the interest payment date, and the interest rate adjustment date is the ________ day after
the interest
payment date;
☒ The
interest rate is adjusted quarterly, and the interest rate adjustment date is the ___________ day of the last month of each
quarter;
☒
The interest rate is adjusted monthly, and the interest rate adjustment date is the day of every month;
☒
Other conventions (specific interest rate adjustment date): ____________.
☒ (2) Foreign currency loan interest rate:
☒ 1) Each loan under this
Contract shall be calculated based on the ______________ (LIBOR/HIBOR/SIBOR) published by the Lender on
____________(date, month, year)
(hereinafter referred to as the “Benchmark Interest Rate Term”) on the actual date of loan issuance as the Benchmark
Interest Rate plus BPS (hereinafter referred to as the “Spread”, and the Spread ≥0).
If the Benchmark Interest Rate is less than 0%, the Benchmark Interest
Rate shall be calculated at 0%.
☆ 11054179
Page 3
ZEZAEBAA
Working Capital Loan Contract
After each loan under this
Contract is issued, the loan interest rate will be adjusted during the loan period as follows (please mark ü
in the box below,
and mark ⅹ if you do not select):
☒ From the date of
each loan disbursement, the loan interest rate shall be adjusted according to the Benchmark Interest Rate Term agreed in this
Contract, the latest foreign currency benchmark interest rate of the corresponding day plus the interest rate spread agreed in this
Contract. If the Benchmark
Interest Rate is less than 0%, the Benchmark Interest Rate shall be calculated at 0%.
☒ Fixed interest rate, which means the interest
rate will remain the same.
☒
2) The foreign currency loan interest rate under this Contract is detailed in the “Foreign Currency Interest Rate Supplementary
Contract” signed
separately by both parties to this Contract.
☒ 3) The interest rate for each loan
under this Contract is ____/___ %, which is a fixed rate and will not be adjusted during the loan period.
6. The interest settlement method under this Contract
is (please mark ü in the box below, and mark ⅹ if you do not select):
☐ If the interest is settled monthly,
the interest settlement date is the 20th day of each month;
☐ If the interest is settled quarterly,
the interest settlement date is the 20th day of the last month of each quarter;
☐ Other methods: ________________________________.
The interest of each repayment
under this Contract shall be paid together with the principal.
7. The penalty interest
rate under this Contract is:
(1) The overdue penalty interest rate under this Contract shall
be 30 % higher than the loan execution interest rate applicable
on the penalty
interest calculation date.
(2) The penalty interest rate for misappropriation of the loan
or failure to use the loan for the purposes agreed in this Contract shall be 50 % higher than
the loan execution rate applicable
on the penalty interest calculation date.
If the loan currency is in foreign currency,
if there are other provisions in the foreign currency interest rate supplementary contract or foreign currency
interest rate change contract
signed by the two parties to this Contract, such provisions shall apply.
☆ 11054179
Page 4
ZEZAEBAA
Working Capital Loan Contract
8. The loan withdrawal
period under this Contract is from
(date, month, year) to (date,
month, year). The first withdrawal shall be made
before
(date, month, year).
9. The withdrawal plan for
the loan under this Contract is as follows (please mark ü in the box below, and mark
ⅹ if you do not select):
☐ The withdrawal
plan is shown in the table below:
No.
Withdrawal Date
Withdrawal Amount
1
☐
Day ☐ Month ☐ Year
(Amount in words)
2
☐
Day ☐ Month ☐ Year
(Amount in words)
3
☐
Day ☐ Month ☐ Year
(Amount in words)
4
☐
Day ☐ Month ☐ Year
(Amount in words)
5
☐
Day ☐ Month ☐ Year
(Amount in words)
6
☐
Day ☐ Month ☐ Year
(Amount in words)
☐ Other
withdrawal plans:
10. The repayment plan for
the loan under this Contract is as follows (please mark ü in the box below, and mark
ⅹ if you do not select):
☐ The repayment
plan is shown in the table below:
No.
Repayment Date
Repayment Amount
1
☐
Day ☐ Month ☐ Year
(Amount in words)
2
☐
Day ☐ Month ☐ Year
(Amount in words)
3
☐
Day ☐ Month ☐ Year
(Amount in words)
4
☐
Day ☐ Month ☐ Year
(Amount in words)
5
☐
Day ☐ Month ☐ Year
(Amount in words)
6
☐
Day ☐ Month ☐ Year
(Amount in words)
☐ Other repayment
plans:
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11. Penalty for early repayment
of loan: Equivalent to / % of the total amount of loan actually repaid in advance or RMB (currency) Zero Yuan (in
words).
12. The principal amount of
the loan to be repaid in advance shall not be less than RMB (currency) Zero Yuan (in words).
13. Account Opening ( For RMB
loans, choose one of the following modes and mark ü; for foreign currency loans, choose
the special account mode.
Mark ⅹ if you do not select):
☐ Non-special account
mode:
(1) The general settlement account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(2) The fund withdrawal account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
☐ Special account
mode:
(1) The special account for
working capital loans opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(2) The general settlement account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(3) The fund withdrawal account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
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14. Lender entrusted payment:
For loan funds payment with a clear payment object and a single payment amount exceeding RMB
(Currency
and Amount), the Lender entrusted payment method should be adopted.
15. The guarantors and guarantee
contracts that provide guarantee for the debts under this Contract include but not limited to:
☒
Guarantor /
Guarantee Contract No. 【 / 】;
☒ Mortgagor / Mortgage
Contract No. 【 / 】;
☒
Pledgee /
Pledge Contract No. 【 / 】;
☒ Other guarantees
/
.
16. Breach of Contract Handling
Penalty: Equivalent to __________% (in words) of the loan principal amount or
17. The annexs to this Contract
include:
( 1 ) Withdrawal Application
Form .
( 2 ) .
( 3 ) .
( 4 ) .
( 5 ) .
18. Other matters agreed upon
by both parties.
19. This Contract is made in
triplicate , of which the Borrower holds one copy, the Lender holds two copies, and / holds /
copies.
Each copy has the same legal effect.
(End of Part 1)
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Part II General Terms
Article 1 Loan
1. The Borrower irrevocably
agrees and confirms that the Lender has the right to adjust or add loan disbursement conditions due to changes in
laws, regulations and
policies, or restrictions on the government’s macro-monetary policy or financial regulatory policy, or based on market
conditions,
capital position and financial cost conditions, its own business needs, the Borrower’s performance ability or financial status,
or other
major changes in circumstances, and may suspend, reduce or cancel the loan and notify the Borrower.
2. The loan under this Contract
shall be used in accordance with the purpose of the loan agreed in this Contract. The Borrower shall not misappropriate
or embezzle the
loan for fixed asset investment, equity investment, etc., nor shall it be used in the fields and for purposes prohibited by the State
for
production and operation or other activities that are not in line with the purpose of working capital loans.
Article 2 Loan Interest Rate and Interest Calculation
Method
1. Unless otherwise agreed
in this Contract, the interest on the loan under this Contract shall be calculated based on the actual withdrawal amount and
the number
of days occupied from the date the Lender issues the loan. The number of days occupied includes the first day and excludes the last day.
Daily
interest rate = monthly interest rate / 30, monthly interest rate = annual interest rate / 12, that is, daily interest rate = annual
interest rate / 360. When the loan
currency is British Pound, Hong Kong Dollar or Singapore Dollar, daily interest rate = annual interest
rate / 365.
2. The Lender has
the right to charge overdue penalty interest on the principal of the loan that is due (the term “due” in this Contract includes
the
situation where the Lender declares the loan to be due in advance) payable by the Borrower at the overdue rate agreed in this Contract
and calculated on the
actual number of days overdue, starting from the date of overdue, until the Borrower repays the principal and interest.
3. If the Borrower
fails to use the loan funds for the agreed purpose, the Lender shall have the right to charge penalty interest on the amount of the loan
used in breach, calculated according to the actual number of days of breach at the penalty interest rate for misappropriation agreed in
this Contract, starting
from the date of breach, until the Borrower repays the principal and interest.
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4. The Lender shall
charge compound interest on the interest (including normal interest, overdue penalty interest and misappropriation penalty interest)
that
the Borrower fails to pay on time at the overdue penalty interest rate agreed in this Contract based on the actual number of days overdue
from the date of
overdue payment.
5. Unless otherwise
agreed upon by both parties to this Contract, the loan interest rate under this Contract shall be calculated using the “simple interest
method”. The interest rate calculation method can be found on the website of the People’s Bank of China.
6. Interest Rate Market Paralysis
After the loan is
disbursed under this Contract, if there is no applicable LPR (applicable to RMB) or LIBOR/HIBOR/SIBOR (applicable to foreign
currencies)
interest rate on the quotation date of the relevant interest period, the Borrower shall negotiate with the Lender to determine the alternative
interest
rate; if no agreement can be reached within five (5) banking days after the start of the negotiation, the Borrower shall repay
all principal and interest of the
loan within thirty (30) banking days from the date of failure to reach an agreement. If the parties
have signed a foreign currency interest rate supplementary
contract or a foreign currency interest rate modification contract at the same
time as signing this Contract, the interest rate shall be determined in accordance
with the provisions of the supplementary contract or
modification contract.
Article 3 Withdrawal
1. Before making the first
withdrawal, the Borrower shall meet the following conditions:
(1) Submit the Withdrawal
Application (the format is shown in Annex 1 or Annex 2 of this Contract), the completed Debit (Loan) Certificate and other
relevant documents
in accordance with the time and method agreed upon in this Contract;
(2) This Contract
and the corresponding Guarantee Contract (if any) have been signed and remain in force, and the Guarantee Right has been effectively
established;
(3) Submit
the Borrower’s current valid business license, company charter, and recent financial statements on the withdrawal date (including
but not
limited to the previous year’s annual financial report audited by a certified public accountant and current financial statements);
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(4) Submit the original
copy of the loan resolution made by the Borrower’s board of directors/shareholders meeting or other institutions with equivalent
effect, the authorization letter from the legal representative to the authorized representative, and the signature specimens of the legal
representative and the
authorized representative;
(5) The Borrower
has opened a relevant account with the Lender in accordance with the Lender’s requirements;
(6) The Borrower has performed its
obligations under this Contract and no breach of contract has occurred;
(7) Other documents or conditions
required by the Lender.
2. In addition to
conditions for the initial withdrawal, the Borrower shall also meet the following conditions before each withdrawal:
(1) Submit the Withdrawal
Application (the format is shown in Annex 1 or Annex 2 of this Contract), the completed Debit (Loan) Certificate and other
relevant documents
in accordance with the time and method agreed upon in this Contract;
(2) The representations and warranties
made by the Borrower under this Contract shall remain valid;
(3) The Borrower has performed its
obligations under this Contract and no breach of contract has occurred;
(4) Other documents or conditions
required by the Lender.
3. Withdrawal
(1) The Borrower
shall make a one-time or installment withdrawal according to the withdrawal plan agreed upon in this Contract and shall submit a
Withdrawal
Application (the format of which is provided in Annex 1 or Annex 2 to this Contract) to the Lender three (3) banking days before the due
date of
each Withdrawal to complete the withdrawal procedures;
(2) If the Borrower
needs to postpone or change the withdrawal date, the Borrower shall obtain the Lender’s consent three (3) banking days before the
withdrawal date. The Lender shall have the right to require the Borrower to pay the interest loss incurred by the Lender as a result (interest
loss = interest on
the postponed withdrawal period - interest on demand deposits during the same period);
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(3) If the Borrower
requests to cancel all or part of the undrawn loan, he shall apply to the Lender three (3) banking days prior to the determined
withdrawal
date or the end date of the withdrawal period, and the cancellation can only be made after the Lender agrees;
(4) If the Borrower
fails to complete the withdrawal procedures and does not apply for a delay in withdrawal on the specified withdrawal date or within
the
withdrawal period, the Lender has the right to cancel the undrawn loan;
The Lender has the
right to waive one or more of the above withdrawal conditions without affecting any rights of the Lender under this Contract.
Article 4 Account Opening and Management
1. The Borrower
shall have opened a general settlement account and a fund withdrawal account with the Lender (see Part I of this Contract) at the
time
of signing this Contract, as well as a special account for working capital loans (if any) agreed upon by both parties. The Borrower
agrees that the Lender shall
monitor the Borrower’s aforementioned accounts.
2. If a special account
for working capital loans is not opened, the general settlement account shall be used to calculate the disbursement and payment of
loan
funds applied by the Borrower from the Lender.
If a special working capital
loan account is opened, it is used to calculate the loan funds issued and paid by the Borrower from the Lender, and the funds
in the account
are calculated according to the interest of demand deposits. The Borrower agrees that in addition to the Borrower’s reserved seal,
the special
working capital loan account shall also reserve the Lender’s special seal for loan fund payment supervision. The Borrower
cannot change the reserved seal of
the special working capital loan account at will without the Lender’s written consent.
3. The Borrower
confirms that the Fund Withdrawal Account is the income account and repayment reserve account under this Contract. The Borrower’s
income cash flow or the Borrower’s overall cash flow shall be entered into the Fund Withdrawal Account.
The Borrower guarantees that,
on each principal and interest payment date under this Agreement and within the three (3) days prior thereto, the balance
of funds in
the Borrower’s repayment reserve account shall not be less than the principal and interest payment amount that the Borrower should
pay in the
current period. The Borrower agrees that, on each principal and interest payment date and within the three (3) days prior thereto,
the Lender has the right to
restrict or refuse any external payment behavior of the Borrower that will cause the balance of funds in the
repayment reserve account to be less than the
principal and interest payment amount that should be paid in the current period, so as to
ensure that the balance of funds in the repayment reserve account is
sufficient to pay the principal and interest payment amount that
should be paid in the current period.
The Lender has the right
to monitor the funds withdrawal account. When the fund flow in the funds withdrawal account is abnormal, the Lender has the
right to find
out the reason from the Borrower and take corresponding measures.
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Article 5 Payment Supervision
1. The Borrower agrees
that the Lender has the right to manage and control the payment of the loan funds through the Lender’s entrusted payment and/or
the Borrower’s independent payment, so as to supervise the use of the loan funds in accordance with the purposes agreed in this
Contract.
The lender’s entrusted
payment means that the Lender pays the loan funds through the Borrower’s account to the Borrower’s transaction counterparty
that meets the purpose agreed in this Contract based on the Borrower’s withdrawal application and payment entrustment.
The Borrower’s autonomous
payment means that after the Lender disburses the loan funds to the Borrower’s account based on the Borrower’s
withdrawal
application, the Borrower will independently pay it to the Borrower’s transaction counterparty for the purpose agreed in the Contract.
2. The Borrower agrees that
if the Borrower and the Lender have newly established a credit business relationship and the Borrower’s credit status is
average,
or the payment object is clear and the single payment amount exceeds the amount agreed in this Contract (see Part I of this Contract),
or other
circumstances determined by the Lender, the Lender’s entrusted payment method shall be adopted.
If the Lender
is entrusted to pay, the Lender has the right to review the payment object, payment amount and other information listed in the payment
application provided by the Borrower based on the loan purpose agreed in the loan contract to see if they are consistent with the corresponding
business
contract and other supporting materials. After review and approval, the Lender will pay the loan funds to the Borrower’s
trading counterparty through the
Borrower’s account.
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3. When the Borrower applies
to the Lender for external payment of loan funds, he shall submit supporting documents that meet the Lender’s
requirements, including
but not limited to:
(1) Documents proving that the purpose
of payment is in accordance with the purpose agreed in this Contract;
(2) Business contracts
and written documents that truly reflect the Borrower’s payment obligations. For fees that must be paid without signing a contract,
the charging policy and standards approved by the competent authority should be provided;
(3) If the corresponding
invoice or receipt is not available at the time of payment, the Borrower shall promptly submit the corresponding invoice or
receipt after
the payment is completed;
(4) Legal and valid payment voucher;
(5) Other documents required by the
Lender.
The Lender has the
right to waive one or more of the above-mentioned certification documents, without affecting any rights of the Lender under this
Contract.
4. If a special
account for working capital loan is not opened, the Borrower shall submit a withdrawal application (see Appendix 1 of this Contract for
the format) to the Lender three (3) banking days before the intended withdrawal date, and at the same time propose whether to adopt the
Lender’s entrusted
payment method or the Borrower’s independent payment method. The Borrower confirms that the Lender has
the right to review whether the Borrower’s
relevant information meets the payment conditions stipulated in this Contract and has
the right to decide on the payment method of the corresponding loan.
In case of opening
a special account for working capital loan and adopting the method of entrusted payment by the Lender, the Borrower shall submit to
the
Lender a payment application (format as shown in Appendix 3 of this Contract) with the reserved seal of the Borrower for the special account
for
working capital loan three (3) banking business days before the payment date. The Lender shall have the right to review whether the
relevant information of
the Borrower meets the payment conditions stipulated in this Contract. If the Lender approves the review, the
payment voucher shall be stamped with the
special seal for loan fund payment supervision and then the payment shall be made. In case of
adopting the method of independent payment by the Borrower,
the Borrower shall submit to the Lender a payment application (format as shown
in Appendix 3 of this contract) and relevant information three (3) banking
business days in advance. The Lender shall have the right to
review whether the relevant information submitted by the Borrower meets the conditions
stipulated in this contract. If the Lender approves
the application, the Borrower shall fill in the payment voucher (the amount of each summary payment
voucher shall not exceed the amount
entrusted by the Lender stipulated in this Contract). After review, the Lender shall stamp the special seal for loan fund
payment supervision
on the summary payment voucher and transfer the corresponding funds to the general settlement account of the Borrower.
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5. If the Borrower adopts the
self-payment method, the Borrower shall regularly report to the Lender on the self-payment of the loan funds on a monthly
basis. The Lender
has the right to verify whether the Borrower’s loan payment complies with the agreed purpose and payment method through account
analysis, voucher inspection, on-site investigation, etc.
6. The Borrower confirms that
he shall pay the Lender the remittance fee incurred in the payment of loan funds. When the remittance fee is incurred, the
Lender has
the right to directly deduct the actual amount.
7. During the process of loan
issuance and payment, if the Borrower encounters any of the following circumstances, the Lender has the right to require
the Borrower
to supplement the withdrawal conditions and payment conditions, or change the loan payment method, or stop the issuance and payment of
loan funds:
(1) Credit status declines;
(2) The profitability of the
main business is not strong;
(3) There are abnormalities
in the use of loan funds.
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Article 6 Repayment
1. The Borrower shall repay
the principal, interest and related expenses of the loan in a timely and full manner in accordance with the repayment plan
agreed upon
in this Contract. The Borrower hereby irrevocably authorizes the Lender to deduct the aforementioned amount from the Borrower’s
account
opened with the Lender on the due date of the loan or when the conditions agreed upon in this Contract are met to repay the Lender’s
debt.
If the Borrower repays the
loan in advance, he shall submit a written application to the Lender and obtain the Lender’s written consent before the tenth
(10th)
banking day before the expected repayment date. If the Lender’s prior written consent is not obtained, the Borrower shall still
repay the principal and
interest in accordance with the term and interest rate agreed in the Contract.
Early repayment agreed
by the Lender shall be deemed as the early maturity of the loan. In this case, the Lender also has the right to require the
Borrower
to pay a certain amount of liquidated damages as agreed in this Contract (see Part I of this Contract).
The interest on early repayment
shall be calculated based on the actual number of days the Borrower has used the funds, and shall be repaid together
with the principal;
the amount of the principal repaid in advance shall not be less than the limit agreed in Part I of this Contract; the repaid principal
shall be
deducted from the principal of the loan in the reverse order of the repayment plan agreed in this Contract.
3. If the Borrower is unable
to repay the loan on time due to legitimate reasons, he shall apply to the Lender for loan extension before the 30th banking
business
day of the repayment period agreed in this Contract, and prepare necessary materials to go through the relevant extension procedures.
If the loan
under this Contract is guaranteed by guarantee, mortgage or pledge, the guarantor, mortgagor and pledgor shall also provide
a written consent certificate.
Whether to agree to the extension is decided by the Lender. If the Borrower does not apply for an extension
or the application for extension is not approved
by the Lender, the loan will be transferred to the overdue loan from the day after the
due date.
4. The Borrower shall not
re-draw any loan funds that have been repaid.
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Article 7 Representations and Warranties
The Borrower makes
the following representations and warranties to the Lender, which are made upon the signing of this Contract and shall remain valid
during
the validity period of this Contract.
1. The Borrower is
an enterprise (institution) legal person or other economic organization established in accordance with the applicable laws, with
independent
legal personality, complete financial system and repayment capacity, and has the right to enter into and perform this Contract in accordance
with
the law.
2. The Borrower has
the right to sign this Contract and has completed all authorizations and approvals from the shareholders’ meeting, board of directors
or other authorized institutions required to sign this Contract and perform its obligations under this Contract. All clauses of this Contract
are the Borrower’s
true intention and are legally binding on the Borrower.
3. The signing and performance
of this Contract shall not violate the laws that the Borrower shall comply with (the laws under this Contract include the
laws, regulations,
rules, local regulations, judicial interpretations, etc. that the Borrower shall comply with, the same below), the relevant documents,
judgments and rulings of the competent authorities, nor conflict with the Borrower’s Articles of Association or any contract, agreement
signed or any other
obligations undertaken by the Borrower.
4. The Borrower guarantees
that all financial statements (if any) issued by him comply with the provisions of applicable laws and that the statements
truly, completely
and fairly reflect the financial status of the Borrower.
5. The Borrower shall abide
by the principle of honesty and trustworthiness in the process of signing and performing this Contract, and all the materials,
documents
and information (including but not limited to business license, project approval documents, feasibility study report, proof of self-raised
funds,
financial statements, etc.) provided by the Borrower to the Lender, including itself and the guarantor, shall be true, valid, accurate
and complete without any
concealment or omission.
6. The Borrower guarantees
that the filing, registration or other formalities required for the validity and legal performance of this Contract have been
completed.
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7. There have been no significant
adverse changes in the operating and financial conditions of the Borrower since the issuance of the most recent audited
financial statements.
8. Strictly abide by the
law in business activities, carry out various businesses in strict accordance with the provisions of the Borrower’s business license
or the business scope approved by law, complete the registration and annual inspection procedures on time, produce and operate legally
and in compliance
with regulations, have the ability to continue to operate, and have a legal source of repayment.
9. Do not give up any matured
claims, and do not dispose of existing major assets without compensation or in other inappropriate ways.
10. The Borrower has disclosed
to the Lender the facts and conditions that he knows or should know and which are important for the Lender to decide
whether to grant
the loan under this Contract (including but not limited to operating conditions, financial conditions, external guarantees, etc.).
11. The Borrower guarantees
that his credit status is good and has no major bad records.
12. The Borrower warrants
that there are no other circumstances or events that have or may have a significant adverse impact on the Borrower’s ability
to
perform.
Article 8 Agreement
The Borrower and
the Lender agree as follows:
1. The Borrower guarantees
to operate in accordance with the law and use the loan for the purpose agreed in this Contract and not to use it for other
purposes. The
Borrower shall provide various financial and accounting materials including monthly and annual reports regularly according to the
requirements
of the Lender, and actively cooperate with the Lender to supervise the use of the loan and the Borrower’s business. The Lender may
check and
supervise the use of the loan at any time in various ways.
2. The Borrower shall repay
the principal and interest of the loan under this Contract in accordance with the time, amount, currency and interest rate
specified in
this Contract, the Application Form and the Debit (Loan) Certificate.
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3. The Borrower guarantees
that if any event occurs or is about to occur that is likely to have a significant adverse impact on the financial status of the
Guarantor
or its ability to perform its guarantee obligations, the Borrower will promptly provide new guarantees approved by the Lender.
4. The Borrower promises that
he will not take the following actions without the written consent of the Lender:
(1) Transfer (including by
sale, donation, debt repayment, exchange, etc.), mortgage, pledge or other disposal of all or most of its major assets;
(2) Contracting,
joint venture, major foreign investment, change in actual controller or major shareholder, shareholding system reform, merger
(acquisition),
joint venture (cooperation), division, equity transfer, substantial increase in debt financing, establishment of subsidiaries, property
transfer,
capital reduction, suspension of business, dissolution, application for bankruptcy, reorganization or cancellation, and other
actions that may affect the
Borrower’s repayment ability;
(3) Provide a guarantee
to a third party that is sufficient to have a significant adverse effect on its financial condition or its ability to perform its
obligations
under this Contract;
(4) Prepayment of
other long-term debts in advance may have a significant adverse impact on the Borrower’s ability to perform its obligations under
this
Contract;
(5) Signing any contract/agreement
that has a significant adverse effect on the Borrower’s ability to perform its obligations under this Contract or
assuming any relevant
obligation that has such an effect.
5. The Borrower undertakes
that, if the following events occur, the Borrower will immediately notify the Lender on the date of the event and deliver the
original
relevant notice to the Lender (with official seal) within five (5) banking days from the date of the event:
(1) The occurrence of an event
causes the representations and warranties made by the Borrower in this Contract to become untrue, inaccurate or invalid.
(2) The Borrower or its controlling
shareholder, actual controller or its affiliates are involved in litigation or arbitration, or their assets are seized, sealed,
frozen,
enforced or other measures with similar effect are taken against them, or their legal representative/person in charge is involved in litigation,
arbitration or other compulsory measures;
(3) The legal representative
or his authorized agent, person in charge, principal financial officer, correspondence address, company name, office location,
etc. of
the Borrower are changed;
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(4) The company is applied
for reorganization or bankruptcy by other creditors or is revoked by the superior authority;
(5) Any other significant adverse
event that may affect the Borrower’s ability to repay its debts occurs.
6. The Borrower guarantees
that he will not repay other loans in priority in violation of the normal repayment order, and will not sign any contract or
agreement
that will make the loans under this Contract subordinate now or in the future.
7. The Borrower shall
repay and pay the principal and interest of the loan under this Contract in the same currency as far as possible. If the Borrower
repays
the debt in different currencies, the Borrower shall, by himself or by authorizing the Lender, convert the different currencies into the
loan currency
under this Contract in accordance with the “Deduction Agreement” of this Contract to repay the principal and
interest owed, and the expenses incurred shall
be borne by the Borrower. When the Guarantor repays the debt on behalf of the Borrower
in different currencies, the “Deduction Agreement” of the
Guarantee Contract shall be followed, and the expenses incurred
shall be borne by the Borrower.
8. When the guarantee under
this Contract encounters specific circumstances or specific changes, the Borrower shall provide other guarantees approved
by the Lender
in a timely manner in accordance with the Lender’s requirements. Such specific circumstances or specific changes include but are
not limited
to the guarantor’s suspension of production, suspension of business, dissolution, suspension of business for rectification,
revocation or cancellation of
business license, application for or application for reorganization, bankruptcy, major changes in business
or financial status, involvement in major litigation
or arbitration cases, involvement of legal representatives, directors, supervisors,
and major operating and management personnel, reduction or possible
reduction in the value of the collateral, or property preservation
measures such as seizure, breach of contract under the guarantee contract, and request for
termination of the guarantee contract.
9. The Lender has the right
to conduct on-site or off-site due diligence on the Borrower and conduct post-loan inspections on the Borrower’s operating
conditions,
financial conditions, external guarantees, use of loan funds, repayment conditions, etc. The Borrower has the obligation to actively cooperate
with
the Lender in loan payment management, post-loan management and related inspections.
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10. The Lender has the right
to recover the loan funds under this Contract in advance according to the Borrower’s fund withdrawn situation.
11. Special provisions regarding
group customers (applicable to group customers).
If the Borrower of this Contract
is a group customer, the Borrower hereby promises:
(1) The Borrower shall promptly
report any related-party transactions involving more than 10% of the net assets of the actual trustee, including: ① the
relationship
between the parties to the transaction; ② the transaction items and nature of the transaction; ③ the transaction amount or
the corresponding
proportion; ④ the pricing policy (including transactions with no amount or only a symbolic amount).
(2) If the actual creditee
has any of the following circumstances, it shall be deemed that the Borrower has breached the contract under this Contract, and
the Lender
shall have the right to unilaterally decide to cancel the credit that the customer has not used, and to recover part or all of the credit
that has been
used or require the customer to add a margin to 100%: ① Providing false materials or concealing important operating
and financial facts; ② Changing the
original purpose of the credit without the consent of the Lender, misappropriating the credit
or using the bank credit for illegal or irregular transactions; ③
Using false contracts with related parties to discount or pledge
bills receivable, accounts receivable and other debts without actual trade background to the
bank to obtain bank funds or credit; ④
Refusing to accept the Lender’s supervision and inspection of its use of credit funds and related operating and
financial activities;
⑤ There are significant mergers, acquisitions, reorganizations, etc., which the Lender believes may affect the safety of the credit;
⑥
Intentionally evading bank debts through related transactions.
12. Special guarantees,
commitments and agreements on Green Credit (applicable to borrowers whose construction, production and operation
activities
of nuclear power plants, large hydropower plants, water conservancy projects, resource mining projects, etc. are likely to
seriously change the original state
of the environment and the adverse environmental and social consequences are difficult to eliminate,
and borrowers whose construction, production and
operation activities of petroleum processing, coking and nuclear fuel processing, chemical
raw materials and chemical product manufacturing, etc. will
produce adverse environmental and social consequences but are easier to eliminate
through mitigation measures):
(1) The Borrower undertakes
to submit an environmental, social and governance risk report to the Lender and declares and guarantees
to strengthen
environmental, social and governance risk management, including: ① The internal
management documents related to environmental, social and governance
risks comply with the requirements of laws and regulations and are
effectively implemented; ② There are no major litigation cases involving environmental,
social
and governance risks;
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(2) The Borrower commits
to accept the Lender’s supervision and strengthen the management of environmental, social and governance risks, including:
①
Committing to comply with the regulations in all its behaviors and performances related to environmental,
social and governance risks; ② Committing to
establish and improve the internal management
system for environmental, social and governance risks, and specify in detail the responsibilities, obligations
and penalties of the Borrower’s
relevant responsible persons; ③ Committing to establish and improve the emergency response
mechanism and measures for
environmental, social and governance risk emergencies; ④ Committing to set up a special department
and/or designate special personnel to be responsible
for environmental, social and governance risk matters; ⑤ Committing to cooperate
with the Lender or a third party recognized by him in assessing and
inspecting the Borrower’s environmental, social and governance
risks; ⑥ Committing to give appropriate responses or take other necessary actions in the
face of strong doubts from the public or
other stakeholders on the Borrower’s performance in controlling environmental, social and governance risks; ⑦
Committing to
urge the Borrower’s key related parties to strengthen management to prevent the transmission of environmental, social and governance
risks
of related parties to the Borrower; ⑧ Committing to perform other matters that the Lender considers relevant to the control
of environmental, social and
governance risks;
(3) The Borrower undertakes
to inform the Lender in a timely and adequate manner when the following situations occur: ① All kinds of permits,
approvals and
ratifications related to environmental, social and governance risks during the commencement, construction, operation and closure of the
project; ② The assessment and inspection of the environmental, social and governance risks of the Borrower by the environmental,
social and governance
risk regulatory agency or its recognized agency; ③ The supporting construction and operation of environmental
facilities; ④ The emission and compliance of
pollutants; ⑤ The safety and health of employees; ⑥ Major complaints and
protests against the Borrower by neighboring communities; ⑦ Major
environmental and social claims; ⑧ Other major situations
that the Lender considers to be related to environmental, social and governance risks;
(4) If the Borrower and the
Actual Trustee have any of the following circumstances, it shall be deemed that the Borrower has defaulted under this
Contract: ①
The Borrower’s statements, warranties and commitments on environmental, social and governance risk management have not been
conscientiously
performed; ② The Borrower is punished by relevant government departments for poor environmental, social and governance risk
management;
③ The Borrower is strongly questioned by the public and/or the media for poor environmental, social and governance risk management;
④
Other defaults on environmental, social and governance risk management agreed upon by the Lender and the Borrower, including cross-default
events;
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Working Capital Loan Contract
If the Borrower
defaults as mentioned above, the Lender has the right to unilaterally decide: ① to cancel the credit commitment that has been made;
②
to suspend the disbursement of the loan until the Borrower has taken rescue measures that are satisfactory to the Lender; ③
to recover the disbursed loan in
advance; ④ to exercise the relevant mortgage rights and other penalty measures in advance when
the loan cannot be repaid; ⑤ other penalty measures agreed
upon by the Lender and the Borrower.
13. The Borrower
promises not to increase the local government’s implicit debt in violation of regulations, otherwise the Lender has the right to
immediately suspend/terminate the Borrower’s withdrawal and declare that part or all of the issued loans are due in advance. At
the same time, the Lender
has the right to report the relevant situation to the relevant regulatory authorities.
14. Anti-Money Laundering Agreement The
Borrower confirms and agrees that the Lender has the right to conduct money laundering risk assessment
on the transactions involved in
this Contract in accordance with the applicable anti-money laundering laws and regulations and internal management
requirements. If the
Borrower violates the Lender’s anti-money laundering management regulations, or the Lender has reasonable grounds to suspect that
the
Borrower and/or the transactions under this Contract are suspected of participating in money laundering, sanctions, terrorist financing
or financing activities
for the proliferation of weapons of mass destruction, export control, or tax evasion and other illegal and irregular
activities recognized by the United Nations
Security Council, the Financial Action Task Force on Money Laundering, China, the United States,
the European Union, the United Kingdom, Singapore and
other international organizations or countries, the Lender has the right to take
necessary control measures in accordance with the anti-money laundering
supervision regulations and internal management regulations of
the People’s Bank of China. At the same time, the Lender has the right to directly restrict or
suspend all or part of the business
under this Contract without notifying the Borrower, declare the loan to be due in advance, terminate this Contract, and
shall not bear
any responsibility, and shall have the right to require the Borrower to bear all losses caused to the Lender.
15.
The
Borrower
agrees
and
irrevocably
authorizes:
The
Lender
has
the
right
to
provide
the
information
of
all
contracts/agreements/commitments
signed between the Borrower and the Lender, including relevant information on the performance of all the
above
contracts/agreements/commitments, and the basic information of the enterprise and other information provided by the Borrower, to the
Financial Credit Information Basic Database established by the State, in accordance with the provisions of the Credit Reporting
Industry
Management Regulations and other credit-related laws and regulations and the requirements of regulatory provisions, as well
as the collection
requirements of the Financial Credit Information Basic Database established by the State, for the inquiry and use
by qualified units; at the same
time, the Lender also has the right to inquire and use the credit information of the Borrower that
has been entered into the Financial Credit
Information Basic Database established by the State. This authorization covers all
aspects of the Lender’s necessary business management of the
business under this Contract before and after the signing of this
Contract, and its validity period shall expire with the actual termination of this
Contract.
16. The Borrower hereby confirms
that he has fully understood and is aware of the Lender’s position that he opposes his employees taking advantage of
their positions
to seek any form of benefits, and promises to avoid such situations in accordance with the principles of integrity and fairness, and not
to
privately provide any form of kickbacks, gifts, securities, valuables, various rewards, personal expense compensation, private travel,
high-consumption
entertainment and other improper benefits to the Lender’s employees.
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Article 9 Deduction Agreement
1. The Borrower agrees
that when any debt related to the loan under this Contract becomes due and payable, the Lender has the right to
directly deduct the funds
in the repayment reserve account opened by the Borrower with Shanghai Pudong Development Bank Co., Ltd. to repay
the due and payable debt.
If the funds in the repayment reserve account are insufficient to repay the debt, the Lender has the right to deduct the
funds from any
other account opened by the Borrower with any branch of Shanghai Pudong Development Bank Co., Ltd.
2. The Lender has the
right to choose to use the proceeds to repay the loan principal, interest or other expenses. If there are multiple claims that
are due
and unpaid at the same time, the Lender shall decide the order of repayment of the claims.
3. If the currency of the deducted
funds is inconsistent with the currency to be repaid, the following procedures shall me applied:
(1) If the loan currency
is RMB, the principal and interest of the loan shall be repaid after the amount is converted into RMB at the applicable buying
rate for
the deduction currency published by the Lender at the time of deduction.
(2) If the loan currency
is not RMB and the deduction currency is RMB, the principal and interest of the loan shall be repaid directly by deducting the
applicable
selling price of the loan currency and RMB published by the Lender at that time and converting it into the loan currency.
(3) If both the loan
currency and the deduction currency are not RMB and they’re not the same, the loan principal and interest shall be repaid after
the
foreign exchange settlement is completed at the buying rate of the currency of the deduction and RMB announced by the Lender at the
time of deduction and
then the foreign exchange settlement is completed at the selling rate of the currency of the loan and RMB announced
by the Lender on the same day and then
the loan principal and interest shall be repaid.
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Article 10 Proof of Debt
The Lender shall, in accordance
with his usual business practices, maintain accounting records related to the business activities involved in this Contract
in its accounting
books to prove the Lender’s loan amount. The Borrower’s valid evidence of the loan claim under this Contract shall be the
accounting
vouchers or other valid supporting materials issued and recorded by the Lender in accordance with its own business regulations.
Article 11 Agreed Delivery Address
1. The Lender confirms that
the address listed on the first page of this Contract is his valid delivery address. Any notice delivered directly or by mail to
the Lender
by the Borrower under this Contract shall be sent to the address listed on the first page of this Contract until the Lender announces
a change in the
address. The Borrower agrees that all notices sent by him to the Lender shall be deemed delivered when the Lender actually
receives them.
2. The Borrower confirms
that the address and fax, e-mail and other delivery information listed on the first page of this Contract are his valid
mailing or electronic
delivery addresses. All kinds of notices and other documents under this Contract during non-litigation, as well as letters,
summonses,
notices and other legal documents issued to him during any litigation (including any litigation procedures and enforcement procedures
such as first instance, second instance and retrial) arising from this Contract, shall be deemed to have been delivered as long as they
are sent to the
mailing or electronic delivery address listed on the first page of this Contract by mail or by electronic delivery such
as fax, e-mail, etc. The specific
delivery date shall be subject to the provisions on delivery date in the Civil Procedure Law. The change
of the above-mentioned mailing or electronic
delivery address shall not be legally effective unless the Lender is notified in advance,
and the delivery address confirmed in this Contract shall still
be deemed to be the valid delivery address.
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Article 12 Breach of Contract and Its Handling
1. Breach of Contract
Any of the following circumstances
shall constitute the breach of contract by the Borrower against the Lender:
(1) Any representation
or warranty made by the Borrower in this Contract or in any notice, authorization, approval, consent, certificate or other
document made
pursuant to or in connection with this Contract is incorrect or misleading at the time of making, or has been proved to be incorrect or
misleading, or has been proved to be invalid or revoked or has no legal effect.
(2) The Borrower
has breached any of the provisions of “Other Matters Agreed by the Parties ” (if any) in Part I of this Contract or any of
the matters
agreed in Article 8 of Part II.
(3) The Borrower
has a major cross-default event, including but not limited to the Borrower’s breach of any other loan contract or agreement signed
by
him; or the Borrower’s failure to pay debts under other loan contracts or agreements signed by him when due.
(4) The Borrower’s investors
withdraw funds, transfer assets, or transfer equity without authorization.
(5) The Guarantor
no longer has or will no longer have the ability to provide a guarantee corresponding to the loan, or violates the guarantee document
signed by him.
(6) The Borrower
ceases operations, stops production, closes down, suspends business for rectification, reorganization, liquidates, is taken over or placed
under trusteeship, is dissolved, has his business license revoked or cancelled, or goes bankrupt.
(7) The financial
condition of the Borrower or Guarantor deteriorates, the operation encounters serious difficulties, or an event or situation occurs that
has an adverse impact on his normal operation, financial condition or debt repayment ability.
(8) The Borrower
or his controlling shareholder, actual controller or his affiliates are involved in major litigation or arbitration or their major assets
are
seized, confiscated, frozen, enforced or other measures with similar effect are taken against them, or their legal representatives/persons
in charge, directors,
supervisors or senior management are involved in litigation, arbitration or other compulsory measures, which have
an adverse impact on the Borrower’s debt
repayment ability.
(9) Failure to repay the principal
and interest on time or failure to use the loan for the agreed purpose.
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(10) Failure to pay the loan funds
in accordance with the agreed method.
(11) The documents and information
submitted for loan application are false or incorrect.
(12) Failure to comply with or exceeding
the relevant financial indicator constraints agreed upon in this Contract.
(13) Within three
(3) days before any principal and interest payment date under this Contract, the balance of funds in the Repayment Reserve Account is
lower than the principal and interest payment due by the Borrower for that period.
(14) There are abnormalities in the
flow of funds within the general settlement account/fund withdrawal account.
(15) The Borrower
is suspected of participating in illegal activities such as money laundering, sanctions, terrorist financing or financing of the
proliferation
of weapons of mass destruction, export controls, tax evasion, etc.
(16) The Borrower illegally increases
the hidden debt of the local government.
(17) The Borrower
commits any other act in violation of this Contract that is sufficient to hinder the normal performance of this Contract, or any other
act that is prejudicial to the legitimate interests of the Lender.
2. Breach Handling
(1) If one or more
of the default circumstances listed in the preceding paragraph occur, the Lender may, at its discretion, take one or more of the
following
measures:
① Require
the Borrower to make corrections within a specified period of time.
② Cancel
the Borrower’s unused loans and stop issuing and paying the Borrower’s unused loans.
③ Declare
that all or part of the principal of the loan under this Contract is due in advance immediately, and require the immediate repayment of
part or all of the loan, settlement of the outstanding interest, and immediate pursuit of the Guarantor or Borrower through various forms.
④ Penalty
interest and compound interest will be charged on overdue loans and misappropriated loans.
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⑤ Deduct
the funds from any account opened by the Borrower in any branch of Shanghai Pudong Development Bank Co., Ltd.
⑥ Require
the Borrower to supplement the loan issuance and payment conditions, or change the loan payment method.
⑦ Require
the Borrower to provide other guarantees approved by the Lender.
⑧ Other
necessary measures prescribed by law.
(2) In addition to
the above measures, the Lender may also require the Borrower to bear the liability for breach of contract and require the Borrower to
pay liquidated damages (the calculation method of liquidated damages is shown in Part I of this Contract). If the liquidated damages are
not sufficient to
compensate the losses suffered by the Lender, the Borrower shall compensate the Lender for all losses suffered thereby.
(3) If the Borrower
fails to repay the principal and interest in full and on time, it shall also bear all expenses paid by the Lender in realizing the creditor’s
rights and security rights, including but not limited to collection expenses, litigation costs, attorney fees, travel expenses and various
other payable expenses.
Article 13 Effectiveness, Change and Termination
1. This Contract shall come
into force after being signed (or sealed) by the legal representative of the Borrower or his/her authorized agent and affixed
with the
official seal, and after being signed (or sealed) by the legal representative (person in charge) of the Lender or his/her authorized agent
and affixed
with the official seal (or special seal for the Contract), and shall terminate after all the debts under this Contract are
paid off.
2. After this contract comes
into effect, neither party shall unilaterally change or terminate this Contract in advance. If this Contract needs to be changed
or terminated,
it shall be negotiated and agreed upon in writing by both parties.
Article 14 Other Terms
1. Definition
(1) The term “all
the debts” under this Contract refers to the principal, interest, liquidated damages and all other expenses incurred in realizing
the debts.
(2) The term “interest”
under this Contract includes interest, penalty interest and compound interest.
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Working Capital Loan Contract
(3) The term “banking
day” under this Contract refers to the day on which the Lender is normally open for business for public business at the Lender’s
domicile, excluding Saturdays, Sundays (except those closed due to holiday adjustments) or other statutory holidays.
2. Applicable Law
This Contract shall be governed
by and interpreted in accordance with the laws of the People’s Republic of China (excluding the laws of the Hong Kong
Special Administrative
Region, the Macao Special Administrative Region and Taiwan for the purpose of this Contract).
3. Dispute Resolution
All disputes concerning this
Contract shall be settled through friendly negotiation. If no agreement is reached through negotiation, the parties shall file a
lawsuit
with the People’s Court at the place of residence of the Lender. During the dispute period, the parties shall continue to perform
the clauses not
involved in the dispute.
4. Miscellaneous
(1) If there are
any matters not covered in this Contract that need to be supplemented, the parties may agree on them and record them in Part I of this
Contract, or they may reach a separate written agreement as an annex to this Contract. The annex to this Contract (see Part I of this
Contract) is an integral
part of this Contract and has the same legal effect as the main body of this Contract.
(2) During the validity
period of this Contract, any forbearance or delay in taking action against any breach of contract or other behavior of the Borrower
by
the Lender shall not prejudice, affect or restrict any rights or interests that the Lender shall enjoy as a creditor under the law or
this Contract, nor shall it be
regarded as the Lender’s approval of the Borrower’s breach of this Contract, nor shall it be
regarded as the Lender’s waiver of the right to take action against
the Borrower’s existing or future breach of contract.
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(3) The invalidity
of any clause of this Contract shall not affect the validity of the other clauses of this Contract. If this Contract becomes invalid for
any
reason, the Borrower shall still be responsible for repaying all debts owed to the Lender under this Contract. If the above situation
occurs, the Lender shall
have the right to terminate the execution of this Contract immediately and may immediately recover all debts
owed by the Borrower under this Contract from
the Borrower.
(4) The Lender may
transfer all or part of his rights and/or obligations under this Contract, and in such case, the transferee shall enjoy and/or bear the
same rights and/or obligations to the Borrower as he would have if he were a party to this Contract. The Borrower shall bear the liabilities
to the transferee in
accordance with the provisions of this Contract after receiving the Lender’s notice of the transfer of the
debts.
(5) Unless otherwise
specified in this Contract, the relevant terms and expressions in the Annex to this Contract shall have the same meaning as in this
Contract.
(6) The headings under this Contract
are for reference only and shall not be construed as the basis for the contents under such headings.
(REMINDER OF PAGE INTENTIONALLY
LEFT BLANK)
(SIGNATURE PAGE TO FOLLOW)
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This Contract has
been signed between the Borrower and the Lender on ________________ (date, month, year). The Borrower hereby confirms
that, when
signing this Contract, both parties have explained and discussed all the terms in detail, and both parties have no doubts about all
the
terms of the Contract and have an accurate understanding of the legal meaning of the rights and obligations of the parties and
the limitation or
exemption of liability.
Borrower (official seal)
Lender (official seal or contract-specific seal)
Legal Representative or Authorized Agent (signature or seal)
Legal Representative/Person in Charge or Authorized Agent (signature
or seal)
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Exhibit 10.18
Serial Number:
Working
Capital Loan Contract
Contract Version Number: SPDB 20 2109
Working Capital Loan Contract
Working Capital Loan Contract
Borrower:
CLPS Shanghai Co., Ltd.
Principal Business Address:
2F, Building
18, 498 Guoshoujing Road, Pudong, Shanghai, China
Contact Person:
Huanzhen Wu
Telephone:
15040094890
Fax:
/
Email:
lisa.wu@clpsglobal.com
Lender:
Shanghai Pudong Development Bank Co., Ltd.
Jinqiao
Branch
Principal Business Address:
509 Jingang Road, Pudong, Shanghai, China
Contact Person:
Lin Xie
Telephone:
021-58994702
Given that:
The Borrower applies to
the Lender for working capital loan due to capital turnover needs; after examination, the Lender agrees to grant the loan in
accordance
with the terms and conditions of this Contract. In order to clarify the rights and obligations of both parties, we hereby enter into this
Contract in
accordance with the relevant laws, regulations and rules of the People’s Republic of China.
Meanwhile, the Borrower
and the Lender confirm the following primary terms:
1.
(Please mark ü
in the appropriate box according to the situation, and mark x if you do not select)
☒
This Contract is signed as a subsidiary financing document of the Financing Line Agreement No. (hereinafter referred to as the Financing
Line
Agreement). After this Contract comes into effect, all its terms shall be incorporated into the Financing Line Agreement and become
its component parts (if
the Borrower has previously signed the Financing Line Agreement, this option shall be selected and the Financing
Line Agreement number shall be
indicated);
þ This contract is an independent credit document signed between the Borrower and the Lender (if the Borrower and the Lender have not signed a
Financing Line Agreement, this option should be selected);
2. (If the purpose of
the loan is to borrow new money to repay old loan or to renew the loan, you must mark ü
in the box)
☒
The guarantors are aware that the loan purpose of this contract
is to repay the loan under the original contract name:
(Signed on:
Serial Number:
).
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Working Capital Loan Contract
Part I Commercial Terms
1. Loan types:
þ Short-term working capital loan ☒ Medium-term working capital loan
2. The loan amount under
this contract is RMB (currency) Fifteen Million Yuan (in words).
3.
The specific purposes of the loan under this Contract are:
4. The loan term under this
Contract is (please mark ü in the following boxes, or mark x if you do not select):
☐ since
(date, month, year) to
(date, month, year);
☐
year(s) (or months) from the date of
first withdrawal.
The actual withdrawal date
and repayment date shall be subject to the date recorded on the IOU (loan certificate) issued by the Lender and the Borrower.
The last
repayment date shall not exceed the loan period agreed in this Contract. The IOU (loan certificate) is an integral part of this Contract.
5. The loan interest rate
under this Contract is (please mark ü in the following boxes, and mark x if you do not
select) :
þ
(1) RMB loan interest rate:
Each loan under this
contract shall be calculated based on the Loan Prime Rate (LPR) ☐ + ☐ - BPS announced by the National Interbank Funding
Center at the end of the day before the actual disbursement date of the loan. If the calculated interest rate is less than 0%, it
will be executed at 0%. (The
Loan Prime Rate is an annual interest rate, which can be found on the National Interbank Funding Center
and the website of the People’s Bank of China).
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After each loan under this Contract
is issued, if the Loan Prime Rate is adjusted during the loan period, the loan interest rate (please mark ü
in the box
below and mark x if you do not select):
☐ No adjustment, fixed
interest rate;
☒ The interest rate
will be adjusted starting from the interest rate adjustment date, based on the Loan Prime Rate (LPR) for the agreed period as stated
above announced by the National Interbank Funding Center at the end of the day before the interest rate adjustment date, and the
floating points and
calculation method of the interest rate agreed above remain unchanged. The specific interest rate adjustment
dates is as follows (please mark ü in the box
below, and mark ⅹ if you do not
select):
☒ The
interest rate is adjusted annually. The interest rate adjustment date is the corresponding day of the corresponding month of the
next calendar
year after the actual loan disbursement date. If there is no corresponding day in the corresponding month of the next
calendar year after the actual
loan disbursement date, the interest rate adjustment date is the last day of the corresponding month
of the next calendar year after the actual loan
disbursement date;
☒
The interest rate is adjusted annually, and the interest rate adjustment date is January 1 of each year;
☒ The
interest rate is adjusted according to the interest payment date, and the interest rate adjustment date is the ________ day after
the interest
payment date;
☒ The
interest rate is adjusted quarterly, and the interest rate adjustment date is the ___________ day of the last month of each
quarter;
☒
The interest rate is adjusted monthly, and the interest rate adjustment date is the day of every month;
☒
Other conventions (specific interest rate adjustment date): ____________.
☒ (2) Foreign currency loan interest rate:
☒ 1) Each loan under this
Contract shall be calculated based on the ______________ (LIBOR/HIBOR/SIBOR) published by the Lender on
____________(date, month, year)
(hereinafter referred to as the “Benchmark Interest Rate Term”) on the actual date of loan issuance as the Benchmark
Interest Rate plus BPS (hereinafter referred to as the “Spread”, and the Spread ≥0).
If the Benchmark Interest Rate is less than 0%, the Benchmark Interest
Rate shall be calculated at 0%.
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After each loan under this
Contract is issued, the loan interest rate will be adjusted during the loan period as follows (please mark ü
in the box below,
and mark ⅹ if you do not select):
☒ From the date of
each loan disbursement, the loan interest rate shall be adjusted according to the Benchmark Interest Rate Term agreed in this
Contract, the latest foreign currency benchmark interest rate of the corresponding day plus the interest rate spread agreed in this
Contract. If the Benchmark
Interest Rate is less than 0%, the Benchmark Interest Rate shall be calculated at 0%.
☒ Fixed interest rate, which means the interest
rate will remain the same.
☒
2) The foreign currency loan interest rate under this Contract is detailed in the “Foreign Currency Interest Rate Supplementary
Contract” signed
separately by both parties to this Contract.
☒ 3) The interest rate for each loan
under this Contract is ____/___ %, which is a fixed rate and will not be adjusted during the loan period.
6. The interest settlement method under this Contract
is (please mark ü in the box below, and mark ⅹ if you do not select):
☐ If the interest is settled monthly,
the interest settlement date is the 20th day of each month;
☐ If the interest is settled quarterly,
the interest settlement date is the 20th day of the last month of each quarter;
☐ Other methods: ________________________________.
The interest of each repayment
under this Contract shall be paid together with the principal.
7. The penalty interest
rate under this Contract is:
(1) The overdue penalty interest rate under this Contract shall
be 30 % higher than the loan execution interest rate applicable
on the penalty
interest calculation date.
(2) The penalty interest rate for misappropriation of the loan
or failure to use the loan for the purposes agreed in this Contract shall be 50 % higher than
the loan execution rate applicable
on the penalty interest calculation date.
If the loan currency is in foreign currency,
if there are other provisions in the foreign currency interest rate supplementary contract or foreign currency
interest rate change contract
signed by the two parties to this Contract, such provisions shall apply.
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8. The loan withdrawal
period under this Contract is from
(date, month, year) to (date,
month, year). The first withdrawal shall be made
before
(date, month, year).
9. The withdrawal plan for
the loan under this Contract is as follows (please mark ü in the box below, and mark
ⅹ if you do not select):
☐ The withdrawal
plan is shown in the table below:
No.
Withdrawal Date
Withdrawal Amount
1
☐
Day ☐ Month ☐ Year
(Amount in words)
2
☐
Day ☐ Month ☐ Year
(Amount in words)
3
☐
Day ☐ Month ☐ Year
(Amount in words)
4
☐
Day ☐ Month ☐ Year
(Amount in words)
5
☐
Day ☐ Month ☐ Year
(Amount in words)
6
☐
Day ☐ Month ☐ Year
(Amount in words)
☐ Other
withdrawal plans:
10. The repayment plan for
the loan under this Contract is as follows (please mark ü in the box below, and mark
ⅹ if you do not select):
☐ The repayment
plan is shown in the table below:
No.
Repayment Date
Repayment Amount
1
☐
Day ☐ Month ☐ Year
(Amount in words)
2
☐
Day ☐ Month ☐ Year
(Amount in words)
3
☐
Day ☐ Month ☐ Year
(Amount in words)
4
☐
Day ☐ Month ☐ Year
(Amount in words)
5
☐
Day ☐ Month ☐ Year
(Amount in words)
6
☐
Day ☐ Month ☐ Year
(Amount in words)
☐ Other repayment
plans:
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11. Penalty for early repayment
of loan: Equivalent to / % of the total amount of loan actually repaid in advance or RMB (currency) Zero Yuan (in
words).
12. The principal amount of
the loan to be repaid in advance shall not be less than RMB (currency) Zero Yuan (in words).
13. Account Opening ( For RMB
loans, choose one of the following modes and mark ü; for foreign currency loans, choose
the special account mode.
Mark ⅹ if you do not select):
☐ Non-special account
mode:
(1) The general settlement account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(2) The fund withdrawal account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
☐ Special account
mode:
(1) The special account for
working capital loans opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(2) The general settlement account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(3) The fund withdrawal account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
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14. Lender entrusted payment:
For loan funds payment with a clear payment object and a single payment amount exceeding RMB
(Currency
and Amount), the Lender entrusted payment method should be adopted.
15. The guarantors and guarantee
contracts that provide guarantee for the debts under this Contract include but not limited to:
☒
Guarantor /
Guarantee Contract No. 【 / 】;
☒ Mortgagor / Mortgage
Contract No. 【 / 】;
☒
Pledgee /
Pledge Contract No. 【 / 】;
☒ Other guarantees
/
.
16. Breach of Contract Handling
Penalty: Equivalent to __________% (in words) of the loan principal amount or
17. The annexs to this Contract
include:
( 1 ) Withdrawal Application
Form .
( 2 ) .
( 3 ) .
( 4 ) .
( 5 ) .
18. Other matters agreed upon
by both parties.
19. This Contract is made in
triplicate , of which the Borrower holds one copy, the Lender holds two copies, and / holds /
copies.
Each copy has the same legal effect.
(End of Part 1)
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Part II General Terms
Article 1 Loan
1. The Borrower irrevocably
agrees and confirms that the Lender has the right to adjust or add loan disbursement conditions due to changes in
laws, regulations and
policies, or restrictions on the government’s macro-monetary policy or financial regulatory policy, or based on market
conditions,
capital position and financial cost conditions, its own business needs, the Borrower’s performance ability or financial status,
or other
major changes in circumstances, and may suspend, reduce or cancel the loan and notify the Borrower.
2. The loan under this Contract
shall be used in accordance with the purpose of the loan agreed in this Contract. The Borrower shall not misappropriate
or embezzle the
loan for fixed asset investment, equity investment, etc., nor shall it be used in the fields and for purposes prohibited by the State
for
production and operation or other activities that are not in line with the purpose of working capital loans.
Article 2 Loan Interest Rate and Interest Calculation
Method
1. Unless otherwise agreed
in this Contract, the interest on the loan under this Contract shall be calculated based on the actual withdrawal amount and
the number
of days occupied from the date the Lender issues the loan. The number of days occupied includes the first day and excludes the last day.
Daily
interest rate = monthly interest rate / 30, monthly interest rate = annual interest rate / 12, that is, daily interest rate = annual
interest rate / 360. When the loan
currency is British Pound, Hong Kong Dollar or Singapore Dollar, daily interest rate = annual interest
rate / 365.
2. The Lender has
the right to charge overdue penalty interest on the principal of the loan that is due (the term “due” in this Contract includes
the
situation where the Lender declares the loan to be due in advance) payable by the Borrower at the overdue rate agreed in this Contract
and calculated on the
actual number of days overdue, starting from the date of overdue, until the Borrower repays the principal and interest.
3. If the Borrower
fails to use the loan funds for the agreed purpose, the Lender shall have the right to charge penalty interest on the amount of the loan
used in breach, calculated according to the actual number of days of breach at the penalty interest rate for misappropriation agreed in
this Contract, starting
from the date of breach, until the Borrower repays the principal and interest.
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4. The Lender shall
charge compound interest on the interest (including normal interest, overdue penalty interest and misappropriation penalty interest)
that
the Borrower fails to pay on time at the overdue penalty interest rate agreed in this Contract based on the actual number of days overdue
from the date of
overdue payment.
5. Unless otherwise
agreed upon by both parties to this Contract, the loan interest rate under this Contract shall be calculated using the “simple interest
method”. The interest rate calculation method can be found on the website of the People’s Bank of China.
6. Interest Rate Market Paralysis
After the loan is
disbursed under this Contract, if there is no applicable LPR (applicable to RMB) or LIBOR/HIBOR/SIBOR (applicable to foreign
currencies)
interest rate on the quotation date of the relevant interest period, the Borrower shall negotiate with the Lender to determine the alternative
interest
rate; if no agreement can be reached within five (5) banking days after the start of the negotiation, the Borrower shall repay
all principal and interest of the
loan within thirty (30) banking days from the date of failure to reach an agreement. If the parties
have signed a foreign currency interest rate supplementary
contract or a foreign currency interest rate modification contract at the same
time as signing this Contract, the interest rate shall be determined in accordance
with the provisions of the supplementary contract or
modification contract.
Article 3 Withdrawal
1. Before making the first
withdrawal, the Borrower shall meet the following conditions:
(1) Submit the Withdrawal
Application (the format is shown in Annex 1 or Annex 2 of this Contract), the completed Debit (Loan) Certificate and other
relevant documents
in accordance with the time and method agreed upon in this Contract;
(2) This Contract
and the corresponding Guarantee Contract (if any) have been signed and remain in force, and the Guarantee Right has been effectively
established;
(3) Submit
the Borrower’s current valid business license, company charter, and recent financial statements on the withdrawal date (including
but not
limited to the previous year’s annual financial report audited by a certified public accountant and current financial statements);
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(4) Submit the original
copy of the loan resolution made by the Borrower’s board of directors/shareholders meeting or other institutions with equivalent
effect, the authorization letter from the legal representative to the authorized representative, and the signature specimens of the legal
representative and the
authorized representative;
(5) The Borrower
has opened a relevant account with the Lender in accordance with the Lender’s requirements;
(6) The Borrower has performed its
obligations under this Contract and no breach of contract has occurred;
(7) Other documents or conditions
required by the Lender.
2. In addition to
conditions for the initial withdrawal, the Borrower shall also meet the following conditions before each withdrawal:
(1) Submit the Withdrawal
Application (the format is shown in Annex 1 or Annex 2 of this Contract), the completed Debit (Loan) Certificate and other
relevant documents
in accordance with the time and method agreed upon in this Contract;
(2) The representations and warranties
made by the Borrower under this Contract shall remain valid;
(3) The Borrower has performed its
obligations under this Contract and no breach of contract has occurred;
(4) Other documents or conditions
required by the Lender.
3. Withdrawal
(1) The Borrower
shall make a one-time or installment withdrawal according to the withdrawal plan agreed upon in this Contract and shall submit a
Withdrawal
Application (the format of which is provided in Annex 1 or Annex 2 to this Contract) to the Lender three (3) banking days before the due
date of
each Withdrawal to complete the withdrawal procedures;
(2) If the Borrower
needs to postpone or change the withdrawal date, the Borrower shall obtain the Lender’s consent three (3) banking days before the
withdrawal date. The Lender shall have the right to require the Borrower to pay the interest loss incurred by the Lender as a result (interest
loss = interest on
the postponed withdrawal period - interest on demand deposits during the same period);
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(3) If the Borrower
requests to cancel all or part of the undrawn loan, he shall apply to the Lender three (3) banking days prior to the determined
withdrawal
date or the end date of the withdrawal period, and the cancellation can only be made after the Lender agrees;
(4) If the Borrower
fails to complete the withdrawal procedures and does not apply for a delay in withdrawal on the specified withdrawal date or within
the
withdrawal period, the Lender has the right to cancel the undrawn loan;
The Lender has the
right to waive one or more of the above withdrawal conditions without affecting any rights of the Lender under this Contract.
Article 4 Account Opening and Management
1. The Borrower
shall have opened a general settlement account and a fund withdrawal account with the Lender (see Part I of this Contract) at the
time
of signing this Contract, as well as a special account for working capital loans (if any) agreed upon by both parties. The Borrower
agrees that the Lender shall
monitor the Borrower’s aforementioned accounts.
2. If a special account
for working capital loans is not opened, the general settlement account shall be used to calculate the disbursement and payment of
loan
funds applied by the Borrower from the Lender.
If a special working capital
loan account is opened, it is used to calculate the loan funds issued and paid by the Borrower from the Lender, and the funds
in the account
are calculated according to the interest of demand deposits. The Borrower agrees that in addition to the Borrower’s reserved seal,
the special
working capital loan account shall also reserve the Lender’s special seal for loan fund payment supervision. The Borrower
cannot change the reserved seal of
the special working capital loan account at will without the Lender’s written consent.
3. The Borrower
confirms that the Fund Withdrawal Account is the income account and repayment reserve account under this Contract. The Borrower’s
income cash flow or the Borrower’s overall cash flow shall be entered into the Fund Withdrawal Account.
The Borrower guarantees that,
on each principal and interest payment date under this Agreement and within the three (3) days prior thereto, the balance
of funds in
the Borrower’s repayment reserve account shall not be less than the principal and interest payment amount that the Borrower should
pay in the
current period. The Borrower agrees that, on each principal and interest payment date and within the three (3) days prior thereto,
the Lender has the right to
restrict or refuse any external payment behavior of the Borrower that will cause the balance of funds in the
repayment reserve account to be less than the
principal and interest payment amount that should be paid in the current period, so as to
ensure that the balance of funds in the repayment reserve account is
sufficient to pay the principal and interest payment amount that
should be paid in the current period.
The Lender has the right
to monitor the funds withdrawal account. When the fund flow in the funds withdrawal account is abnormal, the Lender has the
right to find
out the reason from the Borrower and take corresponding measures.
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Article 5 Payment Supervision
1. The Borrower agrees
that the Lender has the right to manage and control the payment of the loan funds through the Lender’s entrusted payment and/or
the Borrower’s independent payment, so as to supervise the use of the loan funds in accordance with the purposes agreed in this
Contract.
The lender’s entrusted
payment means that the Lender pays the loan funds through the Borrower’s account to the Borrower’s transaction counterparty
that meets the purpose agreed in this Contract based on the Borrower’s withdrawal application and payment entrustment.
The Borrower’s autonomous
payment means that after the Lender disburses the loan funds to the Borrower’s account based on the Borrower’s
withdrawal
application, the Borrower will independently pay it to the Borrower’s transaction counterparty for the purpose agreed in the Contract.
2. The Borrower agrees that
if the Borrower and the Lender have newly established a credit business relationship and the Borrower’s credit status is
average,
or the payment object is clear and the single payment amount exceeds the amount agreed in this Contract (see Part I of this Contract),
or other
circumstances determined by the Lender, the Lender’s entrusted payment method shall be adopted.
If the Lender
is entrusted to pay, the Lender has the right to review the payment object, payment amount and other information listed in the payment
application provided by the Borrower based on the loan purpose agreed in the loan contract to see if they are consistent with the corresponding
business
contract and other supporting materials. After review and approval, the Lender will pay the loan funds to the Borrower’s
trading counterparty through the
Borrower’s account.
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3. When the Borrower applies
to the Lender for external payment of loan funds, he shall submit supporting documents that meet the Lender’s
requirements, including
but not limited to:
(1) Documents proving that the purpose
of payment is in accordance with the purpose agreed in this Contract;
(2) Business contracts
and written documents that truly reflect the Borrower’s payment obligations. For fees that must be paid without signing a contract,
the charging policy and standards approved by the competent authority should be provided;
(3) If the corresponding
invoice or receipt is not available at the time of payment, the Borrower shall promptly submit the corresponding invoice or
receipt after
the payment is completed;
(4) Legal and valid payment voucher;
(5) Other documents required by the
Lender.
The Lender has the
right to waive one or more of the above-mentioned certification documents, without affecting any rights of the Lender under this
Contract.
4. If a special
account for working capital loan is not opened, the Borrower shall submit a withdrawal application (see Appendix 1 of this Contract for
the format) to the Lender three (3) banking days before the intended withdrawal date, and at the same time propose whether to adopt the
Lender’s entrusted
payment method or the Borrower’s independent payment method. The Borrower confirms that the Lender has
the right to review whether the Borrower’s
relevant information meets the payment conditions stipulated in this Contract and has
the right to decide on the payment method of the corresponding loan.
In case of opening
a special account for working capital loan and adopting the method of entrusted payment by the Lender, the Borrower shall submit to
the
Lender a payment application (format as shown in Appendix 3 of this Contract) with the reserved seal of the Borrower for the special account
for
working capital loan three (3) banking business days before the payment date. The Lender shall have the right to review whether the
relevant information of
the Borrower meets the payment conditions stipulated in this Contract. If the Lender approves the review, the
payment voucher shall be stamped with the
special seal for loan fund payment supervision and then the payment shall be made. In case of
adopting the method of independent payment by the Borrower,
the Borrower shall submit to the Lender a payment application (format as shown
in Appendix 3 of this contract) and relevant information three (3) banking
business days in advance. The Lender shall have the right to
review whether the relevant information submitted by the Borrower meets the conditions
stipulated in this contract. If the Lender approves
the application, the Borrower shall fill in the payment voucher (the amount of each summary payment
voucher shall not exceed the amount
entrusted by the Lender stipulated in this Contract). After review, the Lender shall stamp the special seal for loan fund
payment supervision
on the summary payment voucher and transfer the corresponding funds to the general settlement account of the Borrower.
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5. If the Borrower adopts the
self-payment method, the Borrower shall regularly report to the Lender on the self-payment of the loan funds on a monthly
basis. The Lender
has the right to verify whether the Borrower’s loan payment complies with the agreed purpose and payment method through account
analysis, voucher inspection, on-site investigation, etc.
6. The Borrower confirms that
he shall pay the Lender the remittance fee incurred in the payment of loan funds. When the remittance fee is incurred, the
Lender has
the right to directly deduct the actual amount.
7. During the process of loan
issuance and payment, if the Borrower encounters any of the following circumstances, the Lender has the right to require
the Borrower
to supplement the withdrawal conditions and payment conditions, or change the loan payment method, or stop the issuance and payment of
loan funds:
(1) Credit status declines;
(2) The profitability of the
main business is not strong;
(3) There are abnormalities
in the use of loan funds.
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Article 6 Repayment
1. The Borrower shall repay
the principal, interest and related expenses of the loan in a timely and full manner in accordance with the repayment plan
agreed upon
in this Contract. The Borrower hereby irrevocably authorizes the Lender to deduct the aforementioned amount from the Borrower’s
account
opened with the Lender on the due date of the loan or when the conditions agreed upon in this Contract are met to repay the Lender’s
debt.
If the Borrower repays the
loan in advance, he shall submit a written application to the Lender and obtain the Lender’s written consent before the tenth
(10th)
banking day before the expected repayment date. If the Lender’s prior written consent is not obtained, the Borrower shall still
repay the principal and
interest in accordance with the term and interest rate agreed in the Contract.
Early repayment agreed
by the Lender shall be deemed as the early maturity of the loan. In this case, the Lender also has the right to require the
Borrower
to pay a certain amount of liquidated damages as agreed in this Contract (see Part I of this Contract).
The interest on early repayment
shall be calculated based on the actual number of days the Borrower has used the funds, and shall be repaid together
with the principal;
the amount of the principal repaid in advance shall not be less than the limit agreed in Part I of this Contract; the repaid principal
shall be
deducted from the principal of the loan in the reverse order of the repayment plan agreed in this Contract.
3. If the Borrower is unable
to repay the loan on time due to legitimate reasons, he shall apply to the Lender for loan extension before the 30th banking
business
day of the repayment period agreed in this Contract, and prepare necessary materials to go through the relevant extension procedures.
If the loan
under this Contract is guaranteed by guarantee, mortgage or pledge, the guarantor, mortgagor and pledgor shall also provide
a written consent certificate.
Whether to agree to the extension is decided by the Lender. If the Borrower does not apply for an extension
or the application for extension is not approved
by the Lender, the loan will be transferred to the overdue loan from the day after the
due date.
4. The Borrower shall not
re-draw any loan funds that have been repaid.
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Article 7 Representations and Warranties
The Borrower makes
the following representations and warranties to the Lender, which are made upon the signing of this Contract and shall remain valid
during
the validity period of this Contract.
1. The Borrower is
an enterprise (institution) legal person or other economic organization established in accordance with the applicable laws, with
independent
legal personality, complete financial system and repayment capacity, and has the right to enter into and perform this Contract in accordance
with
the law.
2. The Borrower has
the right to sign this Contract and has completed all authorizations and approvals from the shareholders’ meeting, board of directors
or other authorized institutions required to sign this Contract and perform its obligations under this Contract. All clauses of this Contract
are the Borrower’s
true intention and are legally binding on the Borrower.
3. The signing and performance
of this Contract shall not violate the laws that the Borrower shall comply with (the laws under this Contract include the
laws, regulations,
rules, local regulations, judicial interpretations, etc. that the Borrower shall comply with, the same below), the relevant documents,
judgments and rulings of the competent authorities, nor conflict with the Borrower’s Articles of Association or any contract, agreement
signed or any other
obligations undertaken by the Borrower.
4. The Borrower guarantees
that all financial statements (if any) issued by him comply with the provisions of applicable laws and that the statements
truly, completely
and fairly reflect the financial status of the Borrower.
5. The Borrower shall abide
by the principle of honesty and trustworthiness in the process of signing and performing this Contract, and all the materials,
documents
and information (including but not limited to business license, project approval documents, feasibility study report, proof of self-raised
funds,
financial statements, etc.) provided by the Borrower to the Lender, including itself and the guarantor, shall be true, valid, accurate
and complete without any
concealment or omission.
6. The Borrower guarantees
that the filing, registration or other formalities required for the validity and legal performance of this Contract have been
completed.
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7. There have been no significant
adverse changes in the operating and financial conditions of the Borrower since the issuance of the most recent audited
financial statements.
8. Strictly abide by the
law in business activities, carry out various businesses in strict accordance with the provisions of the Borrower’s business license
or the business scope approved by law, complete the registration and annual inspection procedures on time, produce and operate legally
and in compliance
with regulations, have the ability to continue to operate, and have a legal source of repayment.
9. Do not give up any matured
claims, and do not dispose of existing major assets without compensation or in other inappropriate ways.
10. The Borrower has disclosed
to the Lender the facts and conditions that he knows or should know and which are important for the Lender to decide
whether to grant
the loan under this Contract (including but not limited to operating conditions, financial conditions, external guarantees, etc.).
11. The Borrower guarantees
that his credit status is good and has no major bad records.
12. The Borrower warrants
that there are no other circumstances or events that have or may have a significant adverse impact on the Borrower’s ability
to
perform.
Article 8 Agreement
The Borrower and
the Lender agree as follows:
1. The Borrower guarantees
to operate in accordance with the law and use the loan for the purpose agreed in this Contract and not to use it for other
purposes. The
Borrower shall provide various financial and accounting materials including monthly and annual reports regularly according to the
requirements
of the Lender, and actively cooperate with the Lender to supervise the use of the loan and the Borrower’s business. The Lender may
check and
supervise the use of the loan at any time in various ways.
2. The Borrower shall repay
the principal and interest of the loan under this Contract in accordance with the time, amount, currency and interest rate
specified in
this Contract, the Application Form and the Debit (Loan) Certificate.
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3. The Borrower guarantees
that if any event occurs or is about to occur that is likely to have a significant adverse impact on the financial status of the
Guarantor
or its ability to perform its guarantee obligations, the Borrower will promptly provide new guarantees approved by the Lender.
4. The Borrower promises that
he will not take the following actions without the written consent of the Lender:
(1) Transfer (including by
sale, donation, debt repayment, exchange, etc.), mortgage, pledge or other disposal of all or most of its major assets;
(2) Contracting,
joint venture, major foreign investment, change in actual controller or major shareholder, shareholding system reform, merger
(acquisition),
joint venture (cooperation), division, equity transfer, substantial increase in debt financing, establishment of subsidiaries, property
transfer,
capital reduction, suspension of business, dissolution, application for bankruptcy, reorganization or cancellation, and other
actions that may affect the
Borrower’s repayment ability;
(3) Provide a guarantee
to a third party that is sufficient to have a significant adverse effect on its financial condition or its ability to perform its
obligations
under this Contract;
(4) Prepayment of
other long-term debts in advance may have a significant adverse impact on the Borrower’s ability to perform its obligations under
this
Contract;
(5) Signing any contract/agreement
that has a significant adverse effect on the Borrower’s ability to perform its obligations under this Contract or
assuming any relevant
obligation that has such an effect.
5. The Borrower undertakes
that, if the following events occur, the Borrower will immediately notify the Lender on the date of the event and deliver the
original
relevant notice to the Lender (with official seal) within five (5) banking days from the date of the event:
(1) The occurrence of an event
causes the representations and warranties made by the Borrower in this Contract to become untrue, inaccurate or invalid.
(2) The Borrower or its controlling
shareholder, actual controller or its affiliates are involved in litigation or arbitration, or their assets are seized, sealed,
frozen,
enforced or other measures with similar effect are taken against them, or their legal representative/person in charge is involved in litigation,
arbitration or other compulsory measures;
(3) The legal representative
or his authorized agent, person in charge, principal financial officer, correspondence address, company name, office location,
etc. of
the Borrower are changed;
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(4) The company is applied
for reorganization or bankruptcy by other creditors or is revoked by the superior authority;
(5) Any other significant adverse
event that may affect the Borrower’s ability to repay its debts occurs.
6. The Borrower guarantees
that he will not repay other loans in priority in violation of the normal repayment order, and will not sign any contract or
agreement
that will make the loans under this Contract subordinate now or in the future.
7. The Borrower shall
repay and pay the principal and interest of the loan under this Contract in the same currency as far as possible. If the Borrower
repays
the debt in different currencies, the Borrower shall, by himself or by authorizing the Lender, convert the different currencies into the
loan currency
under this Contract in accordance with the “Deduction Agreement” of this Contract to repay the principal and
interest owed, and the expenses incurred shall
be borne by the Borrower. When the Guarantor repays the debt on behalf of the Borrower
in different currencies, the “Deduction Agreement” of the
Guarantee Contract shall be followed, and the expenses incurred
shall be borne by the Borrower.
8. When the guarantee under
this Contract encounters specific circumstances or specific changes, the Borrower shall provide other guarantees approved
by the Lender
in a timely manner in accordance with the Lender’s requirements. Such specific circumstances or specific changes include but are
not limited
to the guarantor’s suspension of production, suspension of business, dissolution, suspension of business for rectification,
revocation or cancellation of
business license, application for or application for reorganization, bankruptcy, major changes in business
or financial status, involvement in major litigation
or arbitration cases, involvement of legal representatives, directors, supervisors,
and major operating and management personnel, reduction or possible
reduction in the value of the collateral, or property preservation
measures such as seizure, breach of contract under the guarantee contract, and request for
termination of the guarantee contract.
9. The Lender has the right
to conduct on-site or off-site due diligence on the Borrower and conduct post-loan inspections on the Borrower’s operating
conditions,
financial conditions, external guarantees, use of loan funds, repayment conditions, etc. The Borrower has the obligation to actively cooperate
with
the Lender in loan payment management, post-loan management and related inspections.
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10. The Lender has the right
to recover the loan funds under this Contract in advance according to the Borrower’s fund withdrawn situation.
11. Special provisions regarding
group customers (applicable to group customers).
If the Borrower of this Contract
is a group customer, the Borrower hereby promises:
(1) The Borrower shall promptly
report any related-party transactions involving more than 10% of the net assets of the actual trustee, including: ① the
relationship
between the parties to the transaction; ② the transaction items and nature of the transaction; ③ the transaction amount or
the corresponding
proportion; ④ the pricing policy (including transactions with no amount or only a symbolic amount).
(2) If the actual creditee
has any of the following circumstances, it shall be deemed that the Borrower has breached the contract under this Contract, and
the Lender
shall have the right to unilaterally decide to cancel the credit that the customer has not used, and to recover part or all of the credit
that has been
used or require the customer to add a margin to 100%: ① Providing false materials or concealing important operating
and financial facts; ② Changing the
original purpose of the credit without the consent of the Lender, misappropriating the credit
or using the bank credit for illegal or irregular transactions; ③
Using false contracts with related parties to discount or pledge
bills receivable, accounts receivable and other debts without actual trade background to the
bank to obtain bank funds or credit; ④
Refusing to accept the Lender’s supervision and inspection of its use of credit funds and related operating and
financial activities;
⑤ There are significant mergers, acquisitions, reorganizations, etc., which the Lender believes may affect the safety of the credit;
⑥
Intentionally evading bank debts through related transactions.
12. Special guarantees,
commitments and agreements on Green Credit (applicable to borrowers whose construction, production and operation
activities
of nuclear power plants, large hydropower plants, water conservancy projects, resource mining projects, etc. are likely to
seriously change the original state
of the environment and the adverse environmental and social consequences are difficult to eliminate,
and borrowers whose construction, production and
operation activities of petroleum processing, coking and nuclear fuel processing, chemical
raw materials and chemical product manufacturing, etc. will
produce adverse environmental and social consequences but are easier to eliminate
through mitigation measures):
(1) The Borrower undertakes
to submit an environmental, social and governance risk report to the Lender and declares and guarantees
to strengthen
environmental, social and governance risk management, including: ① The internal
management documents related to environmental, social and governance
risks comply with the requirements of laws and regulations and are
effectively implemented; ② There are no major litigation cases involving environmental,
social
and governance risks;
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(2) The Borrower commits
to accept the Lender’s supervision and strengthen the management of environmental, social and governance risks, including:
①
Committing to comply with the regulations in all its behaviors and performances related to environmental,
social and governance risks; ② Committing to
establish and improve the internal management
system for environmental, social and governance risks, and specify in detail the responsibilities, obligations
and penalties of the Borrower’s
relevant responsible persons; ③ Committing to establish and improve the emergency response
mechanism and measures for
environmental, social and governance risk emergencies; ④ Committing to set up a special department
and/or designate special personnel to be responsible
for environmental, social and governance risk matters; ⑤ Committing to cooperate
with the Lender or a third party recognized by him in assessing and
inspecting the Borrower’s environmental, social and governance
risks; ⑥ Committing to give appropriate responses or take other necessary actions in the
face of strong doubts from the public or
other stakeholders on the Borrower’s performance in controlling environmental, social and governance risks; ⑦
Committing to
urge the Borrower’s key related parties to strengthen management to prevent the transmission of environmental, social and governance
risks
of related parties to the Borrower; ⑧ Committing to perform other matters that the Lender considers relevant to the control
of environmental, social and
governance risks;
(3) The Borrower undertakes
to inform the Lender in a timely and adequate manner when the following situations occur: ① All kinds of permits,
approvals and
ratifications related to environmental, social and governance risks during the commencement, construction, operation and closure of the
project; ② The assessment and inspection of the environmental, social and governance risks of the Borrower by the environmental,
social and governance
risk regulatory agency or its recognized agency; ③ The supporting construction and operation of environmental
facilities; ④ The emission and compliance of
pollutants; ⑤ The safety and health of employees; ⑥ Major complaints and
protests against the Borrower by neighboring communities; ⑦ Major
environmental and social claims; ⑧ Other major situations
that the Lender considers to be related to environmental, social and governance risks;
(4) If the Borrower and the
Actual Trustee have any of the following circumstances, it shall be deemed that the Borrower has defaulted under this
Contract: ①
The Borrower’s statements, warranties and commitments on environmental, social and governance risk management have not been
conscientiously
performed; ② The Borrower is punished by relevant government departments for poor environmental, social and governance risk
management;
③ The Borrower is strongly questioned by the public and/or the media for poor environmental, social and governance risk management;
④
Other defaults on environmental, social and governance risk management agreed upon by the Lender and the Borrower, including cross-default
events;
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Working Capital Loan Contract
If the Borrower
defaults as mentioned above, the Lender has the right to unilaterally decide: ① to cancel the credit commitment that has been made;
②
to suspend the disbursement of the loan until the Borrower has taken rescue measures that are satisfactory to the Lender; ③
to recover the disbursed loan in
advance; ④ to exercise the relevant mortgage rights and other penalty measures in advance when
the loan cannot be repaid; ⑤ other penalty measures agreed
upon by the Lender and the Borrower.
13. The Borrower
promises not to increase the local government’s implicit debt in violation of regulations, otherwise the Lender has the right to
immediately suspend/terminate the Borrower’s withdrawal and declare that part or all of the issued loans are due in advance. At
the same time, the Lender
has the right to report the relevant situation to the relevant regulatory authorities.
14. Anti-Money Laundering Agreement The
Borrower confirms and agrees that the Lender has the right to conduct money laundering risk assessment
on the transactions involved in
this Contract in accordance with the applicable anti-money laundering laws and regulations and internal management
requirements. If the
Borrower violates the Lender’s anti-money laundering management regulations, or the Lender has reasonable grounds to suspect that
the
Borrower and/or the transactions under this Contract are suspected of participating in money laundering, sanctions, terrorist financing
or financing activities
for the proliferation of weapons of mass destruction, export control, or tax evasion and other illegal and irregular
activities recognized by the United Nations
Security Council, the Financial Action Task Force on Money Laundering, China, the United States,
the European Union, the United Kingdom, Singapore and
other international organizations or countries, the Lender has the right to take
necessary control measures in accordance with the anti-money laundering
supervision regulations and internal management regulations of
the People’s Bank of China. At the same time, the Lender has the right to directly restrict or
suspend all or part of the business
under this Contract without notifying the Borrower, declare the loan to be due in advance, terminate this Contract, and
shall not bear
any responsibility, and shall have the right to require the Borrower to bear all losses caused to the Lender.
15.
The
Borrower
agrees
and
irrevocably
authorizes:
The
Lender
has
the
right
to
provide
the
information
of
all
contracts/agreements/commitments
signed between the Borrower and the Lender, including relevant information on the performance of all the
above
contracts/agreements/commitments, and the basic information of the enterprise and other information provided by the Borrower, to the
Financial Credit Information Basic Database established by the State, in accordance with the provisions of the Credit Reporting
Industry
Management Regulations and other credit-related laws and regulations and the requirements of regulatory provisions, as well
as the collection
requirements of the Financial Credit Information Basic Database established by the State, for the inquiry and use
by qualified units; at the same
time, the Lender also has the right to inquire and use the credit information of the Borrower that
has been entered into the Financial Credit
Information Basic Database established by the State. This authorization covers all
aspects of the Lender’s necessary business management of the
business under this Contract before and after the signing of this
Contract, and its validity period shall expire with the actual termination of this
Contract.
16. The Borrower hereby confirms
that he has fully understood and is aware of the Lender’s position that he opposes his employees taking advantage of
their positions
to seek any form of benefits, and promises to avoid such situations in accordance with the principles of integrity and fairness, and not
to
privately provide any form of kickbacks, gifts, securities, valuables, various rewards, personal expense compensation, private travel,
high-consumption
entertainment and other improper benefits to the Lender’s employees.
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Article 9 Deduction Agreement
1. The Borrower agrees
that when any debt related to the loan under this Contract becomes due and payable, the Lender has the right to
directly deduct the funds
in the repayment reserve account opened by the Borrower with Shanghai Pudong Development Bank Co., Ltd. to repay
the due and payable debt.
If the funds in the repayment reserve account are insufficient to repay the debt, the Lender has the right to deduct the
funds from any
other account opened by the Borrower with any branch of Shanghai Pudong Development Bank Co., Ltd.
2. The Lender has the
right to choose to use the proceeds to repay the loan principal, interest or other expenses. If there are multiple claims that
are due
and unpaid at the same time, the Lender shall decide the order of repayment of the claims.
3. If the currency of the deducted
funds is inconsistent with the currency to be repaid, the following procedures shall me applied:
(1) If the loan currency
is RMB, the principal and interest of the loan shall be repaid after the amount is converted into RMB at the applicable buying
rate for
the deduction currency published by the Lender at the time of deduction.
(2) If the loan currency
is not RMB and the deduction currency is RMB, the principal and interest of the loan shall be repaid directly by deducting the
applicable
selling price of the loan currency and RMB published by the Lender at that time and converting it into the loan currency.
(3) If both the loan
currency and the deduction currency are not RMB and they’re not the same, the loan principal and interest shall be repaid after
the
foreign exchange settlement is completed at the buying rate of the currency of the deduction and RMB announced by the Lender at the
time of deduction and
then the foreign exchange settlement is completed at the selling rate of the currency of the loan and RMB announced
by the Lender on the same day and then
the loan principal and interest shall be repaid.
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Article 10 Proof of Debt
The Lender shall, in accordance
with his usual business practices, maintain accounting records related to the business activities involved in this Contract
in its accounting
books to prove the Lender’s loan amount. The Borrower’s valid evidence of the loan claim under this Contract shall be the
accounting
vouchers or other valid supporting materials issued and recorded by the Lender in accordance with its own business regulations.
Article 11 Agreed Delivery Address
1. The Lender confirms that
the address listed on the first page of this Contract is his valid delivery address. Any notice delivered directly or by mail to
the Lender
by the Borrower under this Contract shall be sent to the address listed on the first page of this Contract until the Lender announces
a change in the
address. The Borrower agrees that all notices sent by him to the Lender shall be deemed delivered when the Lender actually
receives them.
2. The Borrower confirms
that the address and fax, e-mail and other delivery information listed on the first page of this Contract are his valid
mailing or electronic
delivery addresses. All kinds of notices and other documents under this Contract during non-litigation, as well as letters,
summonses,
notices and other legal documents issued to him during any litigation (including any litigation procedures and enforcement procedures
such as first instance, second instance and retrial) arising from this Contract, shall be deemed to have been delivered as long as they
are sent to the
mailing or electronic delivery address listed on the first page of this Contract by mail or by electronic delivery such
as fax, e-mail, etc. The specific
delivery date shall be subject to the provisions on delivery date in the Civil Procedure Law. The change
of the above-mentioned mailing or electronic
delivery address shall not be legally effective unless the Lender is notified in advance,
and the delivery address confirmed in this Contract shall still
be deemed to be the valid delivery address.
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Article 12 Breach of Contract and Its Handling
1. Breach of Contract
Any of the following circumstances
shall constitute the breach of contract by the Borrower against the Lender:
(1) Any representation
or warranty made by the Borrower in this Contract or in any notice, authorization, approval, consent, certificate or other
document made
pursuant to or in connection with this Contract is incorrect or misleading at the time of making, or has been proved to be incorrect or
misleading, or has been proved to be invalid or revoked or has no legal effect.
(2) The Borrower
has breached any of the provisions of “Other Matters Agreed by the Parties” (if any) in Part I of this Contract or any of
the matters
agreed in Article 8 of Part II.
(3) The Borrower
has a major cross-default event, including but not limited to the Borrower’s breach of any other loan contract or agreement signed
by
him; or the Borrower’s failure to pay debts under other loan contracts or agreements signed by him when due.
(4) The Borrower’s investors
withdraw funds, transfer assets, or transfer equity without authorization.
(5) The Guarantor
no longer has or will no longer have the ability to provide a guarantee corresponding to the loan, or violates the guarantee document
signed by him.
(6) The Borrower
ceases operations, stops production, closes down, suspends business for rectification, reorganization, liquidates, is taken over or placed
under trusteeship, is dissolved, has his business license revoked or cancelled, or goes bankrupt.
(7) The financial
condition of the Borrower or Guarantor deteriorates, the operation encounters serious difficulties, or an event or situation occurs that
has an adverse impact on his normal operation, financial condition or debt repayment ability.
(8) The Borrower
or his controlling shareholder, actual controller or his affiliates are involved in major litigation or arbitration or their major assets
are
seized, confiscated, frozen, enforced or other measures with similar effect are taken against them, or their legal representatives/persons
in charge, directors,
supervisors or senior management are involved in litigation, arbitration or other compulsory measures, which have
an adverse impact on the Borrower’s debt
repayment ability.
(9) Failure to repay the principal
and interest on time or failure to use the loan for the agreed purpose.
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(10) Failure to pay the loan funds
in accordance with the agreed method.
(11) The documents and information
submitted for loan application are false or incorrect.
(12) Failure to comply with or exceeding
the relevant financial indicator constraints agreed upon in this Contract.
(13) Within three
(3) days before any principal and interest payment date under this Contract, the balance of funds in the Repayment Reserve Account is
lower than the principal and interest payment due by the Borrower for that period.
(14) There are abnormalities in the
flow of funds within the general settlement account/fund withdrawal account.
(15) The Borrower
is suspected of participating in illegal activities such as money laundering, sanctions, terrorist financing or financing of the
proliferation
of weapons of mass destruction, export controls, tax evasion, etc.
(16) The Borrower illegally increases
the hidden debt of the local government.
(17) The Borrower
commits any other act in violation of this Contract that is sufficient to hinder the normal performance of this Contract, or any other
act that is prejudicial to the legitimate interests of the Lender.
2. Breach Handling
(1) If one or more
of the default circumstances listed in the preceding paragraph occur, the Lender may, at its discretion, take one or more of the
following
measures:
① Require
the Borrower to make corrections within a specified period of time.
② Cancel
the Borrower’s unused loans and stop issuing and paying the Borrower’s unused loans.
③ Declare
that all or part of the principal of the loan under this Contract is due in advance immediately, and require the immediate repayment of
part or all of the loan, settlement of the outstanding interest, and immediate pursuit of the Guarantor or Borrower through various forms.
④ Penalty
interest and compound interest will be charged on overdue loans and misappropriated loans.
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⑤ Deduct
the funds from any account opened by the Borrower in any branch of Shanghai Pudong Development Bank Co., Ltd.
⑥ Require
the Borrower to supplement the loan issuance and payment conditions, or change the loan payment method.
⑦ Require
the Borrower to provide other guarantees approved by the Lender.
⑧ Other
necessary measures prescribed by law.
(2) In addition to
the above measures, the Lender may also require the Borrower to bear the liability for breach of contract and require the Borrower to
pay liquidated damages (the calculation method of liquidated damages is shown in Part I of this Contract). If the liquidated damages are
not sufficient to
compensate the losses suffered by the Lender, the Borrower shall compensate the Lender for all losses suffered thereby.
(3) If the Borrower
fails to repay the principal and interest in full and on time, it shall also bear all expenses paid by the Lender in realizing the creditor’s
rights and security rights, including but not limited to collection expenses, litigation costs, attorney fees, travel expenses and various
other payable expenses.
Article 13 Effectiveness, Change and Termination
1. This Contract shall come
into force after being signed (or sealed) by the legal representative of the Borrower or his/her authorized agent and affixed
with the
official seal, and after being signed (or sealed) by the legal representative (person in charge) of the Lender or his/her authorized agent
and affixed
with the official seal (or special seal for the Contract), and shall terminate after all the debts under this Contract are
paid off.
2. After this contract comes
into effect, neither party shall unilaterally change or terminate this Contract in advance. If this Contract needs to be changed
or terminated,
it shall be negotiated and agreed upon in writing by both parties.
Article 14 Other Terms
1. Definition
(1) The term “all
the debts” under this Contract refers to the principal, interest, liquidated damages and all other expenses incurred in realizing
the debts.
(2) The term “interest”
under this Contract includes interest, penalty interest and compound interest.
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(3) The term “banking
day” under this Contract refers to the day on which the Lender is normally open for business for public business at the Lender’s
domicile, excluding Saturdays, Sundays (except those closed due to holiday adjustments) or other statutory holidays.
2. Applicable Law
This Contract shall be governed
by and interpreted in accordance with the laws of the People’s Republic of China (excluding the laws of the Hong Kong
Special Administrative
Region, the Macao Special Administrative Region and Taiwan for the purpose of this Contract).
3. Dispute Resolution
All disputes concerning this
Contract shall be settled through friendly negotiation. If no agreement is reached through negotiation, the parties shall file a
lawsuit
with the People’s Court at the place of residence of the Lender. During the dispute period, the parties shall continue to perform
the clauses not
involved in the dispute.
4. Miscellaneous
(1) If there are
any matters not covered in this Contract that need to be supplemented, the parties may agree on them and record them in Part I of this
Contract, or they may reach a separate written agreement as an annex to this Contract. The annex to this Contract (see Part I of this
Contract) is an integral
part of this Contract and has the same legal effect as the main body of this Contract.
(2) During the validity
period of this Contract, any forbearance or delay in taking action against any breach of contract or other behavior of the Borrower
by
the Lender shall not prejudice, affect or restrict any rights or interests that the Lender shall enjoy as a creditor under the law or
this Contract, nor shall it be
regarded as the Lender’s approval of the Borrower’s breach of this Contract, nor shall it be
regarded as the Lender’s waiver of the right to take action against
the Borrower’s existing or future breach of contract.
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(3) The invalidity
of any clause of this Contract shall not affect the validity of the other clauses of this Contract. If this Contract becomes invalid for
any
reason, the Borrower shall still be responsible for repaying all debts owed to the Lender under this Contract. If the above situation
occurs, the Lender shall
have the right to terminate the execution of this Contract immediately and may immediately recover all debts
owed by the Borrower under this Contract from
the Borrower.
(4) The Lender may
transfer all or part of his rights and/or obligations under this Contract, and in such case, the transferee shall enjoy and/or bear the
same rights and/or obligations to the Borrower as he would have if he were a party to this Contract. The Borrower shall bear the liabilities
to the transferee in
accordance with the provisions of this Contract after receiving the Lender’s notice of the transfer of the
debts.
(5) Unless otherwise
specified in this Contract, the relevant terms and expressions in the Annex to this Contract shall have the same meaning as in this
Contract.
(6) The headings under this Contract
are for reference only and shall not be construed as the basis for the contents under such headings.
(REMINDER OF PAGE INTENTIONALLY
LEFT BLANK)
(SIGNATURE PAGE TO FOLLOW)
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This Contract has
been signed between the Borrower and the Lender on ________________ (date, month, year). The Borrower hereby confirms
that, when
signing this Contract, both parties have explained and discussed all the terms in detail, and both parties have no doubts about all
the
terms of the Contract and have an accurate understanding of the legal meaning of the rights and obligations of the parties and
the limitation or
exemption of liability.
Borrower (official seal)
Lender (official seal or contract-specific seal)
Legal Representative or Authorized Agent (signature or seal)
Legal Representative/Person in Charge or Authorized Agent (signature
or seal)
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Exhibit 10.19
Serial Number:
Working
Capital Loan Contract
Contract Version Number: SPDB 20 2109
Working Capital Loan Contract
Working Capital Loan Contract
Borrower:
CLPS Shanghai Co., Ltd.
Principal Business Address:
2F, Building
18, 498 Guoshoujing Road, Pudong, Shanghai, China
Contact Person:
Huanzhen Wu
Telephone:
15040094890
Fax:
/
Email:
lisa.wu@clpsglobal.com
Lender:
Shanghai Pudong Development Bank Co., Ltd.
Jinqiao
Branch
Principal Business Address:
509 Jingang Road, Pudong, Shanghai, China
Contact Person:
Lin Xie
Telephone:
021-58994702
Given that:
The Borrower applies to
the Lender for working capital loan due to capital turnover needs; after examination, the Lender agrees to grant the loan in
accordance
with the terms and conditions of this Contract. In order to clarify the rights and obligations of both parties, we hereby enter into this
Contract in
accordance with the relevant laws, regulations and rules of the People’s Republic of China.
Meanwhile, the Borrower
and the Lender confirm the following primary terms:
1.
(Please mark ü in the appropriate box according
to the situation, and mark x if you do not select)
☒
This Contract is signed as a subsidiary financing document of the Financing Line Agreement No. (hereinafter referred to as the Financing
Line
Agreement). After this Contract comes into effect, all its terms shall be incorporated into the Financing Line Agreement and become
its component parts (if
the Borrower has previously signed the Financing Line Agreement, this option shall be selected and the Financing
Line Agreement number shall be
indicated);
þ This contract is an independent credit document signed between the Borrower and the Lender (if the Borrower and the Lender have not signed a
Financing Line Agreement, this option should be selected);
2. (If the purpose of
the loan is to borrow new money to repay old loan or to renew the loan, you must mark ü
in the box)
☒ The
guarantors are aware that the loan purpose of this contract is to repay the loan under the original contract name: (Signed on:
Serial
Number: ).
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Working Capital Loan Contract
Part I Commercial Terms
1. Loan types:
þ Short-term working capital loan ☒ Medium-term working capital loan
2. The loan amount under
this contract is RMB (currency) Eighteen Million Yuan (in words).
3.
The specific purposes of the loan under this Contract are:
4. The loan term under this
Contract is (please mark ü in the following boxes, or mark x if you do not select):
☐ since
(date, month, year) to
(date, month, year);
☐
year(s) (or months) from the date of
first withdrawal.
The actual withdrawal date
and repayment date shall be subject to the date recorded on the IOU (loan certificate) issued by the Lender and the Borrower.
The last
repayment date shall not exceed the loan period agreed in this Contract. The IOU (loan certificate) is an integral part of this Contract.
5. The loan interest rate
under this Contract is (please mark ü in the following boxes, and mark x if you do not
select) :
þ
(1) RMB loan interest rate:
Each loan under this
contract shall be calculated based on the Loan Prime Rate (LPR) ☐ + ☐ - BPS announced by the National Interbank Funding
Center at the end of the day before the actual disbursement date of the loan. If the calculated interest rate is less than 0%, it
will be executed at 0%. (The
Loan Prime Rate is an annual interest rate, which can be found on the National Interbank Funding Center
and the website of the People’s Bank of China).
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After each loan under this Contract
is issued, if the Loan Prime Rate is adjusted during the loan period, the loan interest rate (please mark ü
in the box
below and mark x if you do not select):
☐ No adjustment, fixed
interest rate;
☒ The interest rate
will be adjusted starting from the interest rate adjustment date, based on the Loan Prime Rate (LPR) for the agreed period as stated
above announced by the National Interbank Funding Center at the end of the day before the interest rate adjustment date, and the
floating points and
calculation method of the interest rate agreed above remain unchanged. The specific interest rate adjustment
dates is as follows (please mark ü in the box
below, and mark ⅹ if you do not
select):
☒ The
interest rate is adjusted annually. The interest rate adjustment date is the corresponding day of the corresponding month of the
next calendar
year after the actual loan disbursement date. If there is no corresponding day in the corresponding month of the next
calendar year after the actual
loan disbursement date, the interest rate adjustment date is the last day of the corresponding month
of the next calendar year after the actual loan
disbursement date;
☒
The interest rate is adjusted annually, and the interest rate adjustment date is January 1 of each year;
☒ The
interest rate is adjusted according to the interest payment date, and the interest rate adjustment date is the ________ day after
the interest
payment date;
☒ The
interest rate is adjusted quarterly, and the interest rate adjustment date is the ___________ day of the last month of each
quarter;
☒
The interest rate is adjusted monthly, and the interest rate adjustment date is the day of every month;
☒
Other conventions (specific interest rate adjustment date): ____________.
☒ (2) Foreign currency loan interest rate:
☒ 1) Each loan under this
Contract shall be calculated based on the ______________ (LIBOR/HIBOR/SIBOR) published by the Lender on
____________(date, month, year)
(hereinafter referred to as the “Benchmark Interest Rate Term”) on the actual date of loan issuance as the Benchmark
Interest Rate plus BPS (hereinafter referred to as the “Spread”, and the Spread ≥0).
If the Benchmark Interest Rate is less than 0%, the Benchmark Interest
Rate shall be calculated at 0%.
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After each loan under this
Contract is issued, the loan interest rate will be adjusted during the loan period as follows (please mark ü
in the box below,
and mark ⅹ if you do not select):
☒ From the date of
each loan disbursement, the loan interest rate shall be adjusted according to the Benchmark Interest Rate Term agreed in this
Contract, the latest foreign currency benchmark interest rate of the corresponding day plus the interest rate spread agreed in this
Contract. If the Benchmark
Interest Rate is less than 0%, the Benchmark Interest Rate shall be calculated at 0%.
☒ Fixed interest rate, which means the interest
rate will remain the same.
☒
2) The foreign currency loan interest rate under this Contract is detailed in the “Foreign Currency Interest Rate Supplementary
Contract” signed
separately by both parties to this Contract.
☒ 3) The interest rate for each loan
under this Contract is ____/___ %, which is a fixed rate and will not be adjusted during the loan period.
6. The interest settlement method under this Contract
is (please mark ü in the box below, and mark ⅹ if you do not select):
☐ If the interest is settled monthly,
the interest settlement date is the 20th day of each month;
☐ If the interest is settled quarterly,
the interest settlement date is the 20th day of the last month of each quarter;
☐ Other methods: ________________________________.
The interest of each repayment
under this Contract shall be paid together with the principal.
7. The penalty interest
rate under this Contract is:
(1) The overdue penalty interest rate under this Contract shall
be 30 % higher than the loan execution interest rate applicable
on the penalty interest
calculation date.
(2) The penalty interest rate for misappropriation of the loan
or failure to use the loan for the purposes agreed in this Contract shall be 50 % higher
than the loan execution rate applicable
on the penalty interest calculation date.
If the loan currency is in foreign currency,
if there are other provisions in the foreign currency interest rate supplementary contract or foreign currency
interest rate change contract
signed by the two parties to this Contract, such provisions shall apply.
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8. The loan withdrawal
period under this Contract is from
(date, month, year) to (date,
month, year). The first withdrawal shall be made
before
(date, month, year).
9. The withdrawal plan for
the loan under this Contract is as follows (please mark ü in the box below, and mark
ⅹ if you do not select):
☐ The withdrawal
plan is shown in the table below:
No.
Withdrawal Date
Withdrawal Amount
1
☐
Day ☐ Month ☐ Year
(Amount in words)
2
☐
Day ☐ Month ☐ Year
(Amount in words)
3
☐
Day ☐ Month ☐ Year
(Amount in words)
4
☐
Day ☐ Month ☐ Year
(Amount in words)
5
☐
Day ☐ Month ☐ Year
(Amount in words)
6
☐
Day ☐ Month ☐ Year
(Amount in words)
☐ Other
withdrawal plans:
10. The repayment plan for
the loan under this Contract is as follows (please mark ü in the box below, and mark
ⅹ if you do not select):
☐ The repayment
plan is shown in the table below:
No.
Repayment Date
Repayment Amount
1
☐
Day ☐ Month ☐ Year
(Amount in words)
2
☐
Day ☐ Month ☐ Year
(Amount in words)
3
☐
Day ☐ Month ☐ Year
(Amount in words)
4
☐
Day ☐ Month ☐ Year
(Amount in words)
5
☐
Day ☐ Month ☐ Year
(Amount in words)
6
☐
Day ☐ Month ☐ Year
(Amount in words)
☐ Other repayment
plans:
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11. Penalty for early repayment
of loan: Equivalent to / % of the total amount of loan actually repaid in advance or RMB (currency) Zero Yuan (in
words).
12. The principal amount of
the loan to be repaid in advance shall not be less than RMB (currency) Zero Yuan (in words).
13. Account Opening ( For RMB
loans, choose one of the following modes and mark ü; for foreign currency loans, choose
the special account mode.
Mark ⅹ if you do not select):
☐ Non-special account
mode:
(1) The general settlement account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(2) The fund withdrawal account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
☐ Special account
mode:
(1) The special account for
working capital loans opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(2) The general settlement account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
(3) The fund withdrawal account
opened by the Borrower with the Lender is:
Deposit Bank:
Account Name:
Account Number:
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14. Lender entrusted payment:
For loan funds payment with a clear payment object and a single payment amount exceeding RMB
(Currency
and Amount), the Lender entrusted payment method should be adopted.
15. The guarantors and guarantee
contracts that provide guarantee for the debts under this Contract include but not limited to:
☒
Guarantor /
Guarantee Contract No. 【 / 】;
☒ Mortgagor / Mortgage
Contract No. 【 / 】;
☒
Pledgee /
Pledge Contract No. 【 / 】;
☒ Other guarantees
/
.
16. Breach of Contract Handling
Penalty: Equivalent to __________% (in words) of the loan principal amount or
17. The annexs to this Contract
include:
( 1 ) Withdrawal Application
Form .
( 2 ) .
( 3 ) .
( 4 ) .
( 5 ) .
18. Other matters agreed upon
by both parties.
19. This Contract is made in
triplicate , of which the Borrower holds one copy, the Lender holds two copies, and / holds /
copies.
Each copy has the same legal effect.
(End of Part 1)
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Part II General Terms
Article 1 Loan
1. The Borrower irrevocably
agrees and confirms that the Lender has the right to adjust or add loan disbursement conditions due to changes in
laws, regulations and
policies, or restrictions on the government’s macro-monetary policy or financial regulatory policy, or based on market
conditions,
capital position and financial cost conditions, its own business needs, the Borrower’s performance ability or financial status,
or other
major changes in circumstances, and may suspend, reduce or cancel the loan and notify the Borrower.
2. The loan under this Contract
shall be used in accordance with the purpose of the loan agreed in this Contract. The Borrower shall not misappropriate
or embezzle the
loan for fixed asset investment, equity investment, etc., nor shall it be used in the fields and for purposes prohibited by the State
for
production and operation or other activities that are not in line with the purpose of working capital loans.
Article 2 Loan Interest Rate and Interest Calculation
Method
1. Unless otherwise agreed
in this Contract, the interest on the loan under this Contract shall be calculated based on the actual withdrawal amount and
the number
of days occupied from the date the Lender issues the loan. The number of days occupied includes the first day and excludes the last day.
Daily
interest rate = monthly interest rate / 30, monthly interest rate = annual interest rate / 12, that is, daily interest rate = annual
interest rate / 360. When the loan
currency is British Pound, Hong Kong Dollar or Singapore Dollar, daily interest rate = annual interest
rate / 365.
2. The Lender has
the right to charge overdue penalty interest on the principal of the loan that is due (the term “due” in this Contract includes
the
situation where the Lender declares the loan to be due in advance) payable by the Borrower at the overdue rate agreed in this Contract
and calculated on the
actual number of days overdue, starting from the date of overdue, until the Borrower repays the principal and interest.
3. If the Borrower
fails to use the loan funds for the agreed purpose, the Lender shall have the right to charge penalty interest on the amount of the loan
used in breach, calculated according to the actual number of days of breach at the penalty interest rate for misappropriation agreed in
this Contract, starting
from the date of breach, until the Borrower repays the principal and interest.
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4. The Lender shall
charge compound interest on the interest (including normal interest, overdue penalty interest and misappropriation penalty interest)
that
the Borrower fails to pay on time at the overdue penalty interest rate agreed in this Contract based on the actual number of days overdue
from the date of
overdue payment.
5. Unless otherwise
agreed upon by both parties to this Contract, the loan interest rate under this Contract shall be calculated using the “simple interest
method”. The interest rate calculation method can be found on the website of the People’s Bank of China.
6. Interest Rate Market Paralysis
After the loan is
disbursed under this Contract, if there is no applicable LPR (applicable to RMB) or LIBOR/HIBOR/SIBOR (applicable to foreign
currencies)
interest rate on the quotation date of the relevant interest period, the Borrower shall negotiate with the Lender to determine the alternative
interest
rate; if no agreement can be reached within five (5) banking days after the start of the negotiation, the Borrower shall repay
all principal and interest of the
loan within thirty (30) banking days from the date of failure to reach an agreement. If the parties
have signed a foreign currency interest rate supplementary
contract or a foreign currency interest rate modification contract at the same
time as signing this Contract, the interest rate shall be determined in accordance
with the provisions of the supplementary contract or
modification contract.
Article 3 Withdrawal
1. Before making the first
withdrawal, the Borrower shall meet the following conditions:
(1) Submit the Withdrawal
Application (the format is shown in Annex 1 or Annex 2 of this Contract), the completed Debit (Loan) Certificate and other
relevant documents
in accordance with the time and method agreed upon in this Contract;
(2) This Contract
and the corresponding Guarantee Contract (if any) have been signed and remain in force, and the Guarantee Right has been effectively
established;
(3) Submit
the Borrower’s current valid business license, company charter, and recent financial statements on the withdrawal date (including
but not
limited to the previous year’s annual financial report audited by a certified public accountant and current financial statements);
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(4) Submit the original
copy of the loan resolution made by the Borrower’s board of directors/shareholders meeting or other institutions with equivalent
effect, the authorization letter from the legal representative to the authorized representative, and the signature specimens of the legal
representative and the
authorized representative;
(5) The Borrower
has opened a relevant account with the Lender in accordance with the Lender’s requirements;
(6) The Borrower has performed its
obligations under this Contract and no breach of contract has occurred;
(7) Other documents or conditions
required by the Lender.
2. In addition to
conditions for the initial withdrawal, the Borrower shall also meet the following conditions before each withdrawal:
(1) Submit the Withdrawal
Application (the format is shown in Annex 1 or Annex 2 of this Contract), the completed Debit (Loan) Certificate and other
relevant documents
in accordance with the time and method agreed upon in this Contract;
(2) The representations and warranties
made by the Borrower under this Contract shall remain valid;
(3) The Borrower has performed its
obligations under this Contract and no breach of contract has occurred;
(4) Other documents or conditions
required by the Lender.
3. Withdrawal
(1) The Borrower
shall make a one-time or installment withdrawal according to the withdrawal plan agreed upon in this Contract and shall submit a
Withdrawal
Application (the format of which is provided in Annex 1 or Annex 2 to this Contract) to the Lender three (3) banking days before the due
date of
each Withdrawal to complete the withdrawal procedures;
(2) If the Borrower
needs to postpone or change the withdrawal date, the Borrower shall obtain the Lender’s consent three (3) banking days before the
withdrawal date. The Lender shall have the right to require the Borrower to pay the interest loss incurred by the Lender as a result (interest
loss = interest on
the postponed withdrawal period - interest on demand deposits during the same period);
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(3) If the Borrower
requests to cancel all or part of the undrawn loan, he shall apply to the Lender three (3) banking days prior to the determined
withdrawal
date or the end date of the withdrawal period, and the cancellation can only be made after the Lender agrees;
(4) If the Borrower
fails to complete the withdrawal procedures and does not apply for a delay in withdrawal on the specified withdrawal date or within
the
withdrawal period, the Lender has the right to cancel the undrawn loan;
The Lender has the
right to waive one or more of the above withdrawal conditions without affecting any rights of the Lender under this Contract.
Article 4 Account Opening and Management
1. The Borrower
shall have opened a general settlement account and a fund withdrawal account with the Lender (see Part I of this Contract) at the
time
of signing this Contract, as well as a special account for working capital loans (if any) agreed upon by both parties. The Borrower
agrees that the Lender shall
monitor the Borrower’s aforementioned accounts.
2. If a special account
for working capital loans is not opened, the general settlement account shall be used to calculate the disbursement and payment of
loan
funds applied by the Borrower from the Lender.
If a special working capital
loan account is opened, it is used to calculate the loan funds issued and paid by the Borrower from the Lender, and the funds
in the account
are calculated according to the interest of demand deposits. The Borrower agrees that in addition to the Borrower’s reserved seal,
the special
working capital loan account shall also reserve the Lender’s special seal for loan fund payment supervision. The Borrower
cannot change the reserved seal of
the special working capital loan account at will without the Lender’s written consent.
3. The Borrower
confirms that the Fund Withdrawal Account is the income account and repayment reserve account under this Contract. The Borrower’s
income cash flow or the Borrower’s overall cash flow shall be entered into the Fund Withdrawal Account.
The Borrower guarantees that,
on each principal and interest payment date under this Agreement and within the three (3) days prior thereto, the balance
of funds in
the Borrower’s repayment reserve account shall not be less than the principal and interest payment amount that the Borrower should
pay in the
current period. The Borrower agrees that, on each principal and interest payment date and within the three (3) days prior thereto,
the Lender has the right to
restrict or refuse any external payment behavior of the Borrower that will cause the balance of funds in the
repayment reserve account to be less than the
principal and interest payment amount that should be paid in the current period, so as to
ensure that the balance of funds in the repayment reserve account is
sufficient to pay the principal and interest payment amount that
should be paid in the current period.
The Lender has the right
to monitor the funds withdrawal account. When the fund flow in the funds withdrawal account is abnormal, the Lender has the
right to find
out the reason from the Borrower and take corresponding measures.
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Article 5 Payment Supervision
1. The Borrower agrees
that the Lender has the right to manage and control the payment of the loan funds through the Lender’s entrusted payment and/or
the Borrower’s independent payment, so as to supervise the use of the loan funds in accordance with the purposes agreed in this
Contract.
The lender’s entrusted
payment means that the Lender pays the loan funds through the Borrower’s account to the Borrower’s transaction counterparty
that meets the purpose agreed in this Contract based on the Borrower’s withdrawal application and payment entrustment.
The Borrower’s autonomous
payment means that after the Lender disburses the loan funds to the Borrower’s account based on the Borrower’s
withdrawal
application, the Borrower will independently pay it to the Borrower’s transaction counterparty for the purpose agreed in the Contract.
2. The Borrower agrees that
if the Borrower and the Lender have newly established a credit business relationship and the Borrower’s credit status is
average,
or the payment object is clear and the single payment amount exceeds the amount agreed in this Contract (see Part I of this Contract),
or other
circumstances determined by the Lender, the Lender’s entrusted payment method shall be adopted.
If the Lender
is entrusted to pay, the Lender has the right to review the payment object, payment amount and other information listed in the payment
application provided by the Borrower based on the loan purpose agreed in the loan contract to see if they are consistent with the corresponding
business
contract and other supporting materials. After review and approval, the Lender will pay the loan funds to the Borrower’s
trading counterparty through the
Borrower’s account.
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3. When the Borrower applies
to the Lender for external payment of loan funds, he shall submit supporting documents that meet the Lender’s
requirements, including
but not limited to:
(1) Documents proving that the purpose
of payment is in accordance with the purpose agreed in this Contract;
(2) Business contracts
and written documents that truly reflect the Borrower’s payment obligations. For fees that must be paid without signing a contract,
the charging policy and standards approved by the competent authority should be provided;
(3) If the corresponding
invoice or receipt is not available at the time of payment, the Borrower shall promptly submit the corresponding invoice or
receipt after
the payment is completed;
(4) Legal and valid payment voucher;
(5) Other documents required by the
Lender.
The Lender has the
right to waive one or more of the above-mentioned certification documents, without affecting any rights of the Lender under this
Contract.
4. If a special
account for working capital loan is not opened, the Borrower shall submit a withdrawal application (see Appendix 1 of this Contract for
the format) to the Lender three (3) banking days before the intended withdrawal date, and at the same time propose whether to adopt the
Lender’s entrusted
payment method or the Borrower’s independent payment method. The Borrower confirms that the Lender has
the right to review whether the Borrower’s
relevant information meets the payment conditions stipulated in this Contract and has
the right to decide on the payment method of the corresponding loan.
In case of opening
a special account for working capital loan and adopting the method of entrusted payment by the Lender, the Borrower shall submit to
the
Lender a payment application (format as shown in Appendix 3 of this Contract) with the reserved seal of the Borrower for the special account
for
working capital loan three (3) banking business days before the payment date. The Lender shall have the right to review whether the
relevant information of
the Borrower meets the payment conditions stipulated in this Contract. If the Lender approves the review, the
payment voucher shall be stamped with the
special seal for loan fund payment supervision and then the payment shall be made. In case of
adopting the method of independent payment by the Borrower,
the Borrower shall submit to the Lender a payment application (format as shown
in Appendix 3 of this contract) and relevant information three (3) banking
business days in advance. The Lender shall have the right to
review whether the relevant information submitted by the Borrower meets the conditions
stipulated in this contract. If the Lender approves
the application, the Borrower shall fill in the payment voucher (the amount of each summary payment
voucher shall not exceed the amount
entrusted by the Lender stipulated in this Contract). After review, the Lender shall stamp the special seal for loan fund
payment supervision
on the summary payment voucher and transfer the corresponding funds to the general settlement account of the Borrower.
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5. If the Borrower adopts the
self-payment method, the Borrower shall regularly report to the Lender on the self-payment of the loan funds on a monthly
basis. The Lender
has the right to verify whether the Borrower’s loan payment complies with the agreed purpose and payment method through account
analysis, voucher inspection, on-site investigation, etc.
6. The Borrower confirms that
he shall pay the Lender the remittance fee incurred in the payment of loan funds. When the remittance fee is incurred, the
Lender has
the right to directly deduct the actual amount.
7. During the process of loan
issuance and payment, if the Borrower encounters any of the following circumstances, the Lender has the right to require
the Borrower
to supplement the withdrawal conditions and payment conditions, or change the loan payment method, or stop the issuance and payment of
loan funds:
(1) Credit status declines;
(2) The profitability of the
main business is not strong;
(3) There are abnormalities
in the use of loan funds.
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Article 6 Repayment
1. The Borrower shall repay
the principal, interest and related expenses of the loan in a timely and full manner in accordance with the repayment plan
agreed upon
in this Contract. The Borrower hereby irrevocably authorizes the Lender to deduct the aforementioned amount from the Borrower’s
account
opened with the Lender on the due date of the loan or when the conditions agreed upon in this Contract are met to repay the Lender’s
debt.
If the Borrower repays the
loan in advance, he shall submit a written application to the Lender and obtain the Lender’s written consent before the tenth
(10th)
banking day before the expected repayment date. If the Lender’s prior written consent is not obtained, the Borrower shall still
repay the principal and
interest in accordance with the term and interest rate agreed in the Contract.
Early repayment agreed
by the Lender shall be deemed as the early maturity of the loan. In this case, the Lender also has the right to require the
Borrower
to pay a certain amount of liquidated damages as agreed in this Contract (see Part I of this Contract).
The interest on early repayment
shall be calculated based on the actual number of days the Borrower has used the funds, and shall be repaid together
with the principal;
the amount of the principal repaid in advance shall not be less than the limit agreed in Part I of this Contract; the repaid principal
shall be
deducted from the principal of the loan in the reverse order of the repayment plan agreed in this Contract.
3. If the Borrower is unable
to repay the loan on time due to legitimate reasons, he shall apply to the Lender for loan extension before the 30th banking
business
day of the repayment period agreed in this Contract, and prepare necessary materials to go through the relevant extension procedures.
If the loan
under this Contract is guaranteed by guarantee, mortgage or pledge, the guarantor, mortgagor and pledgor shall also provide
a written consent certificate.
Whether to agree to the extension is decided by the Lender. If the Borrower does not apply for an extension
or the application for extension is not approved
by the Lender, the loan will be transferred to the overdue loan from the day after the
due date.
4. The Borrower shall not
re-draw any loan funds that have been repaid.
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Article 7 Representations and Warranties
The Borrower makes
the following representations and warranties to the Lender, which are made upon the signing of this Contract and shall remain valid
during
the validity period of this Contract.
1. The Borrower is
an enterprise (institution) legal person or other economic organization established in accordance with the applicable laws, with
independent
legal personality, complete financial system and repayment capacity, and has the right to enter into and perform this Contract in accordance
with
the law.
2. The Borrower has
the right to sign this Contract and has completed all authorizations and approvals from the shareholders’ meeting, board of directors
or other authorized institutions required to sign this Contract and perform its obligations under this Contract. All clauses of this Contract
are the Borrower’s
true intention and are legally binding on the Borrower.
3. The signing and performance
of this Contract shall not violate the laws that the Borrower shall comply with (the laws under this Contract include the
laws, regulations,
rules, local regulations, judicial interpretations, etc. that the Borrower shall comply with, the same below), the relevant documents,
judgments and rulings of the competent authorities, nor conflict with the Borrower’s Articles of Association or any contract, agreement
signed or any other
obligations undertaken by the Borrower.
4. The Borrower guarantees
that all financial statements (if any) issued by him comply with the provisions of applicable laws and that the statements
truly, completely
and fairly reflect the financial status of the Borrower.
5. The Borrower shall abide
by the principle of honesty and trustworthiness in the process of signing and performing this Contract, and all the materials,
documents
and information (including but not limited to business license, project approval documents, feasibility study report, proof of self-raised
funds,
financial statements, etc.) provided by the Borrower to the Lender, including itself and the guarantor, shall be true, valid, accurate
and complete without any
concealment or omission.
6. The Borrower guarantees
that the filing, registration or other formalities required for the validity and legal performance of this Contract have been
completed.
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7. There have been no significant
adverse changes in the operating and financial conditions of the Borrower since the issuance of the most recent audited
financial statements.
8. Strictly abide by the
law in business activities, carry out various businesses in strict accordance with the provisions of the Borrower’s business license
or the business scope approved by law, complete the registration and annual inspection procedures on time, produce and operate legally
and in compliance
with regulations, have the ability to continue to operate, and have a legal source of repayment.
9. Do not give up any matured
claims, and do not dispose of existing major assets without compensation or in other inappropriate ways.
10. The Borrower has disclosed
to the Lender the facts and conditions that he knows or should know and which are important for the Lender to decide
whether to grant
the loan under this Contract (including but not limited to operating conditions, financial conditions, external guarantees, etc.).
11. The Borrower guarantees
that his credit status is good and has no major bad records.
12. The Borrower warrants
that there are no other circumstances or events that have or may have a significant adverse impact on the Borrower’s ability
to
perform.
Article 8 Agreement
The Borrower and
the Lender agree as follows:
1. The Borrower guarantees
to operate in accordance with the law and use the loan for the purpose agreed in this Contract and not to use it for other
purposes. The
Borrower shall provide various financial and accounting materials including monthly and annual reports regularly according to the
requirements
of the Lender, and actively cooperate with the Lender to supervise the use of the loan and the Borrower’s business. The Lender may
check and
supervise the use of the loan at any time in various ways.
2. The Borrower shall repay
the principal and interest of the loan under this Contract in accordance with the time, amount, currency and interest rate
specified in
this Contract, the Application Form and the Debit (Loan) Certificate.
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3. The Borrower guarantees
that if any event occurs or is about to occur that is likely to have a significant adverse impact on the financial status of the
Guarantor
or its ability to perform its guarantee obligations, the Borrower will promptly provide new guarantees approved by the Lender.
4. The Borrower promises that
he will not take the following actions without the written consent of the Lender:
(1) Transfer (including by
sale, donation, debt repayment, exchange, etc.), mortgage, pledge or other disposal of all or most of its major assets;
(2) Contracting,
joint venture, major foreign investment, change in actual controller or major shareholder, shareholding system reform, merger
(acquisition),
joint venture (cooperation), division, equity transfer, substantial increase in debt financing, establishment of subsidiaries, property
transfer,
capital reduction, suspension of business, dissolution, application for bankruptcy, reorganization or cancellation, and other
actions that may affect the
Borrower’s repayment ability;
(3) Provide a guarantee
to a third party that is sufficient to have a significant adverse effect on its financial condition or its ability to perform its
obligations
under this Contract;
(4) Prepayment of
other long-term debts in advance may have a significant adverse impact on the Borrower’s ability to perform its obligations under
this
Contract;
(5) Signing any contract/agreement
that has a significant adverse effect on the Borrower’s ability to perform its obligations under this Contract or
assuming any relevant
obligation that has such an effect.
5. The Borrower undertakes
that, if the following events occur, the Borrower will immediately notify the Lender on the date of the event and deliver the
original
relevant notice to the Lender (with official seal) within five (5) banking days from the date of the event:
(1) The occurrence of an event
causes the representations and warranties made by the Borrower in this Contract to become untrue, inaccurate or invalid.
(2) The Borrower or its controlling
shareholder, actual controller or its affiliates are involved in litigation or arbitration, or their assets are seized, sealed,
frozen,
enforced or other measures with similar effect are taken against them, or their legal representative/person in charge is involved in litigation,
arbitration or other compulsory measures;
(3) The legal representative
or his authorized agent, person in charge, principal financial officer, correspondence address, company name, office location,
etc. of
the Borrower are changed;
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(4) The company is applied
for reorganization or bankruptcy by other creditors or is revoked by the superior authority;
(5) Any other significant adverse
event that may affect the Borrower’s ability to repay its debts occurs.
6. The Borrower guarantees
that he will not repay other loans in priority in violation of the normal repayment order, and will not sign any contract or
agreement
that will make the loans under this Contract subordinate now or in the future.
7. The Borrower shall
repay and pay the principal and interest of the loan under this Contract in the same currency as far as possible. If the Borrower
repays
the debt in different currencies, the Borrower shall, by himself or by authorizing the Lender, convert the different currencies into the
loan currency
under this Contract in accordance with the “Deduction Agreement” of this Contract to repay the principal and
interest owed, and the expenses incurred shall
be borne by the Borrower. When the Guarantor repays the debt on behalf of the Borrower
in different currencies, the “Deduction Agreement” of the
Guarantee Contract shall be followed, and the expenses incurred
shall be borne by the Borrower.
8. When the guarantee under
this Contract encounters specific circumstances or specific changes, the Borrower shall provide other guarantees approved
by the Lender
in a timely manner in accordance with the Lender’s requirements. Such specific circumstances or specific changes include but are
not limited
to the guarantor’s suspension of production, suspension of business, dissolution, suspension of business for rectification,
revocation or cancellation of
business license, application for or application for reorganization, bankruptcy, major changes in business
or financial status, involvement in major litigation
or arbitration cases, involvement of legal representatives, directors, supervisors,
and major operating and management personnel, reduction or possible
reduction in the value of the collateral, or property preservation
measures such as seizure, breach of contract under the guarantee contract, and request for
termination of the guarantee contract.
9. The Lender has the right
to conduct on-site or off-site due diligence on the Borrower and conduct post-loan inspections on the Borrower’s operating
conditions,
financial conditions, external guarantees, use of loan funds, repayment conditions, etc. The Borrower has the obligation to actively cooperate
with
the Lender in loan payment management, post-loan management and related inspections.
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10. The Lender has the right
to recover the loan funds under this Contract in advance according to the Borrower’s fund withdrawn situation.
11. Special provisions regarding
group customers (applicable to group customers).
If the Borrower of this Contract
is a group customer, the Borrower hereby promises:
(1) The Borrower shall promptly
report any related-party transactions involving more than 10% of the net assets of the actual trustee, including: ① the
relationship
between the parties to the transaction; ② the transaction items and nature of the transaction; ③ the transaction amount or
the corresponding
proportion; ④ the pricing policy (including transactions with no amount or only a symbolic amount).
(2) If the actual creditee
has any of the following circumstances, it shall be deemed that the Borrower has breached the contract under this Contract, and
the Lender
shall have the right to unilaterally decide to cancel the credit that the customer has not used, and to recover part or all of the credit
that has been
used or require the customer to add a margin to 100%: ① Providing false materials or concealing important operating
and financial facts; ② Changing the
original purpose of the credit without the consent of the Lender, misappropriating the credit
or using the bank credit for illegal or irregular transactions; ③
Using false contracts with related parties to discount or pledge
bills receivable, accounts receivable and other debts without actual trade background to the
bank to obtain bank funds or credit; ④
Refusing to accept the Lender’s supervision and inspection of its use of credit funds and related operating and
financial activities;
⑤ There are significant mergers, acquisitions, reorganizations, etc., which the Lender believes may affect the safety of the credit;
⑥
Intentionally evading bank debts through related transactions.
12. Special guarantees,
commitments and agreements on Green Credit (applicable to borrowers whose construction, production and operation
activities
of nuclear power plants, large hydropower plants, water conservancy projects, resource mining projects, etc. are likely to
seriously change the original state
of the environment and the adverse environmental and social consequences are difficult to eliminate,
and borrowers whose construction, production and
operation activities of petroleum processing, coking and nuclear fuel processing, chemical
raw materials and chemical product manufacturing, etc. will
produce adverse environmental and social consequences but are easier to eliminate
through mitigation measures):
(1) The Borrower undertakes
to submit an environmental, social and governance risk report to the Lender and declares and guarantees
to strengthen
environmental, social and governance risk management, including: ① The internal
management documents related to environmental, social and governance
risks comply with the requirements of laws and regulations and are
effectively implemented; ② There are no major litigation cases involving environmental,
social
and governance risks;
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(2) The Borrower commits
to accept the Lender’s supervision and strengthen the management of environmental, social and governance risks, including:
①
Committing to comply with the regulations in all its behaviors and performances related to environmental,
social and governance risks; ② Committing to
establish and improve the internal management
system for environmental, social and governance risks, and specify in detail the responsibilities, obligations
and penalties of the Borrower’s
relevant responsible persons; ③ Committing to establish and improve the emergency response
mechanism and measures for
environmental, social and governance risk emergencies; ④ Committing to set up a special department
and/or designate special personnel to be responsible
for environmental, social and governance risk matters; ⑤ Committing to cooperate
with the Lender or a third party recognized by him in assessing and
inspecting the Borrower’s environmental, social and governance
risks; ⑥ Committing to give appropriate responses or take other necessary actions in the
face of strong doubts from the public or
other stakeholders on the Borrower’s performance in controlling environmental, social and governance risks; ⑦
Committing to
urge the Borrower’s key related parties to strengthen management to prevent the transmission of environmental, social and governance
risks
of related parties to the Borrower; ⑧ Committing to perform other matters that the Lender considers relevant to the control
of environmental, social and
governance risks;
(3) The Borrower undertakes
to inform the Lender in a timely and adequate manner when the following situations occur: ① All kinds of permits,
approvals and
ratifications related to environmental, social and governance risks during the commencement, construction, operation and closure of the
project; ② The assessment and inspection of the environmental, social and governance risks of the Borrower by the environmental,
social and governance
risk regulatory agency or its recognized agency; ③ The supporting construction and operation of environmental
facilities; ④ The emission and compliance of
pollutants; ⑤ The safety and health of employees; ⑥ Major complaints and
protests against the Borrower by neighboring communities; ⑦ Major
environmental and social claims; ⑧ Other major situations
that the Lender considers to be related to environmental, social and governance risks;
(4) If the Borrower and the
Actual Trustee have any of the following circumstances, it shall be deemed that the Borrower has defaulted under this
Contract: ①
The Borrower’s statements, warranties and commitments on environmental, social and governance risk management have not been
conscientiously
performed; ② The Borrower is punished by relevant government departments for poor environmental, social and governance risk
management;
③ The Borrower is strongly questioned by the public and/or the media for poor environmental, social and governance risk management;
④
Other defaults on environmental, social and governance risk management agreed upon by the Lender and the Borrower, including cross-default
events;
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If the Borrower
defaults as mentioned above, the Lender has the right to unilaterally decide: ① to cancel the credit commitment that has been made;
②
to suspend the disbursement of the loan until the Borrower has taken rescue measures that are satisfactory to the Lender; ③
to recover the disbursed loan in
advance; ④ to exercise the relevant mortgage rights and other penalty measures in advance when
the loan cannot be repaid; ⑤ other penalty measures agreed
upon by the Lender and the Borrower.
13. The Borrower
promises not to increase the local government’s implicit debt in violation of regulations, otherwise the Lender has the right to
immediately suspend/terminate the Borrower’s withdrawal and declare that part or all of the issued loans are due in advance. At
the same time, the Lender
has the right to report the relevant situation to the relevant regulatory authorities.
14. Anti-Money Laundering Agreement The
Borrower confirms and agrees that the Lender has the right to conduct money laundering risk assessment
on the transactions involved in
this Contract in accordance with the applicable anti-money laundering laws and regulations and internal management
requirements. If the
Borrower violates the Lender’s anti-money laundering management regulations, or the Lender has reasonable grounds to suspect that
the
Borrower and/or the transactions under this Contract are suspected of participating in money laundering, sanctions, terrorist financing
or financing activities
for the proliferation of weapons of mass destruction, export control, or tax evasion and other illegal and irregular
activities recognized by the United Nations
Security Council, the Financial Action Task Force on Money Laundering, China, the United States,
the European Union, the United Kingdom, Singapore and
other international organizations or countries, the Lender has the right to take
necessary control measures in accordance with the anti-money laundering
supervision regulations and internal management regulations of
the People’s Bank of China. At the same time, the Lender has the right to directly restrict or
suspend all or part of the business
under this Contract without notifying the Borrower, declare the loan to be due in advance, terminate this Contract, and
shall not bear
any responsibility, and shall have the right to require the Borrower to bear all losses caused to the Lender.
15.
The
Borrower
agrees
and
irrevocably
authorizes:
The
Lender
has
the
right
to
provide
the
information
of
all
contracts/agreements/commitments
signed between the Borrower and the Lender, including relevant information on the performance of all the
above
contracts/agreements/commitments, and the basic information of the enterprise and other information provided by the Borrower, to the
Financial Credit Information Basic Database established by the State, in accordance with the provisions of the Credit Reporting
Industry
Management Regulations and other credit-related laws and regulations and the requirements of regulatory provisions, as well
as the collection
requirements of the Financial Credit Information Basic Database established by the State, for the inquiry and use
by qualified units; at the same
time, the Lender also has the right to inquire and use the credit information of the Borrower that
has been entered into the Financial Credit
Information Basic Database established by the State. This authorization covers all
aspects of the Lender’s necessary business management of the
business under this Contract before and after the signing of this
Contract, and its validity period shall expire with the actual termination of this
Contract.
16. The Borrower hereby confirms
that he has fully understood and is aware of the Lender’s position that he opposes his employees taking advantage of
their positions
to seek any form of benefits, and promises to avoid such situations in accordance with the principles of integrity and fairness, and not
to
privately provide any form of kickbacks, gifts, securities, valuables, various rewards, personal expense compensation, private travel,
high-consumption
entertainment and other improper benefits to the Lender’s employees.
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Article 9 Deduction Agreement
1. The Borrower agrees
that when any debt related to the loan under this Contract becomes due and payable, the Lender has the right to
directly deduct the funds
in the repayment reserve account opened by the Borrower with Shanghai Pudong Development Bank Co., Ltd. to repay
the due and payable debt.
If the funds in the repayment reserve account are insufficient to repay the debt, the Lender has the right to deduct the
funds from any
other account opened by the Borrower with any branch of Shanghai Pudong Development Bank Co., Ltd.
2. The Lender has the
right to choose to use the proceeds to repay the loan principal, interest or other expenses. If there are multiple claims that
are due
and unpaid at the same time, the Lender shall decide the order of repayment of the claims.
3. If the currency of the deducted
funds is inconsistent with the currency to be repaid, the following procedures shall me applied:
(1) If the loan currency
is RMB, the principal and interest of the loan shall be repaid after the amount is converted into RMB at the applicable buying
rate for
the deduction currency published by the Lender at the time of deduction.
(2) If the loan currency
is not RMB and the deduction currency is RMB, the principal and interest of the loan shall be repaid directly by deducting the
applicable
selling price of the loan currency and RMB published by the Lender at that time and converting it into the loan currency.
(3) If both the loan
currency and the deduction currency are not RMB and they’re not the same, the loan principal and interest shall be repaid after
the
foreign exchange settlement is completed at the buying rate of the currency of the deduction and RMB announced by the Lender at the
time of deduction and
then the foreign exchange settlement is completed at the selling rate of the currency of the loan and RMB announced
by the Lender on the same day and then
the loan principal and interest shall be repaid.
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Article 10 Proof of Debt
The Lender shall, in accordance
with his usual business practices, maintain accounting records related to the business activities involved in this Contract
in its accounting
books to prove the Lender’s loan amount. The Borrower’s valid evidence of the loan claim under this Contract shall be the
accounting
vouchers or other valid supporting materials issued and recorded by the Lender in accordance with its own business regulations.
Article 11 Agreed Delivery Address
1. The Lender confirms that
the address listed on the first page of this Contract is his valid delivery address. Any notice delivered directly or by mail to
the Lender
by the Borrower under this Contract shall be sent to the address listed on the first page of this Contract until the Lender announces
a change in the
address. The Borrower agrees that all notices sent by him to the Lender shall be deemed delivered when the Lender actually
receives them.
2. The Borrower confirms
that the address and fax, e-mail and other delivery information listed on the first page of this Contract are his valid
mailing or electronic
delivery addresses. All kinds of notices and other documents under this Contract during non-litigation, as well as letters,
summonses,
notices and other legal documents issued to him during any litigation (including any litigation procedures and enforcement procedures
such as first instance, second instance and retrial) arising from this Contract, shall be deemed to have been delivered as long as they
are sent to the
mailing or electronic delivery address listed on the first page of this Contract by mail or by electronic delivery such
as fax, e-mail, etc. The specific
delivery date shall be subject to the provisions on delivery date in the Civil Procedure Law. The change
of the above-mentioned mailing or electronic
delivery address shall not be legally effective unless the Lender is notified in advance,
and the delivery address confirmed in this Contract shall still
be deemed to be the valid delivery address.
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Working Capital Loan Contract
Article 12 Breach of Contract and Its Handling
1. Breach of Contract
Any of the following circumstances
shall constitute the breach of contract by the Borrower against the Lender:
(1) Any representation
or warranty made by the Borrower in this Contract or in any notice, authorization, approval, consent, certificate or other
document made
pursuant to or in connection with this Contract is incorrect or misleading at the time of making, or has been proved to be incorrect or
misleading, or has been proved to be invalid or revoked or has no legal effect.
(2) The Borrower
has breached any of the provisions of “Other Matters Agreed by the Parties ” (if any) in Part I of this Contract or any of
the matters
agreed in Article 8 of Part II.
(3) The Borrower
has a major cross-default event, including but not limited to the Borrower’s breach of any other loan contract or agreement signed
by
him; or the Borrower’s failure to pay debts under other loan contracts or agreements signed by him when due.
(4) The Borrower’s investors
withdraw funds, transfer assets, or transfer equity without authorization.
(5) The Guarantor
no longer has or will no longer have the ability to provide a guarantee corresponding to the loan, or violates the guarantee document
signed by him.
(6) The Borrower
ceases operations, stops production, closes down, suspends business for rectification, reorganization, liquidates, is taken over or placed
under trusteeship, is dissolved, has his business license revoked or cancelled, or goes bankrupt.
(7) The financial
condition of the Borrower or Guarantor deteriorates, the operation encounters serious difficulties, or an event or situation occurs that
has an adverse impact on his normal operation, financial condition or debt repayment ability.
(8) The Borrower
or his controlling shareholder, actual controller or his affiliates are involved in major litigation or arbitration or their major assets
are
seized, confiscated, frozen, enforced or other measures with similar effect are taken against them, or their legal representatives/persons
in charge, directors,
supervisors or senior management are involved in litigation, arbitration or other compulsory measures, which have
an adverse impact on the Borrower’s debt
repayment ability.
(9) Failure to repay the principal
and interest on time or failure to use the loan for the agreed purpose.
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Working Capital Loan Contract
(10) Failure to pay the loan funds
in accordance with the agreed method.
(11) The documents and information
submitted for loan application are false or incorrect.
(12) Failure to comply with or exceeding
the relevant financial indicator constraints agreed upon in this Contract.
(13) Within three
(3) days before any principal and interest payment date under this Contract, the balance of funds in the Repayment Reserve Account is
lower than the principal and interest payment due by the Borrower for that period.
(14) There are abnormalities in the
flow of funds within the general settlement account/fund withdrawal account.
(15) The Borrower
is suspected of participating in illegal activities such as money laundering, sanctions, terrorist financing or financing of the
proliferation
of weapons of mass destruction, export controls, tax evasion, etc.
(16) The Borrower illegally increases
the hidden debt of the local government.
(17) The Borrower
commits any other act in violation of this Contract that is sufficient to hinder the normal performance of this Contract, or any other
act that is prejudicial to the legitimate interests of the Lender.
2. Breach Handling
(1) If one or more
of the default circumstances listed in the preceding paragraph occur, the Lender may, at its discretion, take one or more of the
following
measures:
① Require
the Borrower to make corrections within a specified period of time.
② Cancel
the Borrower’s unused loans and stop issuing and paying the Borrower’s unused loans.
③ Declare
that all or part of the principal of the loan under this Contract is due in advance immediately, and require the immediate repayment of
part or all of the loan, settlement of the outstanding interest, and immediate pursuit of the Guarantor or Borrower through various forms.
④ Penalty
interest and compound interest will be charged on overdue loans and misappropriated loans.
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Working Capital Loan Contract
⑤ Deduct
the funds from any account opened by the Borrower in any branch of Shanghai Pudong Development Bank Co., Ltd.
⑥ Require
the Borrower to supplement the loan issuance and payment conditions, or change the loan payment method.
⑦ Require
the Borrower to provide other guarantees approved by the Lender.
⑧ Other
necessary measures prescribed by law.
(2) In addition to
the above measures, the Lender may also require the Borrower to bear the liability for breach of contract and require the Borrower to
pay liquidated damages (the calculation method of liquidated damages is shown in Part I of this Contract). If the liquidated damages are
not sufficient to
compensate the losses suffered by the Lender, the Borrower shall compensate the Lender for all losses suffered thereby.
(3) If the Borrower
fails to repay the principal and interest in full and on time, it shall also bear all expenses paid by the Lender in realizing the creditor’s
rights and security rights, including but not limited to collection expenses, litigation costs, attorney fees, travel expenses and various
other payable expenses.
Article 13 Effectiveness, Change and Termination
1. This Contract shall come
into force after being signed (or sealed) by the legal representative of the Borrower or his/her authorized agent and affixed
with the
official seal, and after being signed (or sealed) by the legal representative (person in charge) of the Lender or his/her authorized agent
and affixed
with the official seal (or special seal for the Contract), and shall terminate after all the debts under this Contract are
paid off.
2. After this contract comes
into effect, neither party shall unilaterally change or terminate this Contract in advance. If this Contract needs to be changed
or terminated,
it shall be negotiated and agreed upon in writing by both parties.
Article 14 Other Terms
1. Definition
(1) The term “all
the debts” under this Contract refers to the principal, interest, liquidated damages and all other expenses incurred in realizing
the debts.
(2) The term “interest”
under this Contract includes interest, penalty interest and compound interest.
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(3) The term “banking
day” under this Contract refers to the day on which the Lender is normally open for business for public business at the Lender’s
domicile, excluding Saturdays, Sundays (except those closed due to holiday adjustments) or other statutory holidays.
2. Applicable Law
This Contract shall be governed
by and interpreted in accordance with the laws of the People’s Republic of China (excluding the laws of the Hong Kong
Special Administrative
Region, the Macao Special Administrative Region and Taiwan for the purpose of this Contract).
3. Dispute Resolution
All disputes concerning this
Contract shall be settled through friendly negotiation. If no agreement is reached through negotiation, the parties shall file a
lawsuit
with the People’s Court at the place of residence of the Lender. During the dispute period, the parties shall continue to perform
the clauses not
involved in the dispute.
4. Miscellaneous
(1) If there are
any matters not covered in this Contract that need to be supplemented, the parties may agree on them and record them in Part I of this
Contract, or they may reach a separate written agreement as an annex to this Contract. The annex to this Contract (see Part I of this
Contract) is an integral
part of this Contract and has the same legal effect as the main body of this Contract.
(2) During the validity
period of this Contract, any forbearance or delay in taking action against any breach of contract or other behavior of the Borrower
by
the Lender shall not prejudice, affect or restrict any rights or interests that the Lender shall enjoy as a creditor under the law or
this Contract, nor shall it be
regarded as the Lender’s approval of the Borrower’s breach of this Contract, nor shall it be
regarded as the Lender’s waiver of the right to take action against
the Borrower’s existing or future breach of contract.
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(3) The invalidity
of any clause of this Contract shall not affect the validity of the other clauses of this Contract. If this Contract becomes invalid for
any
reason, the Borrower shall still be responsible for repaying all debts owed to the Lender under this Contract. If the above situation
occurs, the Lender shall
have the right to terminate the execution of this Contract immediately and may immediately recover all debts
owed by the Borrower under this Contract from
the Borrower.
(4) The Lender may
transfer all or part of his rights and/or obligations under this Contract, and in such case, the transferee shall enjoy and/or bear the
same rights and/or obligations to the Borrower as he would have if he were a party to this Contract. The Borrower shall bear the liabilities
to the transferee in
accordance with the provisions of this Contract after receiving the Lender’s notice of the transfer of the
debts.
(5) Unless otherwise
specified in this Contract, the relevant terms and expressions in the Annex to this Contract shall have the same meaning as in this
Contract.
(6) The headings under this Contract
are for reference only and shall not be construed as the basis for the contents under such headings.
(REMINDER OF PAGE INTENTIONALLY
LEFT BLANK)
(SIGNATURE PAGE TO FOLLOW)
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Working Capital Loan Contract
This Contract has
been signed between the Borrower and the Lender on ________________ (date, month, year). The Borrower hereby confirms
that, when
signing this Contract, both parties have explained and discussed all the terms in detail, and both parties have no doubts about all
the
terms of the Contract and have an accurate understanding of the legal meaning of the rights and obligations of the parties and
the limitation or
exemption of liability.
Borrower (official seal)
Lender (official seal or contract-specific seal)
Legal Representative or Authorized Agent (signature or seal)
Legal Representative/Person in Charge or Authorized Agent (signature
or seal)
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Exhibit 10.20
Important Notes.
Dear customer, in order
to safeguard your rights and interests, please read this agreement in its entirety, especially the bolded and
highlighted clauses, carefully
before signing it. If you have any doubts, please ask us to clarify them promptly. If you are still in doubt or unsure
of anything, please
consult your lawyer and relevant professionals.
Credit Agreement
(applicable in the case of working capital loans
where no separate loan contract is required)
NO. 121XY240709T000157
Grantor: China Merchants Bank Co. LTD Shanghai
branch (hereinafter referred to as Party A)
Credit Applicant: JAJI (Shanghai) Co.,
Ltd. (hereinafter referred to as Party B)
Upon Party B’s application, Party A
agrees to provide a credit line to Party B for your use. Now Party A and Party B agree on the following terms in
accordance with the relevant
legal provisions and after full consultation, and hereby enter into this agreement.
1. Credit limit
1.1 Under this Agreement,
we shall provide you with a credit line (including revolving line and/or one-off line) in the amount of RMB 10 million .Party
B
may apply for specific business in other currencies within the credit line.
Party A (or Party
A’s subsidiary) and Party B originally entered into a《Credit Agreement》
with the number 121XY2023010596 (applicable to working
capital loans that do not require a separate loan contract) (insert the name of
the agreement here), it will automatically be included under this agreement and
will directly occupy the credit line under this agreement.
1.2 The credit period
shall be for a period of 12 months, from 2024.7.11 to 2025.7.10. If Party B needs to use the credit line for specific
credit
business, it shall submit an application to Party A for the use of the credit line within such period. Party A shall not accept
any application for the
use of the credit line submitted by Party B beyond the expiry date of the credit line period, except as otherwise
provided in this Agreement.
1.3 The types of credit business
granted under the credit line include but are not limited to one or more credit businesses such as loans/order loans, trade
finance, bill
discounting, commercial bill acceptance, commercial bill acceptance/bonding, international/domestic letters of guarantee, customs duty
payment
guarantee, corporate account overdraft, derivative transactions, gold leasing, etc.
“Trade Finance”
includes, but is not limited to, international/domestic letters of credit, import charge, lading guarantee, import collection charge,
packaged release, export charge, export negotiation, export collection charge, import/export remittance financing, credit guarantee financing,
factoring, bill
factoring and other business types.
1.4 Revolving Credit
Limit means the maximum amount of the sum of the principal balance of one or more credit facilities referred to in the preceding
paragraph
that we may provide to you on a continuous and revolving basis during the credit period.
The one-off line of credit
refers to the cumulative amount of each type of credit business provided by Party A for Party B during the credit period shall
not exceed
the amount of the one-off line of credit approved by Party A. Party B shall not recycle the one-off credit line, and the corresponding
amount of
multiple credit operations applied for by Party B shall occupy the one-off credit line amount until the accumulated amount is
full.
2. credit line occupancy
arrangements
2.1 Specific credit
operations applied for by you and approved by us during the credit period are automatically included in this Agreement and will be
covered
by the credit limit under this Agreement.
2.2 If Party A applies for
factoring business in which Party B is the payer (debtor of the receivables), the credit line mentioned above shall be
used for the receivables
claims assigned to Party B by Party A from a third party in such business; if Party B applies to Party A for factoring business
in
which Party B is the payee (creditor of the receivables), the credit line mentioned above shall be used for the purchase of the receivables
claims held by
Party B paid by Party A to Party B with its own funds or funds from other legal sources. The acquisition amount (off-take
payment) of the receivable claims
held by Party B will occupy the above credit line.
2.3 If Party A, according to
its internal process, entrusts other branches of China Merchants Bank to reopen a letter of credit to the beneficiary after the
letter
of credit has been issued, the letter of credit and the guarantee business of charge and delivery under it will occupy the above credit
line.
When classifying an import
opening business, if an import charge actually occurs subsequently under the same letter of credit, the import opening and
the import
charge will occupy the same line of credit at different stages. In other words, when an import charge is made, the amount recovered after
the letter
of credit is paid out is then used for the import charge and is deemed to be the same amount used for the original import opening.
3. Approval and use of
credit lines
3.1 The type of credit
line (revolving line or one-off line) and the applicable credit business types under this Agreement, the amount of credit
line corresponding
to each credit business type, whether the credit line can be transferred between credit business types and the specific conditions
of
use are subject to Party A’s approval and consent. If, during the credit period, Party A makes any adjustment to the original Party A’s
approval
opinion upon Party B’s application, the subsequent approval opinion issued by Party A shall constitute a supplement and change
to the original
approval opinion, and so on.
2
3.2 Party B must apply
for the use of the credit line on a case-by-case basis and submit the materials required by Party A, which will be
approved and agreed
by Party A on a case-by-case basis. Party A has the right to consider whether or not to agree in conjunction with its internal
management
requirements and Party B’s business situation, and has the right to unilaterally reject Party B’s application for the use of the credit
line without incurring any form of legal liability to Party B. In the event of any inconsistency between this paragraph and other relevant
agreements
in this Agreement, this paragraph shall prevail.
3.3 When specific
credit operations are classified after Party A’s approval and consent, the specific business text (including but not limited to individual
agreement/application, framework agreement or specific business contract, etc.) signed by Party A and Party B in respect of the specific
credit operations
shall form an integral part of the Credit Agreement. The specific amount, interest rate, term, purpose, fees and
other business elements of each loan or
other credit business are determined by the specific business text, the business documents confirmed
by us (including but not limited to the
withdrawal application, loan debit note (if any), etc.) and the business records in our system.
Unless otherwise agreed in the specific business text,
the business documents confirmed by us (including but not limited to borrowing
documents, etc.) and the business records in our system, the
interest rate under this Agreement shall be calculated using the simple interest
method.
If Party B applies for a working
capital loan within the credit line, there is no need for Party A and Party B to sign a separate Loan Contract on an
individual basis.
When Party B applies for a loan, it will submit its application for withdrawal on a case-by-case basis and Party A will approve it on
a case-
by-case basis.
3.4 We shall have the
right to adjust the benchmark interest rate or interest rate pricing method for loans/other credit facilities under this
Agreement from
time to time, taking into account changes in relevant national policies, domestic and international market conditions or our own
credit
policies. Such adjustment shall take effect upon notice by us to you (by way of announcement at our branches or the official website of
China
Merchants Bank, or by sending notice to any of the contact addresses/methods reserved by you in this Agreement); if you do not accept
the
adjustment, you may repay the loan early, otherwise you shall be deemed to have accepted the implementation of the notice. If the
relevant
financing business under this Agreement involves periodic repricing and the market benchmark interest rate is lower than 0 at
the time of repricing,
both parties agree to use 0 as the benchmark for calculating the interest rate pricing.
In the event of any inconsistency
between this clause and any other relevant agreement in this Agreement, the agreement in this clause shall
prevail.
3
3.5 Each loan or other credit
within the credit line shall be used for a specific period determined in accordance with Party B’s operational needs and
Party A’s business
management regulations, and the maturity date of each specific business may be later than the maturity date of the credit period (unless
otherwise required by Party A).
3.6 During the credit
period, we shall have the right to assess Party B’s operation and financial position on an annual basis and to adjust the
credit limit
available to Party B in the light of the assessment.
4. Interest rate terms for
working capital loans
4.1 The interest rate
of any loan under this Agreement shall be determined by Party B as specified in the corresponding drawdown application
and approved and
agreed by Party A. If the drawdown application is inconsistent with the loan note (if any) or our system records for that loan, the
loan
note (if any) or our system records shall prevail.
4.2 If Party B fails to
use the loan in accordance with this Agreement, a penalty interest rate of 100% will be charged on the original interest
rate from
the date of change of use for the portion of the loan not used for the agreed purpose. The original interest rate refers to the interest
rate
that was applicable before the change of use of the loan.
If Party B fails to repay
the loan on time, late interest (penalty interest) will be charged on the outstanding portion of the loan from the overdue
date at a rate
of 50% (the overdue loan interest rate) over the original interest rate. The original interest rate refers to the interest rate
applicable
until the loan maturity date (including early maturity date) (or in the case of a floating rate, the last floating period before
the loan maturity date
(including early maturity date)).
If the loan is both overdue
and not used for the contracted purpose, interest will accrue on the higher of the above provisions.
4.3 In the event that the People’s
Bank of China adjusts the regulations on loan interest rates during the term of the loan, the relevant regulations of the
People’s Bank
of China shall apply.
4.4 If the maturity date of
the loan falls on a holiday, the loan will automatically be postponed to the first working day after the holiday and the interest
will
be calculated according to the actual number of days the loan funds are occupied.
4.5 Interest shall be
paid by Party B on each interest accrual date and Party A may deduct the interest payable directly from any account of
Party B with China
Merchants Bank. If the last payment date of the principal amount of the loan is not an interest-bearing date, the last payment
date of
the principal amount of the loan shall be the interest payment date and the borrower shall pay all the interest payable corresponding
to the
principal amount of the loan on that date. If Party B fails to pay the interest on time, compound interest shall be calculated
on the unpaid interest
payable (including penalty interest) at the overdue loan rate as stipulated in this Article.
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5. Guarantee clause
5.1 All debts owed by Party
B to Party A under this Agreement shall be secured by a pledge of property or joint and several guarantee provided by Party
B or a third
party approved by Party A. Party B or the third party acting as guarantor shall issue or sign a separate copy of the guarantee as required
by Party
A.
5.2 If the guarantor fails
to sign the text of the guarantee and complete the guarantee formalities in accordance with the provisions of this Article
(including
if the debtor of the receivables defends the receivables before the pledge of the receivables), we shall have the right to refuse to provide
credit to
Party B.
5.3 In the event that the mortgagor
provides security for all debts owed by Party B to Party A under this Agreement, if Party B becomes aware that the
mortgaged property
has been or may be included in the government’s demolition or expropriation plan, it shall immediately inform Party A and urge the
mortgagor
to continue to provide security for Party B’s debts with the compensation provided by the demolishing party as agreed in the mortgage
contract
and complete the corresponding security procedures in a timely manner, or provide Party A with other safeguards as requested
by Party A. other security
measures that are acceptable to us.
6. Party B’s rights and obligations
6.1 Party B shall have the
following rights.
6.1.1 the right to require
us to provide a loan or other credit within the credit limit on the terms set out in this Agreement.
6.1.2 the right to use the
credit line as agreed in this Agreement.
6.1.3 the right to require
Party A to keep confidential the production, operations, property and accounts provided by Party B, except as otherwise
provided in this
Agreement.
6.1.4 The right to assign the
debt to a third party with our written consent.
6.2 Party B undertakes the
following obligations.
6.2.1 shall truthfully provide
the documents and information requested by Party A (including but not limited to its true financial books/statements and
annual financial
reports, major decisions and changes in production, operation and management, information on withdrawals/use of funds, information
relating
to collateral, etc.), as well as all account opening banks, account numbers and deposit and loan balances, and cooperate with Party A’s
investigation,
examination and inspection.
6.2.2 shall accept Party A’s
supervision of its use of credit funds and related production, operation and financial activities.
6.2.3 Loans and/or other credits
shall be used as agreed and/or committed to in this Agreement and in each specific operational text.
6.2.4 shall repay in full and
on time the principal, interest and fees on loans, advances and other credit obligations as agreed in this Agreement and each
specific
business text.
6.2.5 the assignment of all
or part of the obligations under this Agreement to a third party shall be subject to our written consent.
6.2.6 Party B shall immediately
notify Party A in the following circumstances and actively cooperate with Party A to implement measures to ensure the
safe repayment of
principal and interest of loans, advances and other credit debts and all related expenses under this Agreement.
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6.2.6.1 the occurrence of a
significant financial loss, loss of assets or other financial crisis.
6.2.6.2 loans or guarantees
for the benefit of third parties or for the protection of third parties against loss, or guarantees of credit (pledge) on
own property
(rights).
6.2.6.3 the occurrence
of winding up of business, revocation or cancellation of business licence, filing or being filed for bankruptcy, dissolution,
etc., or
changes in important corporate information, such as changes in corporate name, registered address, place of business, beneficial owner,
etc.;
or changes in the controlling shareholders/actual controllers of the borrower.
6.2.6.4 where its controlling
shareholder or other affiliated companies or the de facto controller has a major crisis in operation or finance which affects
its normal
operation, or where there is a change in personnel of the legal representative/main person in charge, director or important senior
management,
or where it is punished/restricted in personal freedom by the state authority for matters such as violation of law or discipline, or
where
it is missing for more than 7 days, which may affect its normal operation.
6.2.6.5 connected transactions
with its controlling shareholder or other affiliated company or beneficial owner amounting to 10% or more of
Party B’s net assets (Party
B’s notification should cover at least the connected relationship between the parties to the transaction, the nature of the
transaction
item and transaction, the amount or corresponding proportion of the transaction, pricing policy (including transactions with no amount
or only a nominal amount), etc.).
6.2.6.6 the occurrence of any
litigation, arbitration or criminal or administrative penalty that has a material adverse effect on its business or property
position.
6.2.6.7 Party B or
its de facto controller has a large amount of private usury; or has a bad record of borrowing new money, overdue or defaulting on
interest
payments in other financial institutions; or Party B’s affiliated enterprises have a broken internal capital chain and a debt crisis;
or Party B’s projects
are halted or suspended or major investment mistakes have occurred.
6.2.6.8 The occurrence of other
material events that may affect the solvency of Party B and or its controlling shareholders/actual controllers.
6.2.7 Not to neglect to
manage and pursue its claims as they fall due, or to dispose of existing major property without compensation and in other
inappropriate
ways.
6.2.8 Party B shall obtain
Party A’s written consent before undertaking major matters such as merger (amalgamation), demerger,
restructuring, joint venture (cooperation),
transfer of production (share) rights, shareholding reform, foreign investment, increase in debt financing,
etc.
6.2.9 In the case of pledge
of accounts receivable, Party B guarantees that the credit balance at any point during the credit period is less than 70% of the
pledged
accounts receivable balance, otherwise Party B must provide a new, Party A-approved accounts receivable for pledge or deposit a security
deposit
(the security deposit account number is automatically generated or recorded by Party A’s system at the time the security deposit
is made, the same below)
until the pledged accounts receivable balance x 70% + Effective margin > credit balance.
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6.2.10 In the event that the
balance in the margin account is less than 105% of the amount of the specific operation to which it relates due to exchange
rate
fluctuations, Party B shall be obliged to provide additional margin or other security in the corresponding amount as required by Party
A. In the event that
Party B provides a margin pledge, Party B shall be obliged to provide additional margin or other security in the
corresponding amount as required by Party A.
6.2.11 To ensure that the payment
for sales under import is recovered from the account designated by Party A; and to transfer the bills and/or documents
under the letter
of credit to Party A under export negotiation.
6.2.12 Party B shall ensure
that settlement, payment and other income and expenditure activities are mainly carried out in its bank settlement
account with Party
A. The share of settlement transactions in Party B’s designated account during the credit period shall be at least not less than the
share
of Party B’s financing with Party A in its financing with all banks.
7. Party A’s rights and obligations
7.1 We shall have the following
rights.
7.1.1 the right to require
you to repay the principal, interest and costs of loans, advances and other credit obligations under this Agreement and the
specific Contract
in full and on time.
7.1.2 the right to request
information from you in relation to the use of its credit facilities.
7.1.3 the right to be informed
of Party B’s production operations and financial activities.
7.1.4 the right to supervise
the use of loans and/or other credit facilities by Party B in accordance with the purposes agreed in this Agreement and each
specific
business text; the right to unilaterally and directly suspend or restrict the corporate internet banking / corporate APP / other online
functions of Party B’s account (including but not limited to closing the corporate internet banking / corporate APP / other online functions,
presetting the list of payment recipients / single payment limit / stage payment limit and other restrictions) and other electronic payment
channels,
restrict the sale of settlement vouchers, or restrict over-the-counter payments and transfers for your account, as well as the
payment and pass-
through functions of non-counter channels such as telephone banking and mobile banking.
7.1.5 has the right to entrust
other branches of China Merchants Bank located at the beneficiary’s location to re-open letters of credit to the beneficiary
after accepting
Party B’s application to open a letter of credit, as required by its internal processes.
7.1.6 the right to debit
directly from any of Party B’s accounts with China Merchants Bank for the repayment of debts owed by Party B under
this Agreement and
each specific business text (when the credit debt is not in RMB, the right to purchase foreign exchange or trade in foreign
currency directly
from any of Party B’s accounts at the exchange rate published by us at the time of debit in order to repay the principal, interest
and
fees on the credit)
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7.1.7 the right to assign the
claims it has against Party B and the right to notify Party B of the assignment by such means as it considers appropriate,
including
but not limited to facsimile, post, personal service, announcement in the public media, etc., and to make collection calls on Party
B.
7.1.8 the right to exercise
supervision over Party B’s account and to entrust other institutions of China Merchants Bank other than Party A to exercise
supervision
over Party B’s account and to control the disbursement of loan funds in accordance with the use of the loan and the scope of payment agreed
between the parties.
7.1.9 If Party A
finds that any of the circumstances set out in Clause 6.2.6 of this Agreement exist in Party B, Party A shall have the right to require
Party B to implement measures to ensure the safe repayment of the principal and interest of the credit debt and all related expenses under
this Agreement as
required by Party A, and shall also have the right to directly take one or more of the remedial measures as stipulated
in the “Events of Default and Handling”
clause of this Agreement. (b) to take one or more of the remedies for breach of contract
set out in the “Events of Default and Treatment” clause of this
Agreement.
7.1.10 Other rights under this
Agreement.
7.2 Party A undertakes the
following obligations.
7.2.1 the granting of loans
or other credit to you within the credit limit on the terms set out in this Agreement and in each specific contract.
7.2.2 Party B’s assets, finances,
production and operations shall be kept confidential, except where otherwise provided by laws and regulations, required
by regulatory
bodies, or provided to Party A’s superior or subordinate bodies, or to external professional bodies such as auditors, accountants or lawyers
who
are under an equivalent obligation of confidentiality.
8. In particular, Party B warrants
the following
8.1 Party B is an entity duly
established and legally existing under Chinese law, with legal personality, whose registration and annual report publication
formalities
are true, legal and valid, and has sufficient civil capacity to enter into and perform this Agreement.
8.2 the execution and performance
of this Agreement has been fully authorised by the Board or any other authorised body.
8.3 the documents, information
and vouchers provided by Party B in relation to Party B, the guarantor, the mortgagee (pledge) and the mortgage (pledge)
are true, accurate,
complete and valid and do not contain material errors or omit any material facts that are inconsistent with the facts.
8.4 Strictly comply with the
agreements of each specific operational text and the various types of correspondence and relevant documents issued to us.
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8.5 No litigation, arbitration
or criminal or administrative penalties which may have material adverse consequences for you or your principal property
have occurred
at the time of entering into this Agreement and no such litigation, arbitration or criminal or administrative penalties will occur during
the
performance of this Agreement. In the event of such an occurrence, you shall notify us immediately.
8.6 Strictly abide by all national
laws and regulations in its business activities, carry out all businesses in strict accordance with the scope of business as
stipulated
in Party B’s business licence or as approved by law, and complete business (legal person) registration, business annual report procedures
and
business term extension/extension procedures on time, etc.
8.7 to maintain or improve
the existing management of the business, to ensure the preservation of the value of existing assets and not to abandon any
claims that
have become due or to dispose of existing major property without compensation or in any other inappropriate manner.
8.8 you shall not settle
other long-term debts in advance without our permission.
8.9 The loan items applied
for under the credit line are in compliance with the requirements of laws and regulations, and the loan will not be used for
investments
in fixed assets, equity, etc., or for speculative buying and selling of securities, futures and real estate; will not be used for lending
to each other to
make illegal income; will not be used in areas and for purposes prohibited by the State for production and operation;
and will not be used for purposes other
than those stipulated in this Agreement and each specific business text.
If the loan funds are disbursed
by the borrower, Party B shall regularly (at least on a monthly basis) report to Party A the summary of the loan funds
disbursement, and
Party A has the right to verify whether the loan disbursement is in accordance with the agreed purpose through account analysis, voucher
checking and on-site investigation.
8.10 At the time of entering
into and performing this Agreement, no other material event has occurred to you which affects the performance of your
obligations under
this Agreement.
9. Special provisions on working
capital loans
9.1 Withdrawals and drawdowns
Your use of the Working Capital
Loan under this Agreement will be made both on your own and in trust.
9.1.1 Autonomous payments
Self-disbursement is the disbursement
of loan funds by us to your account after we have released the loan funds to your account in accordance with your
request for withdrawal,
and then by you to your counterparty who meets the agreed purpose.
9.1.2 Fiduciary payments
Fiduciary payment is where
we disburse the loan funds through your account to your counterparty who is eligible for the agreed purposes in accordance
with your withdrawal
application and payment mandate. For loan funds using the fiduciary payment method, Party B authorises us to pay the loan funds to
Party
B’s counterparty through Party B’s account on the day of the drawdown (or on the next business day after the drawdown).
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9.1.3 you shall use the fiduciary
payment method unconditionally and in full if
9.1.3.1 Where a single withdrawal
by Party B exceeds RMB 5 million (inclusive, or its equivalent in foreign currency).
9.1.3.2 Where Party A
requires Party B to adopt a fiduciary payment method in accordance with regulatory requirements or for risk
management purposes.
9.1.4 If payment is made on
trust, external payment after loan disbursement must be approved by Party A. Party B shall not circumvent Party A’s
supervision by means
of online banking, reverse cheque withdrawal or conversion of the whole amount into zero.
9.2 When Party B withdraws
funds, Party B shall submit the withdrawal application (if submitted offline, it shall be stamped with Party B’s official seal
or Party
B’s reserved seal with Party A; if submitted online, it shall be signed with a digital certificate or other means approved by Party A),
the loan debit
note (if required) and such information as Party B may require according to the different requirements of Autonomous Payment
and Entrusted Payment.
Otherwise, we have the right to reject your request for withdrawal. Party A shall not be liable for any delay
or failure in the payment of funds due to
inaccurate or incomplete payment information provided by Party B, resulting in Party B’s
default or formation of other losses to its counterparty.
9.3 Loan extensions
If Party B cannot repay the
loan under this Agreement on time and needs to extend the loan, it shall submit a written application to Party A one month
prior to the
expiry of the relevant loan; if Party A agrees to the extension after examination, Party A and Party B shall enter into a separate extension
agreement. If Party A does not agree to the extension, the borrowings already occupied by Party B and the interest payable shall still
be repaid in accordance
with the provisions of this Agreement and the corresponding loan notes or as recorded in Party A’s system.
10. Events of default and handling
10.1 An event of default shall
be deemed to have occurred if Party B.
10.1.1 Failure to perform
or breach of each of its obligations under this Agreement.
10.1.2 if there is any untruthfulness
or incompleteness in the Special Warranties by Party B under this Agreement, or if Party B breaches the Special
Warranties and fails to
rectify the same as required by Party A.
10.1.3 fails to draw down or
draw down the loan as agreed in this Agreement, or fails to repay the principal, interest or fees of the loan in full and on
time as stipulated
in this Agreement, or fails to use the funds in the fund recovery account as required by us, or fails to accept our supervision and to
rectify
the situation immediately as required by us.
10.1.4 a material breach
by Party B under a legally valid contract with another creditor which is not satisfactorily resolved within three months
from the date
of the breach.
The foregoing material
breach means that Party B’s breach of contract results in its creditors being entitled to claim from it for an amount of
RMB1 million
or more.
10.1.5 if Party B is a listed
company on the New Third Board or intends to apply for listing on the New Third Board and there are circumstances where
Party B encounters
significant impediments to listing on the New Third Board or suspends its application for listing; Party B is issued with a warning letter,
ordered to make corrections, restricted from trading in securities accounts and other self-regulatory measures by the New Third Board
Market for a total of
three or more times or is subject to disciplinary action, termination of listing, etc.
10.1.6 when Party B acts as
a supplier to a government procurement unit, the government procurement unit has risk information that is unfavourable to
the repayment
of Party A’s credit, such as delayed payment for three consecutive or cumulative periods, or Party B has been disqualified from supply
(entered the government procurement blacklist), untimely supply, unstable product quality, operational difficulties, significant deterioration
in financial
position (insolvency), suspension of works, etc..
10.1.7 Party B’s financial
indicators do not consistently meet the requirements as agreed in this Agreement/Specific Business Text; or any of the
conditions precedent
(if any) to the provision of credit/finance by us to Party B as agreed in this Agreement/Specific Business Text are not consistently met.
10.1.8 where Party B draws
down the loan in a “fractional” manner in order to circumvent the requirement under this Agreement that Party B should
entrust
Party A with the external disbursement of the loan funds.
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10.1.9 Your business activities
may pose anti-money laundering or sanctions compliance risks to us.
10.1.10 occurrence of other
circumstances which we consider to be detrimental to our legitimate rights and interests.
10.2 An event of default
shall be deemed to have occurred if the guarantor fails to co-operate with any of the following circumstances which, in
our opinion, may
affect the guarantor’s ability to guarantee and we require the guarantor to remove the adverse effects thereof, or require Party B
to
increase or replace the terms of the guarantee.
10.2.1 the occurrence of one
of the circumstances similar to those described in clause 6.2.6 of this Agreement, or the occurrence of a circumstance
described in clause
6.2.8 without our consent
10.2.2 the issuance of an irrevocable
guarantee conceals its actual capacity to assume liability or is not authorized by a competent authority.
10.2.3 Failure to comply with
registration, annual business report procedures and/or extension/extension of business term procedures, etc. on time.
10.2.4 neglects to manage and
pursue its claims as they become due or disposes of existing major property without compensation or in any other
improper manner.
10.2.5 breach of any obligation,
undertaking or statement in an irrevocable undertaking signed by it.
10.3 An event of default
shall be deemed to have occurred if the mortgagor (or pledgee) fails to co-operate with the mortgagee (or pledgee) or
Party B if Party
A considers that the mortgage (or pledge) may not be established or the collateral (or pledge) is of insufficient value and requests
the
mortgagor (or pledgee) to exclude the adverse effects thereof or requests Party B to increase or replace the terms of the security.
10.3.1 there is no right of
ownership or disposition of the collateral (or pledge), or the ownership is disputed.
10.3.2 the mortgage (or pledge)
has not been registered, or has been leased out, a right of occupancy has been created, has been seized, seized, placed in
custody, has
a joint/prior legal priority (including, but not limited to, a priority for payment of construction work, a priority for a mortgage on
the price of
movable property), a retention-of-title priority of the seller has been created, a priority for a finance lease of the lessor,
and/or conceals the occurrence of such
circumstances.
10.3.3 the mortgagor, without
our written consent, assigns, leases, creates a right of occupancy, re-mortgages or disposes of the collateral in any other
improper manner
or creates any encumbrance of rights of any kind, or he disposes of the collateral with our written consent but does not apply the proceeds
to the payment of the debt owed by you to us as required by us
10.3.4 where the mortgagor
fails to keep, maintain and repair the mortgage properly, resulting in an appreciable depreciation in the value of the
mortgage; or where
the mortgagor’s actions directly endanger the mortgage, resulting in a reduction in the value of the mortgage; or where the mortgagor
fails to insure/renew the mortgage as required by us during the term of the mortgage.
10.3.5 where the mortgaged
property has been or may be included in the scope of government demolition or expropriation and the mortgagor fails to
immediately inform
us and perform the relevant obligations as agreed in the mortgage contract.
10.3.6 where the Mortgagor
provides a residual value mortgage to secure the business under this Agreement using its mortgaged property with China
Merchants Bank,
and where the Mortgagor settles its personal mortgage loan early without our consent before Party B has repaid the credit granted under
this
Agreement.
10.3.7 where the pledgee
pledges financial products, the source of funding for the subscription of the financial products is not legal/compliant.
10.3.8 other matters occurring
or likely to occur in relation to the mortgage (pledge) affecting the value of the mortgage (pledge) or affecting our
mortgage (pledge)
rights, etc.
10.3.9 the mortgagor (or pledgee)
breaches any obligation, promise or representation in the mortgage contract/pledge contract signed by him.
10.4 When the guarantee
under this Agreement includes the pledge of accounts receivable, Party A has the right to require the debtor of the
accounts receivable
to provide security in the event of any significant deterioration of its operation, transfer of property/evasion of funds to evade its
debts, collusion with the pledgee of the accounts receivable to change the route of repayment resulting in the repayment of the accounts
receivable
not entering the special account for repayment, loss of business reputation, loss or likely loss of performance ability or
other material matters
affecting its solvency, etc. Party B to provide corresponding guarantee or provide new valid accounts receivable
for pledge; if Party B fails to do so,
an event of default shall be deemed to have occurred.
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10.5 In the event of any of
the above events of default, we shall be entitled to take the following measures separately or concurrently.
10.5.1 reduce the amount of
credit granted under this Agreement or discontinue the use of the remaining credit line.
10.5.2 early recovery of principal,
interest and related fees on loans granted within the credit limit.
10.5.3 For bills of exchange
accepted by Party A or letters of credit, letters of guarantee or letters of guarantee for goods delivery opened (including
entrusted
transfer) during the credit period, regardless of whether Party A has made advances or not, Party A may request Party B to increase the
amount of
the deposit, or transfer the deposits in other accounts opened by Party B with Party A to its deposit account as the deposit
for settling future advances made
by Party A under this Agreement, or hand over the corresponding amount to a third party withdraw the
corresponding amount to a third party as security for
future advances made by Party A to Party B.
10.5.4 For outstanding receivables
claims assigned by Party A from Party B under factoring business, Party A shall have the right to request Party B to
immediately fulfill
its repurchase obligations and take other recovery measures in accordance with the relevant specific business text; for receivables claims
assigned by Party A to Party B under factoring business, Party A shall have the right to immediately reclaim them from Party B.
10.5.5 Party A may also directly
request Party B to provide other property acceptable to Party A as new security as appropriate. If Party B fails to
provide new security
as requested, Party B shall be liable for liquidated damages equivalent to 30% of the amount of the credit facility under this
Agreement.
10.5.6 to directly
freeze/withhold the deposits in any settlement account and/or other accounts opened by Party B with China Merchants Bank,
to stop opening
new settlement accounts for Party B and to stop issuing new credit cards to Party B’s legal representatives.
10.5.7 to report
to credit reference agencies and banking associations information on Party B’s default and breach of trust, and have the right to
share
such information among banking institutions and even publicize it to the community through appropriate means.
10.5.8 dispose of
the pledge and/or recover it from the guarantor in accordance with the provisions of the security text.
10.5.9 for working capital
loans under the credit facility, change the terms of the loan funds entrusted to you and remove the use of the loan by you on a
“self-pay”
basis.
10.5.10 Recourse
in accordance with this Agreement.
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10.6 The amounts recovered
by us shall be repaid in the order of the actual maturity date of each credit in descending order. The order of repayment of
each specific
credit shall be in accordance with the order of fees, default, compound interest, penalty interest, interest and finally the principal
amount of the
credit until the principal and interest and all related fees are repaid in full.
Party A has the right
to unilaterally adjust the above repayment order, unless otherwise required by law or regulation.
11. Changes and additions to
the agreement
This agreement may be varied
by mutual agreement and written agreement between A and B. Until such time as a written agreement is reached, this
Agreement shall remain
in force. Neither party may make unilateral changes to this agreement.
The written supplemental
agreements reached by consensus between A and B in respect of matters not covered by this Agreement and changes thereto,
as well as each
specific business text under this Agreement, shall form an integral part of this Agreement.
12. Other matters
12.1 The granting of any indulgence,
relief or delay by us in respect of any breach or delay by you while this Agreement is in force shall not prejudice,
affect or limit all
our rights and entitlements as a creditor under the relevant legal provisions and this Agreement, nor shall it be deemed to be our permission
or approval of any breach of this Agreement, nor shall it be deemed to be a waiver of our It shall not be deemed a waiver of our right
to act in respect of any
existing or future breach.
12.2 In the event that this
Agreement becomes legally invalid for whatever reason, or part of its provisions are invalid, Party B shall remain liable to pay
all debts
owed to us under this Agreement. In the event of such an event, we shall be entitled to terminate this Agreement and may immediately recover
from
you all debts owed by you under this Agreement.
If, as a result of changes
in applicable laws and policy requirements, Party A incurs additional costs in performing its obligations under the
Agreement, Party B
shall reimburse Party A for the additional costs incurred at Party A’s request.
12.3 Notices, requests or other
documents from Party A and Party B in relation to this Agreement shall be sent in writing (including but not limited to
letters, faxes,
emails, electronic platforms such as China Merchants Bank Corporate Internet Banking / Corporate APP, mobile phone SMS or WeChat, etc.).
Party B confirms the following in relation to the address and manner of service of documents.
12.3.1 Party B acknowledges
and agrees to use Party B’s China Merchants Bank Corporate Internet Banking / Corporate App and Party B’s contact
address, email, fax
number, mobile phone number or micro-signal set out in this Agreement as Party B’s address for service of all commercial and legal
documents
under this Agreement.
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The commercial documents referred
to in this Article refer to all kinds of commercial documents such as business notices, confirmations, default notices,
early maturity
notices, overdue reminders, etc. formed in the course of business transactions under this Agreement; the legal documents referred to in
this
Article include notarized documents and judicial documents (including but not limited to indictment/application for arbitration,
appeal, reply, evidence,
summons, notice of appeal, notice of proof, notice of court hearing, notice of hearing, judgment/judgment, ruling,
mediation, notice of deadline for
performance, etc.). (including, but not limited to, documents for trial and enforcement, such as indictment/arbitration
application, appeal, defence, evidence,
summons, notice of appeal, notice of proof, notice of hearing, judgment/award, ruling, conciliation,
notice of deadline for performance).
Service by Party A, the Court
of Appeal and the Notary Public by the means of service agreed in this Agreement to the address for service agreed in the
preceding paragraph
shall be deemed to be valid service.
12.3.2 Party B acknowledges
and agrees that: if delivered by hand (including but not limited to delivery by lawyers/notaries, courier delivery, etc.),
delivery shall
be deemed to have been effected upon signature by the recipient (if the recipient refuses to accept, delivery shall be deemed to have
been
effected upon the expiry of seven days from the date of refusal/return or the date of posting, whichever is earlier); if delivered
by postal letter,
delivery shall be deemed to have been effected upon the expiry of seven days from the date of posting; if delivered
by fax, email, China Merchants
Bank Corporate Internet Banking/Enterprise App (i.e. delivery to Party B’s China Merchants Bank Corporate
Internet Banking/Enterprise App via China
Merchants Bank Corporate Internet Banking/Enterprise App), mobile phone SMS or WeChat, etc.
(i.e. delivered to Party B’s China Merchants Bank
Corporate Internet Banking/Enterprise App via China Merchants Bank Corporate Internet
Banking/Enterprise App), mobile phone SMS or WeChat, etc., the
date of delivery shall be deemed to be the date of delivery when the corresponding
system/electronic device of Party A shows successful delivery. If Party A
notifies Party B of the transfer of debts or makes a collection
call on Party B by way of announcement in the public media, the date of
announcement shall be deemed to be the date of service.
12.3.3 If Party B changes its
contact address, email address, fax number or mobile phone number or micro-signal, it shall notify Party A in writing of the
change five
working days from the date of the change, otherwise Party A shall have the right to serve Party B at its original contact address or information.
If
the change of Party B’s contact address or information is not successfully delivered, the date of return or seven days after posting
(whichever is earlier) shall
be deemed to be the date of delivery. Party B shall bear any loss that may arise as a result and shall not
affect the legal validity of service.
12.3.4 Party B further agrees
that the court may serve judicial documents on Party B by electronic means such as the China Open Network for Judicial
Process Information
and the National Unified Service Platform; if the court serves judicial documents electronically as agreed above, the date of successful
transmission as shown on the China Open Network for Judicial Process Information and the National Unified Service Platform shall be regarded
as the date
of service; if the court completes the service of judicial documents by electronic service If the court completes the service
of judicial documents by electronic
service, there is no need to serve paper judicial documents to Party B’s contact address.
14
12.3.5 The address and mode
of service agreed in this article apply to all stages of the contract performance, dispute resolution, arbitration, court hearing
(first
trial, second trial, retrial) and enforcement.
12.4 The Parties agree that
for each application for business under the Trade Finance Business, it is sufficient for Party B to affix its reserved seal on
Party A
and both Parties acknowledge the validity of such signature.
12.5 Both parties agree
that if Party B submits applications or business vouchers for credit business through Party A’s electronic platform
(including but not
limited to Enterprise Banking/Enterprise APP), its electronic signature generated by means of digital certificate is regarded as
Party
B’s valid signature and represents Party B’s true intention, and Party A has the right to fill in relevant business vouchers based on
the
application information issued online, and Party B acknowledges its authenticity, accuracy and legality and is bound by it. Party
A is entitled to fill
in the relevant business vouchers according to the application information issued online, and Party B recognises
its authenticity, accuracy and
legality and is bound by it.
12.6 In order to facilitate
business processing, all operations of Party A involving transactions (including but not limited to application
acceptance, information
review, payment release, transaction confirmation, debit, enquiry, receipt printing, collection, payment deduction, etc. and
all kinds
of notifications) may be handled by any of Party A’s business outlets and relevant correspondence may be generated, issued or issued,
and
the business operations and correspondence of Party A’s outlets shall be deemed to be Party A’s acts and shall be binding on Party
B. Binding effect.
12.7 The annexes under this
Agreement form an integral part of this Agreement and shall automatically apply to the corresponding specific operations
actually occurring
between the Parties.
12.8 Covering
costs
☐ 12.8.1 Where this Agreement involves Party B taking out accident insurance with Party A as the first beneficiary, the relevant
insurance costs shall be
borne in the following form (a tick in “☐”
indicates that the provisions of this clause apply).
Please tick one of
the following.
☐
The Party A is responsible for.
☐
A and B share in the following proportions: Party A / %, Party B / %.
☐
12.8.2 Where this Agreement relates to enforcement notary fees (other than the fee for the application for the issue of a certificate
of enforcement),
the following form of fee payment shall apply (a tick in “☐”
indicates that the provisions of this clause apply).
Please tick one of
the following.
☐
Party A bears
☐
A and B share in the following proportions: Party A / %, Party B / %.
15
12.8.3 In other matters
where services are entrusted to a third party, the relevant costs shall be borne by the principal. If both parties are jointly acting
as
principal, each shall bear 50%.
12.8.4 In the event
that Party B fails to repay the debts owed to Party A under this Agreement on time, all costs incurred by Party A for realising the
claim,
such as attorney’s fees, litigation fees, travel expenses, public notice fees, service of process fees, application for issuance of enforcement
certificate
fees, etc., shall be fully borne by Party B, and Party B authorises Party A to deduct them directly from Party B’s bank
account with Party A. If there is
any shortfall, Party B guarantees to reimburse the full amount upon receipt of notice from Party A without
any proof from Party A.
12.9 Party B shall,
at Party A’s request (tick one of the following options at£ ).
☐ insure its core
assets and designate us as the first-ranking beneficiary.
☐ No sale or encumbrance
of assets designated by us until the credit debt has been settled.
☐ The dividends
to its shareholders prior to the settlement of the credit debt are restricted in accordance with our requirements as follows.
_______/________________________________________________________
12.10 You shall ensure
that the financial indicators of Party B during the credit period do not fall below the following requirements.
_______/________________________________________________________
12.11 You also acknowledge
that China Merchants Bank and your parent/head office/holding company (insert name of enterprise), agrees to be
bound by the contents
of the Group Credit Business Cooperation Agreement (including any adjustments and supplements thereto from time to time
made by the signatories)
numbered (insert name of enterprise) and agrees to undertake the obligations set out therein in respect of the Group’s
subordinate units
as a subordinate unit of the Group under the Agreement. In the event of any breach, Party B shall be deemed to be in default and
Party
A shall be entitled to take all remedies for such breach as set out in this Agreement.
12.12 Other engagements.
12.12.1 (1) Party B shall
not use false contracts with related parties or debts such as bills and receivables without trade background to conduct
various businesses
such as bill discounting, factoring, pledge, letter of credit and forfaiting in Party A. If Party B uses the connected transactions to
damage or evade the claims of Party A or other branches of China Merchants Bank, it shall be regarded as an event of default under this
Agreement and Party A shall have the right to take corresponding default handling measures in accordance with this Agreement. (2) If any
related
party of Party B defaults on its obligations to China Merchants Bank, it shall be deemed to be an event of default under the Group
Credit Facility
and Party A shall be entitled to decide whether or not to take the default handling measures as stipulated in this Agreement
in accordance with the
degree of impact of the event of default, irrespective of whether or not Party B has defaulted under this Agreement.
(3) Related transaction means a
transfer of resources or obligations between related parties, whether or not a price is received. A related
party is defined as a party who has the
ability to control, jointly control or exercise significant influence over another party, directly
or indirectly, in the financial and operating decisions of
the enterprise; two or more parties are also related if they are controlled
by the same party. Both parties agree that the specific definition of related
party shall be determined by Party A. (4) Group means a
group of legal persons who have a direct or indirect controlling (control) or controlled
(control) relationship, or other groups of legal
persons who have a materially significant risk connection (such as being jointly controlled by a third
party, having other related relationships
and possibly not transferring assets and profits on a fair price basis). A control relationship is one in which
you have effective control
or exert significant influence over the operating decisions, capital operations or senior management appointments of the
other party.
Both parties agree that whether or not they are members of the Group is subject to Party A’s determination.
16
12.12.2 Party B guarantees
that there will be no performance under the foreign insured domestic loan, and if there is such a situation, Party B
shall notify Party
A in a timely manner, and Party A has the right to suspend the conclusion of new foreign insured domestic loan contracts or the
processing
of new withdrawals; Party B guarantees that if there is performance under the guarantee, the sum of the outstanding principal balance
and the stock of external liabilities will not exceed the risk-weighted balance of Party B’s cross-border financing, and the risk arising
from exceeding
the risk-weighted balance of Party B’s cross-border financing shall be borne by Party B The risk arising from exceeding
the risk-weighted balance
of your cross-border financing shall be borne by you.
12.12.3 Party B undertakes
that if the amount under this Agreement is used for affiliated procurement, the affiliated party shall open an
account with Party A, and
the funds shall be entrusted to the final seller for a second time or Party A shall directly handle the agency business.
12.12.4 Party B undertakes that until all
credit obligations under this Agreement are settled, the terms of the guarantee provided by Party B to
Party A for obtaining credit under
this Agreement will not be weaker than the terms of the guarantee provided by Party B to other banks for new
applications for financing
by Party B in other banks.
13. Account information
þ
13.1 Special Loan Account (tick if applicable)
All disbursements and payments
of loan funds under this Agreement must be made through the following accounts.
Account name. JAJI (Shanghai)
Co., Ltd.
Account number. 121923728310801
Bank of Account. Century
Avenue Branch of China Merchants Bank Co., LTD
13.2 Funds back account
13.2.1 We both agree to designate
the following account as Party B’s funds recovery account.
Account name. JAJI (Shanghai)
Co., Ltd.
Account number. 121923728310801
Bank of Account. Century
Avenue Branch of China Merchants Bank Co., LTD
13.2.2 The account
monitoring requirements are as follows. ___/______
Party A has the right
to recover the loan early based on Party B’s funds recovery, i.e. when there are funds recovered from the account, then the
loan corresponding
to the amount of such recovered funds may be deemed to mature early and Party A has the right to debit the account directly to
repay such
part of the loan.
17
13.3 Party B shall provide
quarterly information on the movement of funds in and out of the above accounts and cooperate with Party A in the
monitoring of the relevant
accounts and the return of funds.
14. Applicable law and dispute
resolution
14.1 The laws of the People’s
Republic of China (excluding the laws of Hong Kong, Macau and Taiwan) shall apply to the conclusion, interpretation and
settlement of
disputes of this Agreement, and the rights and interests of both A and B shall be protected by the laws of the People’s Republic of China.
14.2 Disputes arising
in the course of the performance of this Agreement between A and B shall be settled by mutual agreement. If consultation
fails, either
party shall (choose one of the three, tick one of the following).
þ
14.2.1 to the People’s Court of competent jurisdiction in the location of Party A.
☐ 14.2.2 to the people’s court with jurisdiction in the place where the agreement was signed, which is Century Avenue Branch of
China
Merchants Bank Co., LTD
☐
14.2.3 Application for arbitration to / (insert name of specific arbitration institution), where the arbitration
will take place.
14.3 After this Agreement and
each specific business text has been notarised by both parties to give enforcement effect, Party A may apply directly to
the people’s
court having jurisdiction for enforcement in order to recover the debts owed by Party B under this Agreement and each specific business
text.
15. Entry into force of the
agreement
This Agreement shall come into
effect upon the signature (or name seal) of the legal representative/principal person in charge of both parties or their
authorized agent
and the official seal/contractual seal of the entity, and shall automatically expire on the date of expiry of the credit period or the
date of
settlement of all debts and all other related expenses owed by Party B to Party A under this Agreement (whichever is later).
16. By-laws
This agreement is made in four
copy, one for Party A, one for Party B and one for each with the same legal effect.
Attachment: 1. Special Terms
and Conditions for Cross-border Trade Finance Business
2. Special Terms for Buyer/Import
Factoring
3. Special Terms for Order
Credit Business
4. Special Terms for Commercial
Acceptance Guarantee Business
5. Special provisions for derivative
business
6. Special Terms for Gold Leasing
Business
18
Attachment 1
Special Terms for Cross-border Trade Finance Business
1. Cross-border linked trade
finance business refers to the cross-border trade finance business applied by Party B to Party A based on the real cross-
border trade
background with overseas companies and provided by Party A in cooperation with overseas institutions of China Merchants Bank (hereinafter
referred to as “linked platform”).
2. The specific types of cross-border
linked trade finance business include: back-to-back letter of credit, entrusted issuance, entrusted offshore financing,
bill guarantee,
letter of guarantee offshore credit and cross-border trade finance through train. The specific meaning and business rules of each business
type
will be agreed in the specific business text.
3. Under a back-to-back letter
of credit, the parent letter of credit applied for by you to us directly occupies the credit line under this Agreement, and the
charge
or advance (whether or not incurred during the credit period) and the corresponding interest and costs incurred by us in fulfilling our
obligations to the
issuing bank under such parent letter of credit constitute financing obligations of you to us and are included in the
credit guarantee.
Under the entrusted letter
of credit / entrusted offshore financing, we entrust the Linkage Platform to accept letters of credit / trade finance applied for by
offshore
companies under your application to occupy the credit line under this Agreement. If Party A issues a charge or provides an advance to
Party B for
external payment under import collection, such charge or advance (whether or not it occurs within the credit period) and the
related interest and fees directly
constitute Party B’s financing obligations to Party A and are included in the credit guarantee.
Under the note guarantee, Party
A will, upon Party B’s application, directly draw on its credit facilities under this Agreement to guarantee the payment of
Party B’s
promissory note. If Party B fails to pay the bill in full and on time, Party A has the right to make direct advances on the guaranteed
bills, and such
advances (whether or not incurred during the credit period) and related interest and fees are included in the credit guarantee.
Under the letter of guarantee
offshore credit business, Party A directly occupies the credit line under this Agreement based on the letter of guarantee/
standby letter
of credit issued by Party B upon application. After the offshore company assigns its right to receive payment under the letter of guarantee
(not
the right to claim) to the linked platform, when the linked platform claims against Party A under the letter of guarantee / standby
letter of credit, the advances
made by Party A (whether or not incurred during the credit period) and the related interest and expenses
directly constitute Party B’s financing obligations to
Party A and are included in the credit guarantee.
Under the cross-border trade
finance through train business, after Party A has approved Party B’s trade finance based on Party B’s application, the trade
finance provided
by the linked platform directly to Party B will occupy the credit line under this Agreement. If Party B fails to repay the trade financing
amount to the Linkage Platform in full and on time, Party A is entitled to repay the amount by way of charge or advance, and the relevant
charge or advance
(whether or not it occurs within the credit period) and related interest and fees directly constitute Party B’s financing
debt to Party A and are included in the
credit guarantee.
19
Attachment 2
Special Terms for Buyer/Import Factoring
1. Definition clause
1.1 Buyer/Import Factoring
is a comprehensive factoring service including payment approval, receivables collection and management for the
Seller/Export Factor after
we, as the Buyer/Import Factor, have assigned the receivables under the Commercial Contract to the Seller/Export Factor with
Party B as
the debtor of the receivables.
Under the buyer/import factoring
business, if Party B incurs buyer’s credit risk, Party A shall be liable to the seller/export factor for approved payment;
in the event
of a dispute during the performance of the business contract, Party A shall be entitled to counter-assign the assigned accounts receivable
to the
seller/export factor.
1.2 A seller/export factor
is a party that enters into a factoring agreement with a supplier/service provider (receivables creditor) under a commercial
contract
and assigns the receivables held by the receivables creditor. We may act as both buyer/import factor and seller/export factor.
1.3 Dispute means a defence,
counterclaim, set-off or similar action by you in respect of the receivables assigned to us as a result of a dispute between
the creditor
of the receivables and you over the relevant goods, services, invoices or any other matter relating to a commercial contract, and the
assertion by
a third party of its rights or application for seizure of the receivables under this Agreement. A dispute shall be deemed
to have arisen whenever the
receivables assigned to us are not fully or partially realised as a result of any credit risk other than that
of the buyer.
1.4 Commercial Contract: A
contract for a transaction between Party B and a receivable creditor for the purpose of a commodity transaction and/or a
service transaction,
settled on credit.
1.5 Approved payment/guaranteed
payment means that Party A, as the buyer/import factor, shall pay the corresponding amount of receivables to the
seller/export factor
within a certain period of time after the receivables are due, after Party B has incurred buyer’s credit risk.
2. Upon application by Party
B, Party A agrees to handle the buyer/import factoring business for him/her within the credit line, and his/her receivables
assigned from
the seller/export factor will be reduced/occupied according to their amount under the credit line of the credit agreement.
The amount paid by Party A as
the buyer/import factor in fulfilling the approved payment/guaranteed payment obligations and the related fees shall be
deemed to be the
credit granted by Party A to Party B under the Credit Agreement (the financing interest rate within 30 days from the date of credit granting
shall be based on the one-year loan market quotation rate announced by the National Interbank Lending Center one working day before the
guarantee
payment date, add 300 points. The financing interest rate beyond this period is the benchmark interest rate, plus 50%, as quoted
by the 1-year loan market
published by the National Interbank Lending Center 1 working day before the guaranteed payment date.) and included
in the guarantee of the credit
guarantee provided by Party B. We are entitled to take all the measures agreed under the Credit Agreement
to recover the approved/guaranteed payment from
you. As long as the seller/export factor (whether or not it is Party A) assigns the
receivables within the credit period, Party A shall have the right of
recourse against Party B in accordance with the Credit Agreement
and the Commercial Contract, even if Party A fulfils its approved payment
obligations beyond the credit period.
3. Buyer/Import Factoring Charges
The factoring fee is a business
management fee charged by Party A for providing buyer/import factoring services and shall be charged by Party A to
Party B at the time
of settlement of the assignment at a rate of a certain percentage of the receivable amount, the exact rate of which shall be reasonably
determined by Party A in accordance with its business rules.
4. Party B waives the right
to dispute any disputes arising in the course of the performance of the commercial contract. In view of this, regardless of any
other
agreement, once Party B fails to make external payments as agreed in the Commercial Contract, it shall be deemed that Party B has incurred
buyer’s
credit risk and Party A will make approved payments, to which Party B has no objection.
20
Annex 3
Special Terms for Order Credit Business
1. The order loan business is
a loan granted by us to you under a commercial contract (or works contract) with your downstream customer (the payer) for
the purpose
of performing the daily production and operation of the commercial contract (or performing the works contract), with the sales return
(or works
return) of the contract as the first source of repayment.
2. Party B shall open a special
account in Party A for the repayment of sales under commercial contracts (or engineering contracts). All sales under
commercial contracts
(or engineering contracts) for which order credits are applied must be paid back directly to the special account, which cannot be used
or
changed without our approval. Party B shall inform the payer that the account is the only account for sales refunds. Party A has the
right to withhold the
money in the special account for the purpose of repaying the principal and interest, penalty and interest and other
related expenses of the order loan
financing.
3. Party A may immediately stop
the use of Party B’s credit line under the Credit Agreement and take default handling measures as agreed in the Credit
Agreement when
the following circumstances occur
3.1 circumstances that are not
conducive to the protection of our claims, such as three consecutive late payments by Party B’s downstream customers or,
in our reasonable
judgement, a deterioration in their financial position.
3.2 Party B is disqualified as
a supplier by the downstream customer, Party B’s supply to the downstream customer is not delivered in a timely manner,
the quality of
the product is not stable, the construction is not carried out in accordance with the progress agreed in the works contract without the
approval of
the downstream customer, the qualification of Party B’s practice is adjusted downward and makes its qualification not meet
the requirements of the
downstream customer, Party A reasonably judges that it is in operational difficulties, its financial position
deteriorates, or there are three consecutive months
when the downstream customer’s repayment is less than The total monthly repayment
amount due from Party B under each financing contract under this
credit facility, or the downstream customer fails to pay in instalments
as agreed in the construction contract for the second consecutive period.
21
Annex 4
Special Terms and Conditions for Commercial Acceptance
Guarantee Business
1. Commercial acceptances are
discounted by Party A or allowed to be discounted by the bearer at any branch of China Merchants Bank (hereinafter
referred to as other
discounting banks). The holder (hereinafter referred to as the discounting applicant) may apply for discounting with the commercial
acceptances
to Party A or other discounting accepting banks, and such discounting operations shall occupy the credit line under this Agreement.
Given
that the provision of commercial acceptances by Party A to Party B is a prerequisite for other discount accepting banks to accept the
holder’s
application for discounting, other discount accepting banks are entitled to transfer the discounted bills to Party A after discounting,
and Party A is obliged to
accept the transfer, and Party B has no objection to this.
2. The commercial acceptances
referred to herein include both paper commercial acceptances and electronic commercial acceptances (hereinafter
referred to as electronic
commercial acceptances); the interest payment methods include interest payment by the buyer, interest payment by the seller, interest
payment by other parties and interest payment by agreement.
3. Party B shall open a commercial
acceptances margin account with Party A (the account number shall be the one generated or recorded by Party A’s
system at the time of
deposit of the margin) and deposit a certain amount of funds into such margin account in proportion to Party A’s requirements prior to
the acceptance of each instrument as payment margin for commercial acceptances discounted by Party A or assigned from other discount accepting
banks.
If Party B is the acceptor
of a commercial acceptances, Party B shall deposit the full amount of each commercial acceptances payable in its margin
account opened
with Party A before the maturity of the bill.
4. During the credit period,
the discounting applicant may apply for discounting directly to Party A with the commercial acceptances accepted, endorsed
or guaranteed
by Party B, or may apply for discounting with other discounting acceptance banks. Party A or other discount accepting banks have the right
to
examine the eligibility of the discount applicant, request Party B to conduct audit and confirmation, and decide whether to process
the discount at their own
discretion.
After discounting, other discount
accepting banks have the right to endorse and transfer the discounted commercial acceptances to Party A in accordance
with the relevant
regulations of China Merchants Bank. After Party A has discounted or transferred the commercial promissory notes from other discount
accepting
banks, Party B shall unconditionally pay Party A the full amount of the note payable in a timely manner when Party B is requested to pay
with the
note.
5. The business records such
as the business information stored in the China Bills Transaction System or the electronic commercial draft system, or the
customer statements
filled in or printed out accordingly, shall govern the opening, acceptance, guarantee, endorsement and discounting of each electronic
commercial draft. The information stored in the China Bills Transaction System or the electronic commercial draft system and the business
records generated
thereunder are part of this Annex and have the same legal effect as this Annex. Party B acknowledges its accuracy, authenticity
and legality.
6. Any dispute arising from
the underlying contract of the commercial acceptances guaranteed by Party A shall be resolved by Party B in coordination
with the parties
concerned and shall not relieve Party B of its obligation to deposit the deposit and the payment in full and in a timely manner in accordance
with the provisions of Clause 3.
7. If Party A has discounted
the commercial acceptances accepted, endorsed or guaranteed by Party B or has assigned such commercial acceptances from
other discount
accepting banks, Party A shall have the right to take recourse directly against Party B if the payer of the commercial acceptances or
Party B
has not delivered the full amount of the notes before the maturity date, including but not limited to deducting the amount from
any account opened by Party
B with China Merchants Bank for payment. Any advance made by Party A as a result of insufficient delivery
by Party B and insufficient debit from Party B’s
account balance shall be subject to a penalty interest charge by Party A to
Party B at the rate of 5% per day of the amount advanced in accordance with
the relevant provisions of the Payment and
Settlement Measures.
22
Annex 5
Special Terms for Derivative Trading Business
1. In respect of derivative
transactions which Party A accepts Party B’s application for classification, the credit line may be taken up by a certain
percentage of
the notional principal amount of the transaction/transaction amount, or in the event of a floating loss on the derivative transaction,
Party A may
take up additional credit line from Party B according to the specific agreement of both parties (at the time of each transaction,
Party A shall determine the
specific amount of credit line to be taken up in accordance with the variety, maturity and risk level of the
transaction, the business to which the
credit line is deducted, etc.). The actual amount of credit line to be taken up shall be determined
by the transaction documents such as the notification of
credit line taking up and/or the confirmation/certification of the transaction
issued by Party A.
2. Any derivative transaction
that has a balance or loss during the credit period, whether or not the transaction occurs within the credit period,
will be charged to
the credit line in accordance with the previous article.
23
Annex 6
Special Terms for Gold Leasing Business
1. “Gold Leasing”
is a business in which we lease out physical gold to Party B. Upon expiry, Party B returns an equivalent amount of gold of the same
quality
and property and pays the leasing fee to Party A in RMB on a regular basis.
2. Party A may, upon Party
B’s application, handle the gold leasing business for Party B within the credit period and credit limit. The physical gold
leased by Party
A shall occupy the credit limit in accordance with the agreed value of the gold leasing agreement signed by both parties and shall constitute
a
debt owed by Party B to Party A.
Party B declares that
All the terms of this
agreement have been fully negotiated by both parties. We have drawn your attention in particular to those provisions
which relate to the
exclusion or reduction of our liability and which are of material interest to you, and have clarified these provisions accordingly at
your request. Party B has given a full and accurate understanding of them. The contracting parties are in full agreement as to the terms
of this
agreement.
(No text below)
24
(The following is the signature line of
the Credit Agreement (for liquidity loans without a separate loan contract) numbered:121XY240709T000157)
Party A: China Merchants Bank
Co. LTD. Shanghai Branch
Principal or authorised
agent (signature/name seal).
Contact address. 1088
Lujiazui Ring Road, Pudong New Area, Shanghai
Unit e-mail address.qsong@cmbchina.com
Unit fax number. /
Contact mobile number. Song Qian
13585859417
Unit micro signal. /
Party B: (seal) JAJI (Shanghai)
Co., Ltd.
Legal representative/principal
person in charge or authorised agent (signature/name seal).
Contact address. Room 511, Building
1,Chuangzhi Space 2966, Jinke Road, Pudong New Area, Shanghai
Unit e-mail address.penny.dai@jajiglobal.com
Unit fax number. /
Contact mobile number. Dai Panpan 15721320032
Unit micro signal. /
Date: 2024.7.10
25
Exhibit 10.21
Industrial and Commercial Finance - Accounts
Receivable Financing
CN11095286399-230412-CLPS GZ-FTG
Date: June 21, 2023
CLPS Guangzhou Co., Ltd.(the “customer”)
To whom it may concern:
Credit Letter - Accounts Receivable Financing Agreement
Based on recent discussions with your company, our
bank, HSBC Bank (China) Limited Guangzhou Branch (the “Bank”), hereby provides debt purchase
services to your company. This
service will be executed in accordance with the terms and conditions of this letter of credit and the accounts receivable
financing agreement
(also known as the invoice discounting/factoring agreement) signed between your company and our bank (including our bank’s accounts
receivable
financing standard terms (“Standard Terms”, also known as the invoice discounting/factoring standard terms)). We reserve the
right to re-examine
this letter of credit at any time, at least once a year.
This letter of credit refers to the credit letter
referred to in the accounts receivable financing agreement signed between your company and our bank. The
terms used in this letter of
credit should have the same meaning as those used in the accounts receivable financing agreement.
A. Services provided by the bank
1.
Credit Management - Our bank provides services related to debt collection and/or sales classified account management in a manner determined by
the bank from time to time.
2.
Purchase of debt based on notification to customers (as specified in Part E).
3.
Purchase of debt with recourse.
4.
Financing - Our bank can provide advance payment services to your company.
Restricted
B. Basic terms of financing services
1.
Total limit of
fund
utilization:
RMB 20,000,000 or its equivalent in other currencies.
2.
Discount fee
(calculated
based on the
use of funds)
As for the Chinese yuan:
The discount fee is
calculated on a daily basis at an annual interest rate of 3.5% (equivalent to LPR minus an annual interest rate
of 0.05%). The
discount fee should be paid on the last working day of each month. The aforementioned “LPR” refers to the loan
market
quoted interest rate for one-year RMB loans announced by China’s National Interbank Funding Center on June 20, 2023,
in terms of the
daily balance of funds used on a certain day.
3.
Prepayment
rate/fund
limit:
Refer to the specific regulations of customer credit limit notification.
4.
Concentration
rate:
100%
C. Basic conditions for credit guarantee services
1.
Credit protection
rate/credit protection
limit/credit protection
events:
Regarding customer limit notifications issued by customers.
2.
Deductible amount:
See customer credit limit notification.
We can purchase credit insurance in our own name
and/or designate a factoring agent to recover the debt amount.
D. Basic terms applicable to all
services
1.
Customer:
Individuals/entities approved by the bank from time to time and notified to your company by the bank.
2.
Deductible amount:
Exempted.
3.
Maximum payment term:
45 days, unless otherwise specified in the customer limit notification.
4.
Maximum invoicing period:
30 days from the delivery date of the goods, unless otherwise specified in the customer credit limit notification.
2
E. Notice of Debt Transfer and Collection
1.
Unless otherwise agreed in writing by
our bank, we will purchase all customers’ debts on the basis of notifying customers (i.e. issuing debt transfer
notices to customers).
Unless otherwise agreed in writing by
our bank, we will purchase all customers’ debts on the basis of notifying customers (i.e. issuing debt transfer
notices to customers).
2.
The debt should be recovered and paid to the designated account 088-926381-001 opened by your company in our bank, and held by your company
as a trust for our bank. Your company irrevocably authorizes our bank to debit the above-mentioned designated account for the purpose of repaying
any debts or obligations owed by your company to our bank (whether or not under this letter of authorization). Our bank has the right to request
direct payment of any debt amount to our bank at any time.Exempted.
F. Required documents and prerequisites for submission
1.
Your company should provide the following documents, which should meet the requirements of our bank in both form and substance:
(a) The accounts receivable financing agreement (including standard terms) signed between your company and our bank;
(b) Upon verification of the authenticity of the board resolution and/or other applicable internal authorization documents of your company, approve and
authorize the signing, submission, and performance of this letter of authorization and the accounts receivable financing agreement, and designate the
authorized signatory for the accounts receivable financing agreement;
(c) All guarantee documents mentioned in section G below, as well as the internal authorization documents of the guarantor (if applicable), which
approve the signing, submission, and performance of these guarantee documents;
(d) For any personal guarantee (if any), a satisfactory statement of the guarantor’s personal net assets and (if requested by the bank) corresponding
proof of the guarantor’s assets have been provided to the bank;
(e) Certified true copies of all government approvals and certificates (if applicable) related to the establishment of your company and the signing of this
letter of credit and accounts receivable financing agreement;
(f)
The transfer notice signed by your company regarding the relevant debt to each customer should include the customer’s confirmation of such
transfer;
(g) A properly completed and signed payment authorization letter;
(h) A properly completed and signed authorized signatory form;
(i)
Proof of opening an account in our bank in the name of your company for the purpose of receiving all payments related to the creditor’s rights; as
well as
(j)
Other documents, terms or proofs that our bank may require from time to time.
3
2. Subject to the third paragraph below, for each
claim, your company should provide the following supporting documents:
(a) Invoice, endorsed and/or accompanied by a statement made in a format approved by our bank, confirming that our bank is the assignee of the
creditor’s rights; and
(b) Proof of satisfactory delivery of goods to our bank.
Your company should also provide our bank with a
properly signed debt notice, which should be in a format approved by the bank.
3. If approved by our bank, your company can provide
a list of creditor’s rights (the list should include customer names, invoice quantities, invoice amounts,
creditor’s rights due dates,
and other information requested by our bank) in place of invoices and proof of delivery of goods related to the creditor’s rights.
Despite
the aforementioned provisions, your company shall, at any time upon our request, promptly provide us with invoices for relevant debts
and
satisfactory proof of delivery of goods.
G. guarantee
None.
H. Representation and warranties
1. Without the prior written consent of the bank,
the customer shall not establish or attempt to establish or permit any mortgage, floating charge, pledge, lien
or other preferred interest
on all or any part of its existing or future assets, or permit any lien or other preferred interest to arise on such assets (except for
liens arising in the normal course of transactions in accordance with legal provisions).
2. The unaudited semi annual financial statements
and audited annual financial statements of the client and guarantor (if any) prepared by qualified
accountants shall be provided to the
bank as soon as they are ready. The semi annual financial statements shall be submitted to the bank no later than 90 days
after the end
of the semi annual financial year, and the annual financial statements shall be submitted to the bank no later than 120 days after the
end of the
financial year.
3. At the reasonable request of the bank from time
to time, customers should provide other financial or operational information related to the customer.
4. The customer’s statement and commitment are as
follows:
(a) The
customer, any of its subsidiaries, directors, managers, employees, agents or affiliates are not the target or subject of any laws or
regulations
(“sanctions”) imposed, promulgated or enforced by any government or statutory authority that restrict or prohibit
trade or financial transactions, or
(b) located, established or residing in a country or region that is a target or subject of sanctions,
unless such representations/warranties would result
in a violation of any applicable Chinese laws and regulations;
4
(b) The client undertakes that it will only use any funds generated from the accounts receivable financing agreement in any way that does not result in it
or any other person (including any person participating in this credit facility, whether as a management agent, arranger, issuing bank, lending bank,
underwriter, advisor, investor or otherwise) violating sanctions, or directly or indirectly lending, paying or otherwise supplying funds to any
subsidiary, joint venture partner or other person, unless compliance with such commitment results in a violation of any applicable Chinese laws and
regulations;
(c) The customer confirms that it complies in all material respects with foreign and domestic laws and regulations (including sanctions) related to the
jurisdiction or debt (as defined in the accounts receivable financing agreement) in which it operates, and undertakes to maintain its operating
procedures during any period of outstanding debt to ensure that it does not violate any sanctions or applicable laws or regulations; and
(d) Customers should immediately notify the bank of any situation regarding claims that may be related to money laundering, terrorist financing,
bribery, corruption, tax evasion, or sanctions.
5. The customer confirms and agrees as follows:
(a) Given HSBC Group’s commitment to comply with applicable financial crime laws and regulations, banks or other members of HSBC Group may
need to take appropriate actions (“Compliance Actions”) to prevent financial crime (including but not limited to fraud, money laundering, terrorism,
tax evasion, evasion of sanctions, or other financial criminal activities), unless taking such actions would result in the bank violating any applicable
Chinese laws and regulations; as well as
(b) The bank or any member of the HSBC Group shall not be liable to the customer for any compliance actions taken (including delays or non
performance of the bank’s obligations under this credit letter resulting from compliance actions).
6. If a customer fails to pay their debt due to any
anti money laundering, terrorist financing, or sanction laws or regulations (including but not limited to
sanctions) that may prohibit
them from paying their debt, the bank has the right to pursue the customer.
7. Customers should promptly report to the bank the
situation of internal related transactions within the group with a cumulative amount exceeding 10% of
their net assets, and provide detailed
information that satisfies the bank.
8. Without compromising any guarantees or other priority rights (if any) enjoyed by the bank, this credit line shall have at least equal
status with all current
and future liabilities of the customer. The customer promises to notify the bank in advance of any other loans
they may have made.
9 .The customer promises and confirms that the funds
used under this letter of credit can only be used for the customer’s working capital needs and shall not
be used for any purposes prohibited
by relevant Chinese laws and regulations, including but not limited to equity investment, real estate market, or
speculative operations
in the securities market, futures market, or other similar fields. Without prejudice to any rights of the bank under this credit letter,
in
the event of any misuse of funds in violation of their intended use, the bank has the right to require the customer to immediately
pay the amount of funds
used, reduce the total limit of funds used, and hold the customer legally responsible.
5
I. Special Clause
1. Unless otherwise agreed, the discount rates under
this letter of credit are annual interest rates and calculated using the simple interest method. For the
avoidance of doubt, any payable
but unpaid discount fees shall be added to the funds on a monthly basis or at a period reasonably determined by the bank and
compounded,
and shall be immediately due and payable at any time.
2. Please note that the Hong Kong Banking (Risk Tolerance)
Rules (Chapter 155S) and its related regulations, as well as the China Banking and Insurance
Regulatory Commission’s “Measures for
the Administration of Related Party Transactions of Banking and Insurance Institutions” (“Related Party
Transaction Management
Measures”), impose certain restrictions on our bank’s lending to individuals affiliated with HSBC Group and providing lending
with
related party transaction nature. When accepting this letter of credit, your company should inform our bank whether your company has any
form of
affiliated relationship with HSBC Group or whether your company is a “related party” as defined in the related party
transaction management measures. If
your company fails to provide the above notification, our bank will assume that your company has no
such related relationship. If your company experiences
the above-mentioned related relationship after accepting this letter of credit,
you should immediately inform our bank in writing.
3. Unless your company expressly objects in writing,
our bank may provide any other company or institution belonging to the HSBC Group at that time with
any information related to any account
opened by your company with our bank and the debt purchase/credit provided by our bank to your company from
time to time, or the performance
of such matters, or other information related to the business relationship between your company and our bank.
4. If this letter is signed in both English and Chinese,
the Chinese text shall prevail, and in the event of any discrepancy between the English and Chinese
texts, the Chinese text shall prevail.
5. Without prejudice to the right of the bank to
unilaterally suspend or revoke this credit and demand immediate repayment of the relevant loan at any time, if
any applicable laws or
regulations (or their interpretations) or changes occur in the Chinese financial market (including but not limited to the calculation
of
loan interest rates based on LPR), or if the bank needs to comply with any requirements of regulatory agencies/government departments
(regardless of
whether they have legal effect), and the bank believes that the above changes result in an increase in the cost of providing,
maintaining credit or financing for
credit and/or a decrease in the net income obtained by the bank from the credit described in this
credit letter, the bank reserves the right to re determine any
interest rates, spreads, fees, and other charges contained in this credit
letter. Before reaching an agreement on the redefined interest margin, fees, other
charges or applicable benchmark interest rates, the
bank may, after notifying the customer, decide on its own to charge the redefined interest or fees to
compensate for the bank’s increased
costs and/or maintain the bank’s net income. If the changes in the above-mentioned laws and regulations or the
requirements of any regulatory
agency/government department have retroactive effect, the customer shall compensate the bank within five working days
after receiving
written notice from the bank for the increased costs and/or reduced net income of the bank during the retroactive period as a result.
Unless the
compensation requirements of the bank conflict with mandatory requirements of relevant Chinese laws and regulations, the written
notice issued by the bank
regarding such compensation requirements shall be conclusive evidence of the compensation amount payable by
the customer to the bank.
6. All expenses (including but not limited to legal
fees) incurred by the bank in modifying, restructuring, or enforcing the bank’s rights due to the customer’s
breach of any obligations
under this credit letter at the customer’s request shall be fully compensated by the customer.
6
7. Article 28 (Transfer) of the Accounts Receivable
Financing Standard Terms shall apply to this letter of credit, as if the “Accounts Receivable Financing
Agreement” referred
to in this provision were the “Letter of Credit”.
8. All notices or other communications issued by
the bank to the customer as described in Article 29 (Notices) of the Accounts Receivable Financing
Standard Terms shall be deemed to include
any documents, notices or other communications issued by relevant courts, arbitration institutions or other
persons to the customer under
or related to the Accounts Receivable Financing Agreement, any Credit Letter or any transaction under the Accounts
Receivable Financing
Agreement, any Credit Letter or any transaction under the Accounts Receivable Financing Agreement, any Credit Letter or any
transaction
under the Accounts Receivable Financing Standard Terms and Conditions, and relating to litigation or arbitration. The customer confirms
that for
the purposes of this clause 29 and this clause, the address listed in the accounts receivable financing agreement, any credit
letter, or as shown in bank records,
and its or (if applicable) agent for delivery, is the customer’s address.
9. Please note: Our bank’s standard service fee is
specified in the bank rate table, and your company can choose from it[ http://www.hsbc.com.cn/1/2/misc-
cn/file-download-centre#b ]Get
it. We will provide a copy of the bank rate table as requested by your company.
10. Your company authorizes our bank to register,
extend, and modify the transfer of debt and accounts receivable in a manner deemed appropriate by our
bank in accordance with applicable
laws and regulations. If your company name or other information about your company required by the registration
authority (i.e. the Credit
Reference Center of the People’s Bank of China) changes, your company should notify our bank of the relevant changes in a timely
manner
(no later than ten working days after the completion of the relevant changes) and submit relevant supporting documents.
11. This letter of credit shall be governed by and
interpreted in accordance with Chinese law. Your company (as the client) agrees to submit any disputes
arising from or related to the
accounts receivable financing agreement or this letter of credit to the jurisdiction of the Chinese court in the place where the
accounts
receivable financing agreement or this letter of credit is signed (i.e. Shanghai). Nothing in this provision shall limit our bank from
filing a lawsuit
against your company in the court of our bank’s domicile, the court of the place where the accounts receivable financing
agreement and this letter of credit
are signed (i.e. Shanghai), the court of your company’s domicile, or any other court with appropriate
jurisdiction regarding the accounts receivable financing
agreement or this letter of credit.
12. The customer confirms that the contact information
address (including address, email, fax number) listed in this letter of credit or its latest written notice
to the bank, or (if applicable)
its agent for service, is the contact information for receiving notices or documents under or related to this letter of credit, as well
as the contact information for serving litigation or arbitration legal documents by the court or arbitration institution in litigation
(including but not limited to
first instance, second instance, retrial, enforcement) and arbitration proceedings.
7
For the purpose of this clause, the customer’s contact
information is as follows:
Address:
Room
409,
410,
411,
4th
Floor,
No.
9
Linhe
West
Road,
Tianhe
District,
Guangzhou,
China
(office
only)
Email:
ELLEN.DING@CLPSGLOBAL.COM
Fax number: Not applicable
If the customer
changes their contact information, they shall notify the bank, relevant court or arbitration institution in writing in advance. For
banks, relevant
courts, or arbitration institutions that have not received written notice of changes, delivery made using the
customer’s original contact information prior to the
change shall still be considered valid delivery. The customer shall bear the
adverse consequences caused by inaccurate contact information or failure to
provide written notice of changes in contact
information.
Notices, documents, litigation or arbitration legal
documents sent to the customer’s designated contact information shall be deemed delivered at the earliest
of the following times: (a)
if delivered by hand, the delivery date shall be deemed as the delivery date; (b) If delivered by registered mail, express delivery,
courier
or other mailing methods, the third day after mailing (with postmark as proof) shall be deemed as the delivery date; (c) If delivered
by email or fax,
the delivery date shall be the date on which the sender’s email or fax system shows that it has been sent. The customer
hereby confirms that the bank has
informed them of these terms and related risks, and the customer fully understands and voluntarily decides
to be bound by these terms.
13. Our bank reserves the right to audit and verify
debts at your company’s office address on an annual basis, in order to access and verify accounts and
records related to debts.
We kindly request that your company arrange for an
authorized signatory to sign a copy of this letter of authorization and return it to our bank, to
demonstrate your understanding and acceptance
of the terms and conditions related to the debt purchase service.
This credit offer is valid until the end of business
on September 13, 2023. If it is not accepted after the deadline, this credit offer will be deemed invalid.
We look forward to establishing a mutually beneficial
and lasting business relationship with your company.
Best Regards，
HSBC Bank (China) Limited Guangzhou Branch
Authorized signatory:
Position:
Our company agrees to accept the above terms and
conditions.
CLPS Guangzhou Co., Ltd.
Name:
Position:
Date:
8
Exhibit 10.22
Confidential
To: JAJI (Shanghai) Co., Ltd.
Date: June 21, 2023
To whom it may concern:
Bank credit(Credit letter number:
CN11095286399-230412-Jiaji SH)
Based on our recent discussions with you, we hereby
confirm that we agree to grant you the following uncommitted bank credit (“Credit”) in accordance
with the specific terms and
conditions stated in this letter, subject to the completion of the following guarantees and prerequisites to our satisfaction.
Although there may be any contrary provisions in
this letter of authorization, application for credit use, or any other documents related to the credit, our
bank’s provision of credit
is subject to the following conditions:
●
Our
bank has the right to unilaterally suspend or cancel any unused credit facilities at any time or decide whether to allow the use
of any
unused credit facilities；
●
Our
bank has the right to review this credit facility at any time, at least once a year; also
●
Our
bank has the right to demand immediate repayment of relevant loans at any time, including the right to immediately provide cash
guarantees
for expected and contingent liabilities.
The credit (if any) that have been used by you before
signing this letter of credit shall be deemed as the credit under this letter of credit, and shall also be
subject to the relevant provisions
of this letter of credit, and shall be guaranteed by the guarantees mentioned in this letter of credit.
This letter of authorization consists of the main
body of the credit letter, special credit terms, general credit terms, and relevant attachments (if any).
Borrower: JAJI (Shanghai) Co., Ltd.
Lender: HSBC Bank (China) Limited Shanghai
Branch
Debtor: Borrower and each person providing
any guarantee (“Guarantee”) in the “Guarantee” paragraph (“Guarantor”)
Credit amount: A revolving loan facility with
a maximum limit of RMB 10,000,000.
Financing Document: This letter of authorization
and each document containing the guarantee (the “Guarantee Document”).
Guarantee: As a guarantee, in addition to
the guarantees required under the relevant special credit terms (if any), our bank must also hold:
Guarantee issued by CLPS Shanghai Co., Ltd.
Prerequisite：Before the borrower uses
any credit facility, the lender shall have received the following documents and certificates in form and substance
satisfactory to the
lender：
(1) Certified copies of all government
approvals and supporting documents regarding the borrower’s status, which are identical to the original.
(2) The original or certified copy of the borrower’s
internal authorization document, which strictly approves or authorizes others to approve the credit granted
under this letter in accordance
with its articles of association and relevant laws, and authorizes one or more specific persons to sign and/or submit this letter
of
credit and other documents and notices related to the credit granted under this letter.
1
PUBLIC
RESTRICTED
(3) If the credit has one or more
guarantees:
(a) The original of the guarantee document
duly signed by all parties involved;
(b) Certified copies of all government approvals
and supporting documents regarding the guarantor’s status that are identical to the original;
(c) The original or certified copy of the
guarantor’s internal authorization document, which is strictly in accordance with the provisions of its
organizational documents and relevant
laws, or (authorized by others) to provide guarantees, and authorizes one or more specific persons to sign and/or
submit guarantee documents
and other relevant documents and notices;
(d) Proof that the guarantee has been properly
created and perfected, if applicable; and
(e) If the guarantee is a personal guarantee,
the original personal net asset statement issued by the guarantor and (if requested by the lender) the
corresponding guarantor’s asset
certification materials.
(4) A legal opinion issued by a qualified lawyer
accepted by the lender on the relevant matters of the financing documents, if applicable.
(5) If a guarantor is established in a jurisdiction
different from the jurisdiction of the security documents to which it is a party, the guarantor has designated a
service agent acceptable
to the lender for the delivery of the security documents to which it is a party in the jurisdiction of the court, and the service agent
has
accepted the specified proof.
(6) The borrower has opened a loan disbursement account
with the lender.
(7) In the special credit terms of a certain type
of credit, the borrower is required to submit other documents or materials before using the credit.
(8) Other documents or materials that the lender
may reasonably request in connection with this letter of authorization or the facilities under it.
Declaration:
The borrower makes the following representations
and warranties to the lender:
(1) The borrower, any of its subsidiaries, any director,
officer, employee, agent, or affiliated person of the borrower or any of its subsidiaries is not a target or
subject of any laws or regulations
(“Sanctions”) imposed, promulgated, or enforced by any government or statutory authority that restrict or prohibit trade
or
financial transactions, or (b) located in Established or residing in a country or region that is the target or subject of sanctions,
unless such
representation/guarantee would result in a violation of any applicable Chinese laws and regulations;
(2) The borrower is unaware of and has not taken
any action that may directly or indirectly result in a violation of any applicable anti bribery and anti-
corruption laws (the “applicable
anti bribery and anti-corruption laws”, including but not limited to any anti bribery and anti-corruption laws, regulations,
rules,
and rules of each borrower and lender’s place of incorporation and/or business), and to the best of its knowledge, any director, officer
The agent,
employee, or manager, or other person acting on behalf of the borrower or its subsidiaries, is not aware of or has not taken
any such action; and
(3) The borrower and (to the best of its knowledge)
its affiliates’ business operations comply with any applicable anti bribery and anti-corruption laws, and
have developed and maintained
corresponding policies and systems to ensure that their business operations will continue to comply with applicable anti
bribery and anti-corruption
laws, and such policies and systems are reasonably expected to ensure that their business operations will continue to comply with
applicable
anti bribery and anti-corruption laws.
2
Commitment:
During the period when the borrower can use the credit
facility and as long as there are any outstanding payments under this letter, the borrower shall comply
with the following commitments:
(1) Without derogating from any security or other
priority rights (if any) enjoyed by the lender, the borrower shall ensure that the credit granted under this
credit letter has at least
the same status as all current and future unsecured loans of the borrower.
(2) Without the prior written consent of the lender,
the borrower shall not establish or attempt to establish or allow to exist any mortgage, floating charge,
charge, pledge, lien or other
priority interest on all or any part of its existing or future assets, or allow any lien or other priority interest to arise on such assets
(except for liens arising in the normal course of transactions in accordance with legal provisions).
(3) The borrower shall provide the debtor’s audited
or (if there are no audited semi-annual financial statements at that time) unaudited semi-annual financial
statements and audited annual
financial statements prepared by qualified accountants to the lender as soon as they are ready. The semi-annual financial
statements shall
be submitted to the lender no later than 90 days after the end of the half financial year, The annual financial statements must be submitted
to
the lender no later than 120 days after the end of the financial year.
(4) The borrower shall immediately provide the lender
with other financial or operational information related to the borrower as reasonably requested by the
lender upon request.
(5) The borrower undertakes that it will only use
the credit funds in any way that will not cause it or any other person (including any person participating in
this credit facility, whether
as a management agent, arranger, issuer, lender, underwriter, consultant, investor or otherwise) to violate sanctions, or directly or
indirectly lend, pay, or otherwise provide the credit funds to any subsidiary, joint venture partner or other person, Unless compliance
with such commitments
results in a violation of any applicable Chinese laws and regulations.
(6) The borrower shall ensure that no part of the
credit funds is directly or indirectly used for payments that may result in a violation of any applicable anti
bribery and anti-corruption
laws.
(7) The borrower shall comply with all other commitments
(if any) in the special credit terms.
(8) The borrower shall promptly report to the lender
the status of internal related party transactions with a total amount of more than 10% of its net assets at
that time, and provide detailed
information necessary to enable the lender to understand and satisfy the relationship between the borrower and the relevant
contractual
parties, as well as the nature, transaction volume, scale, and pricing mechanism of such internal related party transactions within the
group.
(9) The borrower shall comply with the borrower’s
commitments listed in Article 21 of the Interim Measures for the Management of Working Capital Loans
issued by the China Banking and Insurance
Regulatory Commission on February 12, 2010.
(10) The borrower shall open a fund withdrawal account
with the lender, or (if the fund withdrawal account is opened at a bank other than the lender)
immediately provide the lender with information
on the inflow and outflow of funds from such account upon request.
3
Governing law:
This letter is governed by and interpreted in accordance
with Chinese law.
Jurisdiction:
The borrower agrees to accept the jurisdiction of
the court where the lender’s main place of business is located. The lender also has the right to file a lawsuit
against the borrower in
any other court with jurisdiction regarding this letter of authorization.
Loci solutionis:
The place of performance of this letter of authorization
is the location of the lender’s main place of business.
Contact information and delivery:
The borrower confirms that the contact information
address (including address, email, fax number) listed in this letter of authorization or notified
to the lender in writing, and the contact
information address (including address, email, fax number) of its or (if applicable) its delivery agent, is the
contact information for
receiving notices or documents under or related to this letter of authorization or the credit, And the contact information for
the court
or arbitration institution to serve litigation or arbitration legal documents in litigation (including but not limited to first instance,
second
instance, retrial, execution) and arbitration proceedings.
For the purpose of this clause, the borrower’s
contact information is as follows:
Address: Room 511, Building 1, Chuangzhi Space,
No. 2966 Jinke Road, Pudong New Area, Shanghai, China
Email: penny.dai@jajiglobal.com
Fax: NA
If the borrower changes their contact information,
they shall notify the lender, relevant courts or arbitration institutions in writing in advance. For
lenders, relevant courts, or arbitration
institutions that have not received a written notice of change, their service in accordance with the original
contact information of the
borrower before the change shall still be deemed effective. The borrower shall bear the adverse consequences caused by
inaccurate contact
information or changes in contact information without prior written notice.
Notices, documents, litigation or arbitration
legal documents sent to the borrower’s designated contact information shall be deemed delivered at the
earliest of the following times:
(a) if delivered by personal delivery, the delivery date shall be deemed as the delivery date; (b) If delivered by
registered mail, express
delivery, express delivery, or other postal methods, the third day after mailing (with a postmark as proof) shall be the date
of delivery;
(c) If delivered by email or fax, the delivery date shall be the date displayed by the sender’s email or fax system as having been sent.
The
borrower hereby confirms that the lender has informed them of these terms and related risks, and the borrower has fully understood
and
independently decided to accept the constraints of these terms.
4
Without affecting our rights under any other document
related to this matter, we may disclose any information provided by or related to you to any member
of the HSBC Group, any transferee
or potential transferee of any part of the credit, any supplier of our bank, or any creditor of your company on a
confidential basis and
to the extent permitted by applicable Chinese law.
This credit offer is valid until the end of business
on September 13, 2023 (the “Final Acceptance Date”). You may accept this credit offer within the
aforementioned period.
If it is not accepted by the deadline, this credit offer will be deemed invalid (unless otherwise agreed by our bank).
Please arrange for your authorized signatory to sign
a copy of this letter of authorization and return it to our bank as a sign of your understanding and
acceptance of the terms and conditions
of this letter of authorization.
By signing a copy of this letter of authorization
and returning it to our bank, you shall be deemed to have recognized the credit facilities under this letter of
authorization as uncommitted.
Any content under this letter of authorization, including any terms related to prerequisites, representations and warranties,
commitments
or events of default (if any), shall not prejudice our bank’s unilateral suspension or cancellation of any unused credit facilities at
any time Do
not allow the use of any unused credit facilities or the right to demand repayment of any credit facilities (including immediate
cash guarantees for expected
and contingent liabilities) in accordance with the provisions of this letter of authorization.
We look forward to establishing a mutually beneficial
and lasting business relationship with you.
Best regards!
HSBC Bank (China) Limited Shanghai Branch
Title:
Authorized Signatory:
Accept the above credit letter
JAJI (Shanghai) Co., Ltd.
Authorized Signatory:
(Seal):
Date:
5
Special credit terms
RMB Revolving Loan Facility
Application
This credit facility can only be used to meet the
borrower’s working capital needs, including (1) the purchase of goods, raw materials, and production
materials, (2) remuneration, wages,
fees, and other expenses, and (3) other working capital needs recognized by the lender.
Credit usage conditions
(a) The currency used for the credit is RMB.
(b) The borrower may submit a credit application
form and content satisfactory to the lender at least three working days in advance of the proposed credit use
date to apply for credit
use.
(c) The term of each loan must be one, three, or
six months, or such other term as the lender may agree, and the cumulative term of its extension or renewal
shall not exceed 12 months,
unless otherwise agreed upon by the lender and the borrower, and the agreed term shall comply with relevant laws and
regulations.
Interest
The applicable interest rate for each loan shall
be determined by the lender and borrower prior to the credit use date and (if applicable) renewal date of the
loan, and shall be included
in the loan credit use application and (if applicable) renewal notice.
Default interest
The borrower shall pay default interest at the following
rate for overdue payments (including those not paid at the request of the lender) under this credit
facility or loan funds not used for
the purposes listed in this letter, from the due date (including that date) or (as the case may be) embezzlement date
(including that
date) to the actual payment date (including before and after judgment):
(a) Overdue payment: 150% of the applicable interest
rate for the loan mentioned above; or
(b) Appropriation of funds: 200% of the applicable
interest rate for the loan mentioned above.
Early repayment
The borrower may, with the prior consent of the lender,
notify the lender at least five working days in advance to fully repay a loan or partially repay the
loan.
Loan fund disbursement
The disbursement of loan funds should comply with
the provisions of general credit terms.
For the purpose of general credit terms, the payment
limit for “bank entrusted payment” is RMB 0 or its equivalent currency.
Non-working day
If the due date of any payable under or in connection
with this credit facility is not a working day, the due date shall be adjusted to the previous working day.
6
General credit terms
1. Illustration
The following terms apply to the bank facilities
granted to the borrower by HSBC Bank (China) Limited (acting through any or more branches) (the “Bank”)
and form an integral
part of the credit letter applicable to the borrower, as amended from time to time (including special credit terms and attachments (if
any),
the “Credit Letter”).
If the main text of the letter of authorization is
inconsistent with the special credit terms of a certain credit facility, the special credit terms of that credit
facility shall prevail
for that credit facility (but without prejudice to the bank’s right to unilaterally suspend or cancel any unused credit facility at any
time,
not allow the use of any unused credit facility, or demand repayment of any credit facility in accordance with the provisions of
this credit letter (including
requiring immediate cash guarantee for expected and contingent liabilities).
2. Definition
and Interpretation
2.1 Definition
In this Terms and Conditions and Credit Letter:
“Loan” refers to, in relation to
a certain credit facility, the outstanding principal balance of the loan or disbursement issued or to be issued under that credit
facility
or (as the case may be) at that time.
“Electronic channels “refer to
(a) the HSBC Group’s electronic banking system; (b) Regarding the acceptance, discount, or margin application of electronic
commercial
bills, the bill market infrastructure recognized by the People’s Bank of China; And/or (c) any electronic platform used by banks, borrowers,
and/or any other person to make or receive any instructions, claims, or other communications regarding any trade facility.
“Fixed Interest Date” means, in
relation to a particular Interest Period:
(a) If it is EUROBOR, the first two TARGET days of
the first day of the period;
(b) If it is HIBOR, LPR, or SHIBOR, the first day
of the period;
(c) If it is LIBOR, the first two London working
days of the first day of the period;
(d) If it is TIBOR, the first two Tokyo working days
of the first day of the period,
In any case, if the above market practices differ
from those in the relevant interbank market, the fixing date will be determined by the lender based on the
market practices in the relevant
interbank market (if the quotation is usually given by leading banks in the relevant interbank market on different dates, the
fixing date
will be the last of these dates).
“Tokyo Business Day “refers to
the day on which banks generally open for business in Tokyo (excluding Saturdays and Sundays).
7
“EURIBOR “means, in relation to
the use of a certain credit facility or (if applicable) the use of funds, the following interest rates quoted at 11:00 am on the
interest
date for a period equal to the interest period of the euro and the use of the credit facility or (if applicable) use of funds:
(a) The applicable screen interest rate; or
(b) (If there is no applicable screen interest rate
for the interest period of the use of the credit or (if applicable) the use of the funds, the calculated screen
interest rate for the
use of the credit or (if applicable) the use of the funds, or the interest rate reported by the lender that is applicable to the borrowing
of
Euro funds in the relevant interbank market for the relevant period (assuming that the lender is requesting and accepting reasonable
market amounts of Euro
deposits provided by interbank banks for the relevant period); or
(c) (If there is no applicable screen interest rate
for the currency in which the credit facility is used or (if applicable) the funds are used) the interest rate
quoted by the lender for
the relevant period in the interbank market applicable to the borrowing of euro funds (assuming that the lender is requesting and
accepting
a reasonable market amount of euro deposits provided by interbank banks for the relevant period),
If any such interest rate falls below zero, then
EURIBOR will be considered zero.
“Working day” refers to the day
on which banks generally open for business in China.
“HIBOR “means, in relation to the
use of a certain facility or (if applicable) the use of funds, the following interest rates quoted at 11:00 am on the fixing
day for a
period equal to the interest period of Hong Kong dollars and the use of such facility or (if applicable) funds:
(a) The applicable screen interest rate; or
(b) (If there is no applicable screen interest rate
for the interest period of the use of the credit or (if applicable) the use of the funds, the calculated screen
interest rate for the
use of the credit or (if applicable) the use of the funds, or the interest rate reported by the lender that is applicable to the Hong
Kong dollar
funds that can be borrowed in the relevant interbank market for the relevant period (assuming that the lender is requesting
and accepting a reasonable market
amount of Hong Kong dollar deposits provided by interbank banks for the relevant period); or
(c) (If there is no applicable screen interest rate
for the currency in which the credit facility is used or (if applicable) the funds are used) the interest rate
quoted by the lender that
is applicable to the Hong Kong dollar funds it can borrow in the relevant interbank market for the relevant period (assuming the
lender
is requesting and accepting a reasonable market amount of Hong Kong dollar deposits provided by interbank banks for the relevant period),
If any such interest rate falls below zero, then
HIBOR will be considered zero.
“HSBC Group “means HSBC Holdings
plc, its subsidiaries, related companies, affiliates and organizations, and any of their branches; HSBC Group
members or institutions
should provide corresponding explanations.
“Overseas person “refers to an
individual holding a foreign passport (excluding a Chinese passport) or other person established outside of China.
“Interest Period “refers to each
period determined under these terms and conditions for calculating credit interest.
8
“LIBOR “means, in relation to the
use of a certain credit facility or (if applicable) the use of funds, the following interest rates quoted at 11:00 am on the
interest
date for a period equal to the interest period of the credit facility or (if applicable) the use of funds in the same currency as the
interest period of the
credit facility or (if applicable) the use of funds:
(a) The applicable screen interest rate; or
(b) (If there is no applicable screen interest rate
for the interest period of the use of the credit or (if applicable) the use of funds, the calculated screen interest
rate for the use
of the credit or (if applicable) the use of funds, or the rate reported by the lender The interest rate applicable to the borrower’s borrowing
of
funds in the relevant interbank market for the relevant period using the credit facility or (if applicable) using the currency of the
funds (assuming that the
lender requests and accepts a reasonable market amount of the credit facility or (if applicable) deposits using
the currency of the funds provided by interbank
banks for the relevant period); or
(c) (If there is no applicable screen interest rate
for the currency in which the credit is used or (if applicable) the currency in which the funds are used, the
interest rate quoted by
the lender for the period in which the credit can be borrowed in the relevant interbank market or (if applicable) the currency in which
the funds are used (assuming that the lender is requesting and accepting a reasonable market amount of the credit provided by the interbank
for the relevant
period or (if applicable) deposits in the currency in which the funds are used),
If any such interest rate falls below zero, LIBOR
will be considered zero.
“LPR”, unless otherwise specified
in the special credit terms, refers to:
(a) For a certain credit usage (excluding credit
usage under paragraph (b) below), the loan market quoted interest rate for RMB loans for the corresponding
period specified in the special
credit terms or (as the case may be) credit usage application, as announced by the National Interbank Funding Center of China
on the applicable
interest rate date or (if not announced on that date) the latest published before that date; and
(b) In terms of the daily overdraft balance or daily
balance of funds used on a certain day, the loan market quoted interest rate for a one-year RMB loan
published by China’s National Interbank
Funding Center on that day or (if not published on that day) the latest published before that day.
“London working day “refers to
the day on which commercial banks generally open for business in London (including interbank lending) (excluding
Saturdays and Sundays).
“Screen interest rate” refers
to:
(a) In the case of EURIBOR, on page EURIBOR01 of
the Thomson Reuters screen (or any replacement page of Thomson Reuters that displays interest rates)
or on appropriate pages of other
information services that replace Thomson Reuters from time to time that publish interest rates (without correction,
recalculation, or
republication by the administrator) The Eurointerbank offered interest rate for the relevant period managed by the European Money Markets
Institute (or any other person responsible for managing this rate). If the page or service of the agreement no longer provides services,
the lender may, after
consultation with the borrower, designate other pages or services that display relevant interest rates;
(b) In the case of HIBOR, the Hong Kong interbank
offered rate for the relevant period displayed on the HKABHIBOR page of the Reuters screen (or any
replacement page of Reuters that displays
relevant interest rates) or on the appropriate page of other information services that may be published by Reuters
from time to time regarding
interest rates. If the page or service of the agreement no longer provides services, the lender may, after consultation with the
borrower,
designate other pages or services that display relevant interest rates; and
9
(c) In terms of LIBOR, the London Interbank Offered
Rate (LIBOR) for the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the
Thomson Reuters screen (or any replacement
page of Thomson Reuters that displays relevant interest rates) or other information services that replace
Thomson Reuters from time to
time, managed by ICE Benchmark Administration Limited (or any other person responsible for managing such interest rates).
If the page
or service of the agreement no longer provides services, the lender may, after consultation with the borrower, designate other pages or
services
that display relevant interest rates.
(d) In terms of TIBOR, the Tokyo Interbank Offered
Rate for the relevant period displayed on page 17097 of Thomson Reuters screen and designated as
Japanese yen TIBOR, managed by Ippan
Shadan Hojin JBA TIBOR Administration (or any other person responsible for managing this rate). If the screen
page is replaced, does not
exist, or no longer provides services, the lender may specify other pages or services that display relevant interest rates.
“Person” refers to an
individual, enterprise, company, legal person or unincorporated entity.
“SHIBOR” refers to:
(a) For the use of a certain credit facility
(excluding the use of credit facilities under paragraph (b) below), the Shanghai Interbank Offered Rate (SIBOR) for
RMB loans with a
term equivalent to the interest period of the credit facility, published by the National Interbank Funding Center of China on the
applicable
fixed interest date or (if that day is not a working day) the previous working day; and
(b) As for the daily overdraft balance or
daily balance of funds used on a certain day, the Shanghai Interbank Offered Rate (SIBOR) applicable to overnight
RMB lending
announced by China’s National Interbank Funding Center on that day or (if that day is not a working day) the previous working
day,
And,
(i) If any such interest rate falls below zero, SHIBOR
will be considered zero; And
(ii) If the financing cost exceeds SHIBOR at the
discretion of the bank, SHIBOR will be considered as the designated financing cost by the bank.
“Credit use” refers to the withdrawal
or use of loans, overdrafts, or other facilities, or the extension or renewal of loans, overdrafts, or other facilities.
“Credit Use Date” refers to the
date on which the credit is used.
“Application for Credit Use” refers
to the application or request for credit use.
“Standard Trade Terms” means
the bank’s standard trade terms (as amended from time to time). The borrower can obtain, read, and print the standard trade
terms through
www.gbm.hsbc.com gtrfstt, or obtain them from their account manager. The “customer” mentioned in the standard trade terms refers
to the
borrower.
10
“TARGET2” refers to the Trans
European Automated Real time Gross Settlement Express Transfer, which was put into use on November 19, 2007 and uses
a single shared platform.
“TARGET Day” refers to the day
on which TARGET2 provides Euro payment settlement.
“Overdraft” refers to the overdraft
granted or to be granted under the overdraft facility, or (as the case may be) the outstanding principal balance of such
overdraft at
that time.
“TIBOR” means, in relation to
the use of a certain credit facility or (if applicable) the use of funds, the following interest rates quoted at approximately 11
a.m.
on the interest date for a period equal to the interest period of Japanese yen and the use of such credit facility or (if applicable)
funds:
(a) The applicable screen interest rate; or
(b) (If there is no applicable screen interest rate
for the interest period of the use of the credit or (if applicable) the use of funds, the calculated screen interest
rate for the use
of the credit or (if applicable) the use of funds, or the interest rate quoted by the lender for borrowing yen funds in the relevant interbank
market for the relevant period (assuming that the lender is requesting and accepting reasonable market amounts of yen deposits provided
by interbank banks
for the relevant period); or
(c) (If there is no applicable screen interest rate
for the currency in which the credit facility is used or (if applicable) the funds are used) the interest rate
quoted by the lender that
is applicable to the borrowing of Japanese yen funds in the relevant interbank market for the relevant period (assuming the lender is
requesting and accepting a reasonable market amount of Japanese yen deposits provided by interbank banks for the relevant period),
If any such interest rate falls below zero, then
TIBOR will be considered zero.
“Calculated screen interest rate”
refers to the interest rate (adjusted to the same decimal places as the relevant screen interest rates) calculated on a straight-
line
basis between EURIBOR, HIBOR, LIBOR, or TIBOR for the use of a certain credit facility or (if applicable) the use of funds:
(a) The screen interest rate applicable for
the longest period of interest period shorter than the use of the credit or (if applicable) the use of funds (during
which there is
an applicable screen interest rate); and
(b) The screen interest rate applicable to
the shortest period of interest period exceeding the use of the credit or (if applicable) the use of funds (during which
there is an
applicable screen interest rate),
The currency in which the credit facility is used
or (if applicable) the funds are used shall be reported at 11am on the interest rate fixing day.
“Foreign exchange rate” refers
to the exchange rate used in the relevant foreign exchange market at the time when one currency is exchanged for another
currency, as
determined by the bank. Such decision by the bank is final and binding on the borrower.
“Relevant interbank market” refers
to the Chinese interbank market (in the case of SHIBOR, LPR or RMB), the European interbank market (in the case of
EURIBOR or Euro), the
Hong Kong interbank market (in the case of HIBOR or HKD), the London interbank market (in the case of LIBOR or USD), or the
Tokyo interbank
market (in the case of TIBOR or JPY).
11
“Central Bank” refers to the People’s
Bank of China (including its successors).
“China” refers to the People’s
Republic of China.
2.2 Interpretation
(a) Any reference to any agreement or document refers
to that agreement or document as amended, transferred, supplemented, extended or restated from time
to time.
(b) Any reference to any provision of laws and regulations
refers to such provision as may be amended or reissued from time to time and includes any
substitute provision.
(c) Words in the singular form include their plural
form, and vice versa.
(d) The equivalent amount of currency A and currency
B shall be calculated at any time based on the purchase price of currency A announced by the bank.
(e) The terms and conditions in the special credit
terms of a certain type of credit under a certain credit segment (if applicable) only apply to that type of
credit under that credit segment
(if applicable).
(f) In this credit letter, any reference to China
does not include the following specific jurisdictions in China: Hong Kong Special Administrative Region,
Macau Special Administrative
Region, and Taiwan.
(g) If there are two or more borrowers:
(i) The
‘borrower’ should be interpreted accordingly;
(ii) This letter of authorization is binding on each
borrower, even if it is not binding on any other borrower or any other person who is bound by it;
(iii) If all or part of the terms of this letter
of credit cannot be enforced by any borrower at any time for any reason (including the failure of any borrower
to sign this letter of
credit), this letter of credit shall remain binding on and enforceable against other borrowers as if this letter of credit had been made
solely
by such other borrowers;
(iv) The bank may handle any matter separately with
any borrower, including releasing the borrower’s liability to any extent, without affecting the
liability of any other borrower; And
(v) Any borrower shall not enjoy the rights or remedies
enjoyed by other borrowers.
3. Calculation
and payment of interest and other expenses
3.1 All accrued interest or other fees periodically
charged under the credit line shall be charged on a daily basis based on the actual number of days on a 360
day basis. However, the calculation
of interest on amounts denominated in pounds sterling, Hong Kong dollars, Japanese yen, or Australian dollars shall be
charged on a 365
day basis on a daily basis based on the actual number of days.
3.2 The lender and borrower may separately agree
on interest rates for any credit facility, any credit use, or any time period, which shall be included in the
relevant credit use application
or (if applicable) renewal notice, interest letter, modification letter, or other documents with similar effects.
12
3.3 If any reference interest rate (such as LIBOR)
used in this letter of authorization is below zero, for the purpose of this letter of authorization, such interest
rate shall be deemed
to be equal to zero.
3.4
(a) The borrower shall pay the interest generated
from the use of each credit facility on the last day of each interest period under that credit facility. The
interest period for each
credit usage is equivalent to the initial term of the credit usage, or the duration agreed upon by the borrower and the bank and
included
in the special credit terms of the relevant credit or the credit usage application for the credit usage. The interest period for credit
use starts from the
date of credit use or (if already used) the last day of the previous interest period.
(b) Despite the provisions of paragraph (a)
above, if a certain credit use is or should be fully repaid, prepaid, or otherwise fully repaid, or declared to be
immediately due
and payable by the bank, the current interest period of the credit use shall end on the date of such repayment, prepayment, or
repayment or
(as declared by the bank) the date on which it should be paid.
(c) Despite the provisions of paragraph (a) above,
the borrower and the bank may separately agree on the interest payment arrangement for a certain credit in
the special credit terms of
the credit.
3.5 The borrower shall immediately pay the default
interest incurred under this credit letter upon request by the lender.
3.6 Unless otherwise agreed, the loan interest rates
under this letter of authorization are all annual interest rates and calculated using the simple interest
method. For the avoidance of
doubt, any unpaid interest (including default interest) shall be compounded based on the interest period or such period as the
lender
may reasonably determine, but shall immediately become due and payable at any time.
3.7 If a loan is fully or partially repaid before
its maturity date in accordance with this letter of authorization, the borrower shall, to the extent permitted by
laws and regulations,
pay prepayment compensation to the bank to compensate for the losses suffered by the bank due to its prepayment, that is, the interest
reasonably determined by the bank that would have been received for the remaining period if it had not been repaid by the borrower in
advance, Deducting
the income that the bank can obtain by depositing the corresponding funds in the interbank market after the borrower
pays off in advance. For the avoidance
of doubt, this clause does not apply to situations where early repayment compensation may not be
collected in accordance with relevant laws and regulations
(including but not limited to the Notice on Further Regulating Credit Financing
Charges to Reduce the Comprehensive Cost of Enterprise Financing (Yin
Bao Jian Fa [2020] No. 18) (including the provision as amended or
reissued from time to time).
4. Loan
disbursement, credit utilization, and repayment
4.1 The various and all facilities under the credit
letter are revolving credit facilities. Any funds already used under such credit can be renewed in accordance
with the terms of the credit
letter, and any credit that has been used and repaid can be reused on the first working day after repayment in accordance with the
terms
of the credit letter.
4.2 In terms of trade credit, although there may
be any contrary provisions in this letter of authorization, if the relevant transaction does not comply with the
bank’s operational requirements
for such credit, the bank may, in its sole judgment, refuse to allow withdrawals under the trade credit.
13
4.3 The borrower confirms that the credit application
submitted to the bank through electronic channels is a true and valid application made on behalf of the
borrower and is binding on the
borrower.
4.4 The bank may, at its discretion, allow the borrower
to use a certain credit facility in a currency different from the currency stated in this credit letter.
4.5 The credit application form is irrevocable and
once accepted by the bank, together with the credit letter, constitutes an agreement for the relevant credit. If
the application for credit
use is inconsistent with the credit letter, the credit use in the application for credit use shall prevail.
4.6 The borrower shall repay or settle the credit
use on the relevant maturity date, unless otherwise agreed in the relevant special credit terms.
4.7 The borrower shall not repay any credit in advance,
unless otherwise agreed in the relevant special credit terms.
4.8 The minimum amount approved for early repayment
of partial loans is RMB 1000000 or other amount agreed by the bank.
5. Use
5.1 The borrower shall strictly use the funds provided
by the bank under this credit letter in accordance with the purposes listed in the credit letter, and
comply with Chinese laws and regulations
on the use of credit funds. The borrower shall not use the credit funds for any purpose prohibited by relevant
Chinese laws and regulations,
including but not limited to using the credit funds for equity investments, or engaging in speculative operations in the
securities market,
futures market, real estate market, or other similar fields with the credit funds, or transferring the funds, or purchasing other financial
products for arbitrage.
5.2 If the borrower uses the credit facility under
this letter of authorization to purchase vehicles, they shall ensure that the proposed principal amount for each
credit facility used
to purchase vehicles does not exceed 70% of the price of the proposed vehicle as shown in the relevant vehicle purchase contract and/or
invoice.
6. Market
disruption/increased costs
6.1 Market disruption
(a) Subject to the consideration of paragraph
(c) below and any other basis agreed upon in the agreement, if a market disruption event occurs during any
interest period during which
a credit is granted, the interest rate for that credit period shall be the annual interest rate of the sum of the following interest
rates:
(i) Margin (if applicable); and
(ii) The annual interest rate notified to the borrower
by the lender as soon as practical and in any case no later than five working days before the interest
due and payable for that interest
period, which represents the cost of funds obtained by the lender from a reasonably selected source of funds to provide for
the use of
the credit.
(b) In this credit letter, “market disruption
event” refers to:
(i) Before or after noon on the fixed interest
date of the relevant interest period, there is no applicable screen interest rate or SHIBOR, and the calculated
screen interest rate
(if applicable) cannot be calculated, and the lender is unable to provide a quotation for determining LIBOR, EURIBOR, HIBOR,
SHIBOR,
or TIBOR for the relevant interest period; or
14
(ii) At 5pm on the first working day after the interest
date of the relevant interest period, the lender notifies the borrower that the cost of obtaining the
corresponding deposit in the relevant
interbank market exceeds LIBOR, EURIBOR, HIBOR, SHIBOR or TIBOR (as the case may be).
(c) If a market disruption event occurs and the lender
or borrower requests it, the lender and borrower shall engage in negotiations for a period not exceeding
30 days in order to reach an
agreement on an alternative benchmark for determining interest rates.
(d) For the avoidance of doubt, if no agreement is
reached on any alternative benchmark at the end of the 30 day negotiation period, the interest rate shall
continue to be determined in
accordance with Article 6.1 (a).
6.2 Increased costs
If any applicable laws or regulations (or their
interpretations) or any changes occur in the financial market of China (including but not limited to
when the loan interest rate is calculated
based on LPR), or due to the need to comply with any requirements of any regulatory agency/government
department (whether or not having
legal effect), and the bank believes that the above factors cause the provision of The bank reserves the right to
redefine any interest
rates, spreads, fees, and other charges contained in this letter of authorization in order to increase the cost of maintaining or
financing
the credit and/or reduce the net income obtained by the bank from the credit provided in this letter of authorization. Before reaching
an
agreement on the redefined interest margin, fees, other charges, or applicable benchmark interest rate, the bank may, after notifying
the borrower,
decide to charge the redefined interest or fees to compensate for the increased costs incurred by the bank and/or maintain
the bank’s net income. If
the changes in the above laws and regulations or the requirements of any regulatory agency/government department
have retrospective effect, the
borrower shall compensate the bank for any additional costs and/or decrease in the bank’s net income during
the retrospective period within fifteen
working days after receiving written notice from the bank. Unless the bank’s compensation requirements
conflict with the mandatory requirements
of relevant Chinese laws and regulations, the written notice issued by the bank regarding such
compensation requirements shall be conclusive
evidence of the compensation amount payable by the borrower to the bank.
7. Additional
guarantees
If in fact or in the opinion of the bank, the value
of the guarantees provided by the borrower or other guarantors for the credit facility under this letter of
authorization decreases, the
bank may request the borrower to provide additional guarantees in form and substance satisfactory to the bank.
The “guarantee” mentioned in this clause
includes both the guarantee of the property and the guarantee of the person. The “decrease in the value of
collateral” includes
but is not limited to a decrease in the absolute value of collateral due to a decrease in the market price of collateral, adverse changes
in
the creditworthiness of the guarantor, and a decrease in the guarantee limit or any form of cash guarantee amount or evaluation value
of collateral converted
into the credit currency due to exchange rate fluctuations.
15
8. Loan
fund disbursement
8.1 Unless otherwise specified in the special credit
terms, the disbursement of funds under the credit shall be carried out in accordance with this clause.
8.2 The use of credit granted under the working capital
credit line for borrowers should:
(a) (If the funds disbursed exceed the
“bank entrusted payment” payment limit specified in the special credit terms of the credit), the following “bank
entrusted
payment” terms shall apply; or
(b) In any other case, the following ‘borrower’s
self payment’ clause applies.
8.3 “Bank entrusted payment” refers to
if the bank receives the following documents three working days before the proposed credit use date, and confirms
after reviewing the
relevant transaction materials that the relevant transaction price has become due and payable and meets the agreed purpose of the
(relevant)
credit, The bank will pay the credit funds to the borrower’s loan issuance account on the proposed credit usage date and pay the credit
funds to the
borrower’s counterparty on the same day according to the borrower’s payment instructions:
(a) The original application for credit
use intended for credit use;
(b) A certified copy of the transaction
information (including but not limited to contracts and invoices related to the payment needs supported by the credit
funds) that proves
to be identical to the original; and
(c) The original of the entrusted payment
instruction instructing the bank to pay the credit funds to the relevant third-party counterparty.
8.4 The term “borrower’s independent payment”
refers to the bank distributing the relevant credit funds to the borrower’s loan disbursement account after
receiving the borrower’s credit
utilization application; The borrower can pay the credit funds to a third party on their own. The borrower shall provide the
bank with
evidence and supporting documents related to the use of credit funds under the “borrower’s independent payment” method upon
request.
8.5 Regarding the “bank entrusted payment”,
the borrower hereby promises to the bank as follows:
(a) The borrower, as the payment obligor
under the relevant transaction, shall bear full responsibility for the appropriateness and/or correctness of each
payment made under the
bank’s entrusted payment method. The bank’s review of transaction information and payment based on it does not exempt or
mitigate the
borrower’s responsibility.
(b) The borrower shall not instruct the
bank to pay any credit funds to the borrower’s account with the same name at another bank, unless the borrower’s
payment must be made
through the account with the same name at another bank and the borrower must provide documents satisfactory to the bank to ensure
that
the use of credit funds paid to the same name account at another bank complies with regulatory requirements.
(c) The borrower shall not split any single
credit use or payment into several smaller credit use or payment amounts for the purpose of avoiding the “bank
entrusted payment”
payment limit listed in the special credit terms of the (relevant) credit.
16
8.6 The borrower confirms that, without affecting
the bank’s other rights under this credit letter, the bank may from time to time (including but not limited to
any of the following situations)
review and modify the payment limit of “bank entrusted payment” and/or require any credit that would have been issued
through
“borrower’s independent payment” to be issued through “bank entrusted payment”:
(a) The unused balance of the borrower’s
previous credit use (if any) exceeds RMB 200000 (or equivalent foreign currency);
(b) The borrower divides a single credit
use or payment into several smaller credit use or payment payments to avoid the payment limit requirement of “bank
entrusted payment”;
(c) The borrower did not provide the bank
with evidence and supporting documents related to its use of credit through the “borrower’s independent payment”
method when
requested by the bank; or
(d) The borrower did not use the credit
funds as agreed in this letter, or there were other abnormal situations in the use of the credit funds.
9. Authorization
for fees, taxes, and deductions
9.1 The bank and the borrower shall each pay their
respective stamp duty for the credit facility.
9.2 All expenses incurred by the bank in modifying,
restructuring, or exercising the bank’s rights in response to the borrower’s request (including but not
limited to legal fees, but excluding
stamp duty) shall be fully compensated by the borrower.
9.3 All principal, interest, fees, and other expenses
shall be fully paid by the borrower, and the borrower shall not make any deduction or withholding of
taxes, levies, duties, or any other
nature from the amounts payable.
9.4 The bank may, at any time, offset any matured
debts owed by the borrower to the bank (including but not limited to principal, interest, and other fees and
payments due and payable
under or in connection with the credit letter) against any matured or undue debts owed by the bank to the borrower, regardless of
whether
the payment place, bookkeeping bank, or currency of the aforementioned debts are the same. The above offset does not require further instructions
from the borrower, nor does it require prior notice to the borrower, nor does the bank assume any responsibility towards the borrower
as a result. If the
currency of the above-mentioned debt is different, the borrower authorizes the bank to exchange any debt for the purpose
of the aforementioned offset based
on its usual foreign exchange rate in business.
10. Standard
Trade Terms
This letter of award and any requests regarding trade
services made in accordance with this letter of award will include standard trade terms as if they were
fully listed in this letter of
award or request. Borrower:
(a) Confirm that they have read and understood the
standard trade terms; as well as
(b) Agree that this letter of authorization and any
requests regarding trade services made in accordance with this letter of authorization will include standard
trade terms, which shall
apply to the trade services requested.
17
11. Transference
The bank has the right to transfer all or any part
of its rights and/or obligations under or in connection with this letter of credit to any person upon written
notice to the borrower (without
the borrower’s consent).
12. Related
party transactions
The Hong Kong Banking (Risk Acceptance Limit) Rules
(Chapter 155S) and its related regulations, as well as the China Banking and Insurance Regulatory
Commission’s Management Measures for
Related Party Transactions of Banking and Insurance Institutions (“Management Measures for Related Party
Transactions”), impose
certain restrictions on banks’ lending to individuals associated with the HSBC Group and providing loans with related party
transaction
nature. When accepting this letter of authorization, the borrower should inform the bank whether the borrower has any form of affiliated
relationship with the HSBC Group or whether the borrower is a “related party” as defined in the related party transaction management
measures. If the
borrower fails to provide the above notification, the bank will assume that the borrower has no related relationship
as mentioned above. If the borrower
experiences the aforementioned affiliated relationship after accepting this letter, the borrower shall
immediately notify the bank in writing.
13. Compliance
actions
The borrower is aware and agrees:
(a) Given the commitment of the HSBC Group to comply
with applicable laws and regulations related to financial crimes, banks or other members of the
HSBC Group may be required to take appropriate
action (“Compliance Action”) to prevent financial crimes (including but not limited to fraud, money
laundering, terrorism,
tax evasion, sanctions evasion, or other financial crimes), unless taking such action would result in the bank violating any applicable
Chinese laws and regulations.
(b) The bank or any member of the HSBC Group shall
not be liable to the borrower for taking compliance actions, including any delay or failure to fulfill the
bank’s obligations under this
credit letter caused by compliance actions.
18
Exhibit
10.23
No.:
Z2310LN15659080
Contract
for Loans of Working Capital
Bank
of Communications Co., Ltd.
No.:
Z2310LN15659080
Contract
for Loans of Working Capital
Important
Notes
Please
read the full text of this contract carefully, especially those articles marked with ▲▲. Please inquire the loaner in
case of any question.
Whereas,
the borrower applies to the loaner for the line of credit of current fund, both parties hereby enter into this contract through negotiations
to
clarify the obligations of each party.
Article
1. Definition
“Line
of credit” refers to the maximum amount of balance of loan (under the revolving line of credit) or total loan (under the one-time
line of credit) that
the loaner may issue to the borrower according to this contract. Such line of credit may be revolving or one-time
(to be used for one or several times) in
accordance with this contract.
“Revolving
line of credit” refers to the line of credit within which the borrower may apply for the loan for several times according to this
contract.
“One
time credit “refers to the borrower’s ability to apply for the use of the limit in one or multiple times as agreed in this contract
to obtain a loan, but
the cumulative amount of the loan withdrawn cannot exceed the agreed limit.
“Balance
of loan” refers to the sum of principal of the outstanding loan that the borrower obtains under this contract.
“Balance
of line of credit” refers to the balance of the line of credit deducted with the balance of loan (under the revolving line of credit)
or total loan
(under the one-time line of credit).
“Period
of line of credit” refers to the period for the loaner to issue the loan to the borrower according to the application by the borrower
and this
contract that it is in relation to the occurrence of loan but not the loan itself.
“Period
of loan” refers to the period of each loan that both parties determine in the corresponding Application for Use of Line of Credit
of Bank of
Communications (hereinafter referred to as Application for Use of Line of Credit).
“Pricing
benchmark” refers to the benchmark that the borrower and lender can choose to apply to the corresponding loan to determine the corresponding
loan interest rate, including but not limited to the following specific pricing benchmarks and other types of pricing benchmarks.
“Loan
Market Quotation Rate (LPR)” refers to the loan market quotation rate applicable to RMB loans issued by the National Interbank Funding
Center
on the 20th day of each month (postponed in case of holidays).
“Secured
Overnight Financing Rate (SOFR)” refers to the rate managed by Federal Reserve Bank of New York (or other entity taking over the
pricing
benchmark) and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative
page of other
information service institutions that display the pricing benchmark approved by the lender), Secured overnight financing
rate applicable to USD loans.
“Secured
overnight financing interest rate term reference interest rate (SOFR term interest rate)” refers to the interest rate managed by
CME Group
Benchmark Administration Limited (or other entity taking over the pricing benchmark) and issued by CME Group Benchmark Administration
Limited (or
any other entity taking over the pricing benchmark), The term SOFR reference rate of the secured overnight financing interest
rate applicable to USD loans
displayed on the corresponding page of Bloomberg/Referentiv financial telecommunications terminal (or the
alternative page of other information service
institutions approved by the lender to display the pricing benchmark).
2
“EURIBOR”
refers to the European Money Markets Institute (or other entity taking over the pricing benchmark) managed and displayed on the
corresponding
page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative page of other information service institutions approved
by the lender to display the pricing benchmark), Euro Interbank Offered Rate applicable to euro loans.
“Hong
Kong Interbank Offered Rate (HIBOR)” refers to the rate managed by the Hong Kong Association of Banks (or other entities that take
over the
pricing benchmark) and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminal (or the
alternative page of other
information service institutions that display the pricing benchmark approved by the lender), Hong Kong Interbank
Offered Rate applicable to Hong Kong
dollar loans.
“Tokyo
Risk Free Rate” refers to the Tokyo Risk Free Rate applicable to Japanese yen loans, which is managed by QUICK Benchmarks Co., Ltd.
(or
other entities taking over the pricing benchmark) and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications
terminals (or
the alternative page of other information service institutions approved by the lender that displays the pricing benchmark).
“Sterling
overnight average index reference term interest rate (TSRR)” refers to the interest rate managed and published by Intercontinental
Exchange
Benchmark Administration Limited (or other entities taking over the pricing benchmark), which is displayed on the corresponding
page of
Bloomberg/Refiniv financial telecommunications terminal (or the replacement page of other information service institutions that
display the pricing
benchmark approved by the lender), Term SONIA Reference Rate for sterling loans.
“London
Interbank Offered Rate (LIBOR)” refers to the rate managed by Intercontinental Exchange, Inc. (or other entities taking over the
pricing
benchmark) and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative
page of other
information service institutions approved by the lender to display the pricing benchmark), London Interbank Offered Rate
applicable to USD loans.
“Business
day of bank” and “business day” refer to the day on which banks at the place of the loaner operate the corporation
business, excluding legal
holidays and rest days (excluding those adjusted to be business days). If any issuance, repayment, interest
payment or maturity of loan lies at any non-
business day, it should be postponed to the next business day.
“Foreign
currency working day” means, with respect to the secured overnight financing rate (SOFR) or the term reference rate of the secured
overnight
financing rate (SOFR term interest rate), the U.S. government bond trading day (excluding Saturday and Sunday) recommended
by the Securities Industry
and Financial Markets Association (or its successor organization) to its member’s fixed income department;
The London Interbank Offered Rate (LIBOR) or
the sterling overnight average index reference term rate (TSRR) refers to the opening day
(excluding Saturday and Sunday) for general business of local
commercial banks in London; For the Euro Inter bank Offered Rate (EURIBOR),
it refers to the operation date of Euro payment and clearing of the second
generation pan European real-time automatic clearing system
(TARGET2); For the Hong Kong Interbank Offered Rate (HIBOR), it refers to the open
business day (excluding Saturday and Sunday) for general
business of local banks in Hong Kong; For Tokyo risk-free term interest rate (TORF), it refers to
the opening day for general business
of local banks in Tokyo (excluding statutory holidays and rest days).
“Related
person” refers to the authorized handler, agent, legal representative, responsible person, controlling shareholder or actual controller,
beneficial
owner and other direct or indirect related persons of the borrower.
3
“Business
related parties” refer to all parties to the transaction under the basic transaction contract and other relevant subjects related
to the transaction
other than all parties to the transaction, as well as all parties to the transaction, such transaction parties, their
authorized handlers, agents, legal
representatives, responsible persons, controlling shareholders or actual controllers, beneficial owners,
etc.
Terms
including affiliate, affiliate transaction and major investor should contain the same meaning with those contained in the Accounting
Standards for
Business Enterprises No.36 – Disclosure of Affiliates (CK [2006] No.3) published by the Ministry of Finance,
as well as its subsequent revisions.
ESG
risks: environmental, social, and governance risks.
Article
2. Use of Line of Credit
2.1 Each
time when needing to use the line of credit, the borrower should submit the application to the loaner at least 5 business days in advance.
The
borrower should fill in the Application for Use of Line of Credit to obtain the approval by the loaner before using the line
of credit.
▲▲2.2 Use
of the line of credit must meet following conditions:
(1) Balance
of loan (under the revolving line of credit) or total loan (under the one-time line of credit) is within the line of credit;
(2) Amount
of applied loan is within the balance of line of credit;
(3) Application
date and issuance date are within the period of line of credit;
(4) Period
of loan and maturity date of loan comply with this contract;
(5) Guarantee
contract (if any) under this contract is effective and surviving, and while the guarantee contract is in the form of mortgage contract
and/or
pledge contract, the secured real right is already set and surviving;
(6) The
borrower has handled procedures to obtain licenses, approvals and registrations from the government necessary for the application for
the loan,
and such licenses, approvals or registrations are surviving;
(7) No
serious adverse change occurs in the operation status or financial status of the borrower after this contract takes effect;
(8) Application
by the borrower meets relevant rules and regulations of the loaner;
(9) The
borrower does not violate this contract;
(10) Payment
mode of the loan meets this contract and if the loaner is entrusted to make the payment, the loaner should agree with the payment;
(11) If
the loan is provided in any foreign currency, the borrower should provide the certificate providing that the loan meets relevant policies
on the
management of foreign currency, including but not limited to the valid purpose certificate or registration document of foreign
currency;
(12) The
borrower has appointed the dedicated fund withdrawal account as required by the loaner and has signed the account management agreement.
▲▲2.3 If
the loaner agrees to issue the loan, the final issuance information should be subject to the column of Application for Use of Line
of Credit
printed by the bank. Application for Use of Line of Credit should be regarded as the Loan Certificate.
4
▲▲2.4 If
the currency of the Application for Use of Line of Credit is different from that of the line of credit, it should be converted
at the exchange rate
published by Bank of Communications Co., Ltd. in the beginning of each day only for the purpose of recognizing the
balance of line of credit. If there is no
available exchange rate, it should be converted by the exchange rate reasonably determined
by Bank of Communications Co., Ltd.
▲▲2.5 After
the borrower becomes the shareholder of the guarantor or the “actual controller” defined by the Company Law, the loaner
may suspend or
cancel the line of credit not used by the borrower until the guarantor provides the resolution made by its Board of Shareholders
(General Meeting) about
securing the borrower that is acceptable to the loaner.
Article
3. Interest Rate and Payment of Interest
3.1 Basic
regulations on determining the interest rate
3.1.1 The
annual interest rate (simple interest) of the loan under this contract shall be agreed by both parties in the Application for the Use
of Quota after
negotiation each time the quota is used. If the annual interest rate value is determined according to the pricing benchmark,
the annual interest rate value shall
be calculated according to the pricing benchmark agreed in the Application for the Use of Quota
plus (minus) points (1 basis point is 0.01 percent, and 1
percentage point is 100 basis points).
3.1.2 If
both parties agree to apply the fixed interest rate in the Application for Use of Quota, and the specific value is recorded in the fixed
interest rate
value field, The specific interest rate of each loan shall be subject to the value recorded in the Fixed Interest Rate
Value field of the Application for the Use of
the Quota (where the loan currency is RMB, such specific value shall be determined on the
basis of the specific value of the pricing benchmark applicable on
the applicable date of the pricing benchmark agreed in the Application
for the Use of the Quota (hereinafter referred to as “the pricing benchmark value”) and
according to the plus (minus) point
value agreed in the Application for the Use of the Quota). If no specific value is recorded in the Fixed Interest Rate Value
field, the
specific interest rate of each loan shall be determined based on the applicable pricing benchmark value on the applicable date of the
pricing
benchmark agreed in the Application for the Use of Quota and according to the plus (minus) point value agreed in the Application
for the Use of Quota.
If
both parties agree to apply the floating interest rate in the Application for the Use of Quota, the specific interest rate of each loan
shall be determined
on the basis of the pricing benchmark value applicable to the applicable date of the pricing benchmark agreed in
the Application for the Use of Quota,
according to the plus (minus) point value, interest rate floating rules, interest rate floating
cycle, interest rate floating cycle unit and the floating start date of a
specific date (if necessary) agreed in the Application for
the Use of Quota.
3.1.3 If
the currency is RMB, daily interest rate = monthly interest rate/30, monthly interest rate = annual interest rate/12; if the currency
is HKD, GBP
and AUD, daily interest rate = annual interest rate/365; if the currency is USD, Euro, JPN and other foreign currencies accepted
by the loaner, daily interest
rate = annual interest rate/360.
▲▲3.2 Interest
rate of loan
If
both parties agree on the application of fixed interest rate in the Application for the Use of Quota and the fixed interest rate value
field records a
specific value, the interest rate at the time of each loan disbursement shall be subject to the fixed value. If it is
agreed in the Application for Use of Quota that
a fixed interest rate is applicable and no specific value is recorded in the fixed interest
rate value field, and it is agreed in the Application for Use of Quota
that a floating interest rate is applicable, the loan interest
rate for each loan is determined based on the pricing benchmark value applicable to the “Pricing
Benchmark Application Date”
agreed in the Application for Use of Quota and the plus (minus) point value agreed in the Application for Use of Quota. The
“applicable
date of pricing benchmark” shall be taken as the T day, and the pricing benchmark value rules applicable to the T day shall be implemented
in
accordance with Article 3.5.1 of the Contract.
5
3.3 Adjustment
of interest rate
3.3.1 Once
the interest rate is recorded in the Application for Use of Line of Credit as fixed, such interest rate should apply to the loan
within the period
of loan.
▲▲3.3.2 Once
the interest rate is recorded in the Application for Use of Line of Credit as fluctuating, the interest rate adjustment date should
be
determined according to the interest rate fluctuation rules, interest rate fluctuation cycle, interest rate fluctuation cycle unit
and specific beginning date of
fluctuation (if necessary) agreed in the Application for Use of Line of Credit, and the adjusted
interest rate should apply since the interest rate adjustment
date.
3.3.2.1 If
the benchmark interest rate is adjusted within the period of loan, the adjustment cycle of interest rate should be calculated by choosing
“fluctuating at bookkeeping date” or “fluctuating at specific date” in the “interest rate fluctuation rules”
since the “bookkeeping date” or “specific date”. The
column of interest rate fluctuation cycle should be filled
with the quantity of interest rate fluctuation cycles, the column of interest rate fluctuation cycle unit
may be filled with day or month.
If the quantity of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “day”,
then the adjustment
date of benchmark interest rate should be the adjustment date of loan interest rate; if the quantity of interest
rate fluctuation cycle is “3” while the interest rate
fluctuation unit is “day”, then the adjustment date of
loan interest rate should be every third day since the “bookkeeping date” or “specific date”; if the
quantity
of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “month”, then the adjustment
date of loan interest rate should be the
end of every month since the “bookkeeping date” or “specific date”;
if the quantity of interest rate fluctuation cycle is “3” while the interest rate fluctuation
unit is “month”,
then the adjustment date of loan interest rate should be the end of every third month since the “bookkeeping date” or “specific
date”, and so
on.
3.3.2.2 The
loan interest rate on the loan interest rate adjustment date shall be determined on the basis of the pricing benchmark value applicable
on the
loan interest rate adjustment date. Unless otherwise agreed in the Contract or the two parties agree to adjust the plus (minus)
point value, the plus (minus)
point value of the interest rate shall still be subject to the plus (minus) point value of the interest
rate agreed in the corresponding Application for Use of
Quota of the loan. The “loan interest rate adjustment date” shall be
the T date, and the pricing benchmark value rules applicable to the T date shall be
implemented in accordance with Article 3.5.1 of this
Contract.
▲▲3.3.3 If
the pricing benchmark applicable to the corresponding loan is cancelled or the corresponding issuing agency stops publishing, both parties
shall negotiate and adjust the interest rate of the loan separately, but the adjusted interest rate shall not be lower than the applicable
interest rate at that time; If
the two parties have not reached an agreement on the adjusted interest rate for more than one month since
the pricing benchmark is cancelled or ceased to be
published, the lender has the right to declare that the loan is due ahead of schedule.
▲▲3.3.4 Both
parties may adjust the fluctuation extent or increase (decrease) value of the corresponding loan interest rate through negotiation at
each
adjustment date of loan interest rate.
3.4 The
default interest rate of overdue loans shall be increased by 50% according to the interest rate agreed herein, and the default interest
rate of
misappropriated loans shall be increased by 100% according to the interest rate agreed herein. If the floating rate loan is subject
to adjustment of the loan
pricing benchmark, the lender has the right to adjust the penalty interest rate applicable to each loan accordingly,
and the new penalty interest rate shall apply
from the date of loan interest rate adjustment agreed in the corresponding Application
for Use of Quota.
6
3.5 Calculation
of interest
3.5.1 According
to the different applicable pricing benchmarks, the rules for taking the value of the applicable pricing benchmark value on the T date
(i.e. the “pricing benchmark application date”, “loan interest rate adjustment date” and “repricing date”)
agreed in Article 3.2, 3.3.2.2 and 9.3.3.2 of the
Contract are as follows:
If
the pricing benchmark is the loan market quoted rate (LPR), the pricing benchmark value applicable to T day is the latest published loan
market
quoted rate (LPR) value before T day.
If
the pricing benchmark is the guaranteed overnight financing rate (SOFR), when T day is a foreign currency working day, the pricing benchmark
value
applicable to T day is the value of the guaranteed overnight financing rate (SOFR) corresponding to the fifth foreign currency
working day before T day
displayed on the corresponding financial telecommunications terminal page; If Day T is a non foreign currency
working day, the pricing benchmark value
applicable to Day T is the value of the guaranteed overnight financing rate (SOFR) that should
be applied on the latest foreign currency working day before
Day T (that is, the value of the guaranteed overnight financing rate (SOFR)
that is displayed on the page of the corresponding financial telecommunications
terminal and corresponds to the fifth foreign currency
working day before the latest foreign currency working day).
If
the pricing benchmark is the guaranteed overnight financing interest rate term reference interest rate (SOFR term interest rate), London
Interbank
Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Tokyo risk-free term interest rate (TORF) or sterling overnight
average index reference
term interest rate (TSRR), when T day is a foreign currency working day, the applicable pricing benchmark value
on T day is the corresponding financial
telecommunications terminal page The pricing benchmark value corresponding to the second foreign
currency working day before T day; If Day T is a non
foreign currency working day, the pricing benchmark value applicable to Day T shall
be the pricing benchmark value applicable to the latest foreign currency
working day before Day T (that is, the pricing benchmark value
displayed on the corresponding financial telecommunications terminal page and
corresponding to the second foreign currency working day
before the latest foreign currency working day).
If
the pricing benchmark is Hong Kong Interbank Offered Rate (HIBOR), and T day is a foreign currency working day, the pricing benchmark
value
applicable to T day is the value of Hong Kong Interbank Offered Rate (HIBOR) corresponding to T day displayed on the corresponding
financial
telecommunications terminal page; When T day is a non foreign currency working day, the applicable pricing benchmark value
on T day is the value of Hong
Kong Interbank Offered Rate (HIBOR) displayed on the corresponding financial telecommunications terminal
page and corresponding to the latest foreign
currency working day before T day.
When
the pricing benchmark value displayed on the corresponding financial telecommunication terminal page is greater than or equal to 0, the
pricing
benchmark value used to determine the loan interest rate under this contract shall be determined according to the pricing benchmark
value actually displayed
on the corresponding financial telecommunication terminal page; When the pricing benchmark value displayed on
the corresponding financial
telecommunication terminal page is less than 0, the pricing benchmark value used to determine the loan interest
rate under this contract shall be determined
by 0.
3.5.2 Normal
interest=interest rate agreed herein × Loan amount × Number of days occupied.
The
number of days occupied shall be calculated from the loan granting date (inclusive) to the due date (exclusive). If the due date is not
a working day,
it shall be postponed. The postponed period shall be included in the number of days occupied, and the interest shall still
be calculated according to the
contract.
3.5.3 The
penalty interest of overdue loans and misappropriated loans shall be calculated according to the amount of overdue or misappropriated
loans
and the actual number of days (from the date of overdue or misappropriated loans (inclusive) to the date of principal and interest
settlement (exclusive)).
7
3.5.4
If there are many decimal places of interest/penalty interest calculated, the lender will retain two decimal places according to the
rounding method.
▲▲3.6 If
the borrower repays the loan in advance or the loaner withdraws the loan in advance according to this contract, the corresponding interest
rate
shall still be subject to that specified in this contract.
3.7 If
the loan currency is other than RMB, US dollar, euro, Hong Kong dollar, Japanese yen and British pound, the loan pricing benchmark type,
daily
interest rate calculation rules and the pricing benchmark value determination rules applicable to the pricing benchmark application
date, loan interest rate
adjustment date and repricing date shall be subject to the provisions of Article 17 of the Contract.
Article
4. Payment of Loan
4.1 If
the issuance account appointed by the borrower is the dedicated loan issuance account opened at the loaner, the issuance and payment
of loan
should be handled through the account, which may only be used to issue and externally pay the loan fund and only sell the certificate
of “Application for
Settlement Business” but may not be used to handle any check, draft, bank acceptance or any other settlement.
When handling the allocation of loan fund
independently, the borrower must handle procedures at the counter of the bank of deposit. The
deposit interest of the account should be accounted into the
repayment account of the borrower.
4.2 When
drawing the loan according to this contract, the borrower should clarify the payment mode (entrusted payment by loaner or independent
payment by borrower) and only one mode is applicable in each time of drawing.
4.3 In
the mode of entrusted payment by loaner, the loaner will, after receiving the payment entrustment from the borrower and issuing the loan
according to this contract, pay the loan fund directly to the counterparty of the borrower meeting the purpose specified in this contract
through the account of
the borrower.
If
the amount of a single payment is beyond the limit of the independent payment or any condition specified in Article 19.3, the mode of
entrusted
payment should apply.
When
choosing the mode of entrusted payment by the loaner, the borrower should submit the loaner with the Application for Use of Line of
Credit,
corresponding payment entrustment and other materials required by the loaner (including but not limited to the commercial
contract, invoice and receipt) to
clarify the amount of loan and the receiver and amount of payment, while the amount of drawn loan should
equal to that of the payment.
▲▲ If
the payment planned by the borrower does not comply with this contract or the corresponding commercial contract, or contains any other
defect,
the loaner may refuse to make the payment and return the payment entrustment submitted by the borrower.
▲▲ If
the loaner agrees but fails to make the payment or the payment is returned due to any incorrect information provided by the borrower,
the
borrower should submit relevant documents and materials containing the correct information within the period regulated by the loaner,
and the loaner should
be expected from any liability for any delay or failure of payment.
8
4.4 In
the mode of independent payment by the borrower, after the loaner issues the loan fund to the account of the loaner according to this
contract, the
borrower pays the fund to the counterparty of the borrower meeting the purpose specified in this contract independently.
When
choosing the mode of independent payment by the borrower, the borrower should submit the loaner with the Application for Use of Line
of Credit,
description of fund usage and other materials required by the loaner. The borrower should report the payment situation
of the loan fund to the loaner. The
loaner may check whether the loan is paid for the regulated purpose by analyzing the account, verifying
the certificate and conducting the on-site survey, and
the borrower shall cooperate with such verification by the loaner.
Article
5. Repayment of Loan
5.1 The
borrower should make the repayment according to the date and amount specified in the corresponding Application for Use of Line of
Credit.
▲▲5.2 Without
the written consent from the loaner, the borrower may not repay the loan in advance.
▲▲5.3 The
repayment schedule of principal and interest agreed by the borrower and the loaner in the Application for Use of Line of Credit
is the true
intention of both parties through negotiations on a voluntary basis. Under the repayment arrangement chosen by both parties,
the principal should prior to the
interest in the repayment without influencing the repayment liability of the borrower for the payable
interest, and the borrower may not set up any plea
against the repayment of payable interest. The borrower should be responsible for
repaying all the principal and interest under any repayment arrangement.
▲▲5.4 When
the amount repaid by the borrower is insufficient to cover all the debt of the borrower:
(1) It
should be firstly used to repay the overdue amount. If the principal and interest are overdue for less than 90 days, the balance after
such repayment
should be firstly used to repay the outstanding interest, default interest or compound interest before any overdue principal;
if the principal and interest are
overdue for more than 90 days, the balance after such repayment should be firstly used to repay the
outstanding principal and then the overdue interest,
default interest or compound interest;
(2) If
there are several debts of the borrower (including debts of the borrower owed to the loaner under any other contract), the loaner may
determine the
repayment sequence of each debt, only if such sequence does not violate any applicable law, rule, regulation, system or
any compulsory regulatory provision
of the loaner. The loaner should inform the borrower of the repayment result, unless otherwise regulated.
Article
6. Representation and Guarantee of Borrower
6.1 The
borrower is legally incorporated and surviving, possesses all the necessary capacities, perform obligations under this contract it its
own name
and assumes civil liabilities.
6.2 Signing
and performing this contract are the true intention of the borrower that they must obtain all the necessary approvals, permissions and
authorizations to contain no legal defect.
6.3 The
borrower conducts production and operation in compliance with laws and regulations, possesses the constant operation capability and legal
repayment source, involves no serious environmental or social risk, possesses no serious adverse credit record and no officer of the
borrower possesses any
adverse record.
6.4 All
the documents, statements, materials and information provided by the borrower to the loaner when signing and performing this contract
are
authentic, accurate, complete and valid. The borrower does not conceal any information that may affect its financial status and solvency,
and there is no
serious adverse change to the financial status of the borrower since the issuance of the latest financial statement.
9
▲▲6.5 The
borrower and its related persons and business related parties do not belong to the enterprises or individuals in the sanctions list issued
by the
United Nations and relevant countries, organizations and institutions, or in the list of risks related to terrorism and anti money
laundering issued by Chinese
government departments or competent authorities; It is not located in countries and regions sanctioned by
the United Nations and relevant countries,
organizations and institutions.
▲▲6.6 The borrower guarantees to comply with the national anti money laundering laws, regulations and relevant policies, not to assist
others in
money laundering, terrorist financing, tax evasion, bank debt evasion, cash withdrawal, telecommunications fraud, illegal fund-raising
and other illegal
activities, and actively cooperate with the lender to carry out various anti money laundering work such as customer
identification, transaction record keeping,
customer identity and transaction background due diligence, large sum and suspicious transaction
reports, And provide relevant supporting materials as
required by the lender.
6.7
According to the ESG risks faced by the borrower’s industry, if the borrower belongs to Class A or Class B customers, the borrower promises:
(1)
The borrower’s internal management documents related to ESG risks comply with laws and regulations and are effectively implemented;
(2)
The borrower has no major litigation cases involving ESG risks;
(3)
All behaviors and performances of the borrower related to ESG risks are compliant.
Article
7. Rights and Obligations of Loaner
7.1 The
loaner may withdraw the principal and interest (including compound interest and default interest of overdue and embezzled loan) of the
loan
according to this contract, collect the payable expense from the borrower, withdraw the loan in advance at its own discretion depending
on the fund status of
the borrower, and may exercise other rights under laws, regulations or this contract.
▲▲7.2 The
loaner only conducts the formal examination of materials provided by the borrower during the performance of this contract that the loaner
should be exempted from any liability for the failure to complete entrusted payment if the borrower provides any false, inaccurate or
uncomplete material or
the borrower makes the payment in violation to this contract.
▲▲7.3 The
loaner should issue the loan and make the payment according to this contract. The loaner should be exempted from the liability if the
loaner
fails to issue the loan or make the payment due to any cause below, but the loaner should send a notice to the borrower in time:
the issuance account
appointed by the borrower is frozen, the account of the receiver is frozen, there is any force majeure, communicaiton
or network fault, or the system fault of
the loaner, unless otherwise regulated in this contract.
▲▲7.4 According to the regulatory requirements to be followed by the lender, the lender will conduct a dynamic assessment of the borrower’s
risk of
money laundering, terrorist financing, tax evasion and other risks, and has the right to take one or all of the measures agreed
in Article 9.2 when it believes
that the borrower and the borrower’s business involved in the transaction instructions are suspected
of high risk of money laundering, terrorist financing, tax
evasion.
Article
8. Obligations of Borrower
8.1 The
borrower should repay the principal and interest of loan under this contract according to the time, amount, currency and interest rate
specified in
this contract and the corresponding Application for Use of Line of Credit.
10
The
fund collection account appointed by the borrower should be used to collect the corresponding sales income or planned repayment fund.
If the
corresponding sales income is not settled in cash, the borrower should ensure to allocate it to the fund collection account upon
receiving it. The borrower
should provide the cash flow of the fund collection upon the request from the loaner.
8.2 The
borrower should use the line of credit for the purpose specified in this contract and use the loan for the purpose specified in the corresponding
Application for Use of Line of Credit but may not embezzle the loan for any other purpose, or the investment in fixed assets,
equity or any production or
operation prohibited by the government.
The
borrower should draw the loan fund in the mode agreed by both parties but not avoid the entrusted payment by the loaner by breaking up
the whole
into parts; in the mode of independent payment by the borrower, the borrower should use the loan within the reasonable period
required by the regulatory
authority of the loaner, and the payment of loan fund should meeting this contract.
▲▲8.3 The
borrower shall bear the settlement fees (if any) for the loan fund payment (including the lender’s entrusted payment and the borrower’s
independent payment), and the specific fees shall be subject to the laws, regulations, rules, regulatory provisions and the then effective
Directory of Bank of
Communications Service Fees published by the lender.
If
the loan fund payment does not involve cross-border payment, the lending account is a special loan issuing account. When the loan fund
payment
(including the lender’s entrusted payment and the borrower’s independent payment) is made, if the collection account does not
belong to the account opened
in the Bank of Communications, the fund payment may be made through the People’s Bank of China’s payment
system or the local exchange system. If the
loan granting account is not a special loan granting account, and when the loan fund is paid
(including the lender’s entrusted payment and the borrower’s
independent payment), if the collection account is an account of another
bank in another place, the fund payment is handled through the payment system of
the People’s Bank of China.
If
the loan fund payment involves cross-border payment, the loan fund payment may be handled through the SWIFT system or other systems.
▲▲8.4 The
borrower should cooperate with the loaner in the management of loan payment and the supervision and inspection of the use of loan and
operation situation of the borrower, provide the financial statement, use record and material of the loan fund, information of affiliate
and affiliate transaction,
environmental and social risk report, other materials and information necessary for the after-loan risk management
required by the loaner, and shall ensure
the authenticity, integrity and accuracy of such documents, materials and information.
▲▲8.5 Under
either circumstance below, the borrower should send a written notice to the loaner at least 30 days in advance and take no action before
repaying the principal and interest under this contract or providing the repayment plan or guarantee recognized by the loaner:
(1) The
borrower sells, presents, leases, lends, transfers, mortgages, pledges or disposes in any other manner all or a large part of the assets
or important
assets;
(2) The
operation mechanism or ownership organization of the borrower suffers from any great change, including but not limited to the contracting,
lease, association, corporate system transformation, joint stock cooperation system transformation, sales, combination (merger), joint
venture (cooperation),
separation of enterprise, establishing of subsidiary, equity transfer, ownership transfer, and decrease of capital.
(3) The
external investment or increase of debt financing of the borrower exceeds the agreed limit.
11
▲▲8.6 The
borrower shall notify the lender in writing within 7 days of the occurrence or possible occurrence of the following events and cooperate
in
submitting relevant certificates according to laws and regulations, regulatory provisions and the lender’s requirements:
(1) The
borrower or its affiliate revises the Memorandum of Association, changes the name, legal representative (responsible person), domicile,
mailing
address or business scope of the enterprise, or makes any decision that affects the finance or human resource greatly;
(2) The
borrower, its affiliate or guarantor plans to apply for bankruptcy or may be or has been applied by the creditor for bankruptcy;
(3) The
borrower or its affiliate is involved in any serious lawsuit, arbitration or administrative measure, or its major assets or the guarantee
under this
contract is executed with the property preservation or any other compulsory measure, or the security of its major assets or
the guarantee under this contract is
or may be affected or the value is or may be decreased;
(4) The
borrower or its affiliate provides any guarantee to any third party to affect its economic status, financial status or capability in
performing
obligations under this contract significantly;
(5) The
borrower or its affiliate enters into any contract with significant influence on its operation and financial status;
(6) The
borrower repays the immature debt in advance or repay other mature debt firstly, or increases any form of guarantee for any other existing
debt,
or makes any arrangement with the similar effect or enters into any relevant document;
(7) The
borrower, its affiliate or guarantor is shut down, closed, dissolved, suspended, cancelled, or the business license is withdrawn;
(8) The
borrower or its affiliate, major investor of the borrower or its affiliate, legal representative (responsible person), director or officer
of the
borrower or its affiliate is missing or involved in any violation, to any law, regulation or rule of stock exchange, or suffers
from any abnormal change;
(9) The
borrower or its affiliate suffers from serious difficulty or deterioration of financial status in the operation, or there is any other
event with adverse
influence on the operation, financial status, solvency or economic status of the borrower or its affiliate;
(10) There
is any affiliated transaction and its amount reaches or exceeds 10% of the latest audited net assets;
(11) Before
repaying all the debts under this contract, the borrower becomes or may become the shareholder or the “actual controller”
defined by the
Company Law of the guarantor;
(12) The
borrower or its affiliate causes any liability accident or is made public by the media by violating any law, rule, regulation, national
policy or
industrial standard;
(13) The
borrower or its affiliate encounters any safety or environment protection accident;
(14) The
relationship between the affiliate and the borrower is changed;
(15) The
borrower or its affiliate encounters any significant equity change;
(16) The
opinion issued by the external audit of the borrower on its financial statements is not the standard unreserved opinion;
(17) The
borrower is or may be investigated, punished or taken with other similar measures by the competent authority as it violates the law or
rule
and/or regulatory requirement;
(18) The
borrower or its affiliate is listed to be sanctioned by the UN, EU or US, or the country or area where the borrower or its affiliate
resides in is
listed to be sanctioned by the UN, EU or US;
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(19)
There is any other event with serious adverse influence on the solvency of the borrower or its affiliate.
(20)
According to the lender’s environmental and social risk assessment standards, if the borrower is a customer with environmental and social
risks
classified as A or B, the borrower has or may have any of the following events:
①
Various permits, approvals and approvals related to environment, society and risks during commencement, construction, operation and shutdown;
②
The assessment and inspection of the environmental and social risks of the borrower by the environmental and social risk regulatory authority
or its
recognized institution;
③
Supporting construction and operation of environmental facilities;
④
Discharge and compliance of pollutants;
⑤
Safety and health of employees;
⑥
Major complaints and protests from neighboring communities against the borrower;
⑦
Major environmental and social claims;
⑧
Other major circumstances that the lender considers relevant to ESG risks.
▲▲8.7 In
case of any change of guarantee under this contract that is adverse to the creditor’s right of the loaner, the borrower should
provide other
guarantee recognized by the loaner in time.
The
“change” specified here includes but not limited to: merger, separation, shutdown, dissolution, suspension, cancellation,
withdrawal of business
license, and applying or being applied for bankruptcy of the guarantor; significant change of the operation or
financial status of the guarantor; the guarantor is
involved in any serious lawsuit, arbitration or administrative measures, or the major
assets is taken with property preservation or other compulsory measure;
the security of the guarantee is or may be affected; the value
of the guarantee is or may be decreased, or taken with measures of property preservation, such
as sealing; the guarantor or its legal
representative (responsible person) or officer violates any law, regulation or applicable rules of stock exchange; the
guarantor (when
it is an individual) is missing or dead (announced to be dead); the guarantor breaches the guarantee contract; there is any dispute between
the guarantor and the borrower; the guarantor requires cancelling the guarantee contract; the guarantee contract does not take effect,
or is invalid or cancelled;
the secured real right is not set up or take effect; any other event affecting the security of the creditor’s
right of the loaner.
▲▲8.8 The
borrower promises: during the period since the signing date of this contract to the date at which the principal, interest and relevant
expenses
of the loan under this contract are paid off, the financial index, external rating, as well as production and operation qualification/license
of the borrower will
always comply with this contract, and such production and operation qualification/license will pass the annual inspection
if necessary.
8.9 The
Borrower guarantees that the Borrower and its employees and agents will not provide, give, ask for or receive any form of material benefits
(including but not limited to cash, physical cards, tourism, etc.) or other non-material benefits other than those agreed herein to the
Lender or its employees in
any form; Do not use the funds or services provided by the lender in any form, directly or indirectly, for
activities related to corruption or bribery; If the
borrower is aware of any violation of this article, it shall provide clues and relevant
information to the lender in a timely, truthful, complete and accurate
manner, and cooperate with the lender on relevant matters as required
by the lender.
13
8.10 According
to the lender’s environmental and social risk assessment standards, if the borrower is a customer with environmental and social risks
classified as A or B, the borrower shall assume the following obligations:
(1)
Establish and improve the internal management system of environmental and social risks, and specify the responsibilities, obligations
and
punishment measures of relevant responsible personnel of the borrower;
(2)
Establish and improve the emergency response mechanism and measures for environmental and social risk emergencies;
(3)
Establish special departments and/or designate special personnel to be responsible for environmental and social risks;
(4)
Cooperate with the lender or a third party recognized by the lender in the assessment and inspection of the borrower’s environmental
and social risks;
(5)
Respond appropriately or take other necessary actions when the public or other interested parties strongly question the borrower’s performance
in
controlling environmental and social risks;
(6)
Urge the borrower’s vital related parties to strengthen management and prevent the environmental and social risks of related parties
from being
transmitted to the borrower;
(7)
Perform other obligations that the lender considers relevant to the control of environmental and social risks.
▲▲Article
9. Adjustment of Line of Credit, Acceleration of Maturity and Repricing of Risk
9.1 Any
event below should be deemed as the “early maturity event” of this contract:
(1) The
borrower does not repay the principal or interest of the loan according to the Application for Use of Line of Credit under this
contract;
(2) The
borrower makes any false representation or guarantee under this contract;
(3) Any
event that should be notified as specified in Article 8.6 occurs and influences or may influence the security of the creditor’s
right of the loaner;
(4) Any
law, rule or regulatory policy is changed to the extent that the loaner will or may violate the law or rule if it issues the loan according
to this
contract;
(5) While
performing the contract with the loaner or any third party, the borrower conducts any breach or the debt may be or has been announced
to be
mature in advance;
(6) The
borrower breaches any other article of this contract.
(7)
According to the lender’s environmental and social risk assessment standards, if the borrower’s environmental and social risks are classified
as A or
B, the borrower has any of the following events:
①
The borrower is punished by relevant government departments due to poor environmental and social risk management;
②
The borrower is strongly questioned by the public and/or the media due to poor environmental and social risk management, and it is verified
that there
are relevant situations;
③
The borrower violates the obligations related to environmental and social risk management agreed with the lender in other contracts.
9.2 In
case of any “early maturity event”, the loaner may take any one, several or all measures below:
(1) To
lower, suspend or cancel the line of credit under this contract;
14
(2) To
stop issuing the loan unused by the borrower;
(3) To
stop paying the loan unused but already withdrawn by the borrower;
(4) To
require the borrower to supplement the issuance and payment conditions of loan to the loaner with the regulated period;
(5) To
require the borrower to change the payment mode as required by the loaner;
(6) To
reprice against the risk in executing the loan according to Article 9.3;
(7) To
announce that the principal of loan already issued under this contract becomes mature and require the borrower to repay the principal
and interest
of all the mature loan immediately.
9.3 In
view of the production and operation situation of the borrower when signing this contract, both parties have determined the interest
rate and its
adjustment through negotiations. The borrower agrees that in case of any “early maturity event”, the loaner
may reprice against the risk in executing the loan
according to this article.
9.3.1 The
repricing mentioned above consists of two modes, including repricing and directly raising the loan interest rate. The specific mode is
agreed by
both parties in Article 21.
9.3.2 “Negotiated
reprice” means that the loaner may require the borrower to negotiate with the loaner within the regulated period to raise the loan
interest rate and both parties will determine the “repricing date” and relevant interest rate in the form of supplemental
agreement.
9.3.3 “Direct
raise of loan interest rate” means that the loaner may directly raise the loan interest rate according to this article and Article
21.
9.3.3.1 Since
the loan sends a notice of “repricing date” to the borrower, the loan interest rate should be applied to each loan that the
borrower has not
repaid by the “repricing date”.
9.3.3.2 If
the loan currency is RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound, the increased loan interest rate of each
loan
shall be determined according to the plus (minus) point value agreed in Article 21.2.1 on the basis of the applicable pricing benchmark
value on the
“repricing date”. The “repricing date” shall be the T date, and the pricing benchmark value rules applicable
to the T date shall be implemented in accordance
with Article 3.5.1 of the Contract.
9.3.3.3
If the loan currency is other than RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound, the increased loan interest
rate shall
be determined according to Article 21.2.2.
9.3.4
After the lender executes risk repricing as agreed above, the new interest rate will be executed from the “repricing date”.
On the basis of this
interest rate, it is still subject to floating adjustment as agreed in Article 3 of this contract. If both parties
agree to change relevant agreements, the agreement
after the change shall prevail. If the loan is overdue (including the borrower’s failure
to repay on time or the lender’s announcement of early maturity) or
misappropriated, the default interest rate for overdue and misappropriated
loans shall be determined on the basis of the new interest rate (including the
interest rate after floating adjustment as agreed in this
contract), and the interest rate for compound interest shall be adjusted accordingly.
9.3.5
The implementation of “risk repricing” shall not be deemed or interpreted as the lender waiving other rights stipulated by
laws and regulations and
agreed in this contract. The Lender has the right to take other measures to protect creditor’s rights in accordance
with laws and regulations and this Contract,
including but not limited to the measures agreed in Article 9.2.
15
▲▲Article
10. Breach
10.1 If
the borrower does not repay the principle or interest of the loan in time or uses the loan for any purpose not included in this contract,
the loaner
will collect the interest at the default interest rate of overdue or embezzled loan, and collect the compound interest of
the outstanding interest. If the default
interest rate is adjusted according to this contract, the compound interest rate should also
be adjusted correspondingly.
10.2 If
the borrower does not repay the principle or interest of the loan in time, it should assume the calling expense, lawsuit expense (or
arbitration
expense), preservation expense, announcement expense, execution expense, attorney’s fee, travel expense and other expenses
of the loaner in realizing the
creditor’s right.
▲▲Article
11. Deduction
11.1 The
borrower authorizes that in case of any payable principal, interest, default interest, compound interest or any other expense of the
loan, the
loaner may deduct the fund in any account of the borrower opened at any branch of Bank of Communications Co., Ltd. to repay
the amount mentioned
above.
11.2 After
such deduction, the loaner should inform the borrower of relevant account number, contract number, number of Application for Use of
Line of
Credit, deduction amount and remaining debt.
11.3 If
the deducted fund is insufficient to repay all the debt of the borrower, the debt to be repaid by such fund should be determined according
to this
contract.
11.4 If
the currency of the deducted fund is different from that of the debt to be repaid, the deducted fund should be converted at the exchange
rate
published by Bank of Communications Co., Ltd. at the time of deduction. If any settlement, sales or exchange procedure of foreign
currency is necessary, the
borrower is obliged to assist the loaner and assume the risk in exchange rate.
Article
12. Notice
12.1 Contact
details provided by the borrower in this contract (including mailing address, telephone number and fax number) are all authentic and
valid.
In case of any change of any contact detail, the borrower should send/deliver such change to the mailing address offered by the
loaner in this contract
immediately. Such change should take effect when the loaner receives the notice of change.
12.2 Unless
otherwise specified in this contract, the loaner may send a notice to the borrower in any manner below. The loaner may choose the manner
it
thinks fit but is relieved from any liability for the error, omission or delay caused by the postal service, fax, telephone or any
other communication system. If
the loaner chooses several manners, the one delivering the notice to the borrower, the fastest should
prevail.
(1) If
the loaner chooses the announcement, the date at which the loaner publishes the announcement on its website, online bank, telephone bank
or
outlet should be deemed as the delivery date;
(2) If
the loaner chooses the personal delivery, the date at which the borrower signs to confirm the reception should be deemed as the delivery
date;
(3) If
the loaner chooses the postal service (including express delivery, ordinary mail and registered mail) to send the notice to the latest
mailing address
of the borrower that the loaner knows, the third day (in the same city)/the fifth day (in different cities) since the
sending date should be deemed as the
delivery date;
16
(4) Fax,
mobile phone short message or other electronic communication methods shall be delivered to the borrower’s fax number, mobile phone number
or e-mail address designated by the borrower that the lender knows most recently, and the date of sending shall be deemed as the date
of service. The
aforementioned delivery refers to the entry of relevant information into the server terminal of the service provider
without taking the actual display of
relevant information on the client terminal as the standard.
12.3 The
borrower agrees that, unless the lender receives the borrower’s written notice on changing the mailing address, the mailing address filled
by the
borrower in this contract is the address where the court serves judicial documents and other written documents to the borrower.
The scope of application of
the above address for service includes but is not limited to the first instance of civil litigation, objection
to jurisdiction and reconsideration, second instance,
retrial, remand for retrial and enforcement procedures.
During
the dispute resolution process of this contract, the court has the right to serve judicial documents and other written documents to the
borrower
through any communication method stipulated in Article 12.2. The court has the right to choose the communication method it deems
appropriate, and is not
responsible for any transmission errors, omissions, or delays that may occur in postal, fax, telephone, telex,
or any other communication system. If the court
chooses multiple communication methods simultaneously, the one that reaches the borrower
faster shall prevail.
12.4
This clause is an independent dispute resolution clause in the contract. If the contract is invalid, canceled or terminated, the validity
of this clause
will not be affected.
▲▲Article
13. Disclosure and Confidentiality
13.1
With respect to the information and materials of the borrower obtained in the signing and performance of this contract, the loaner may
not violate
any law, rule or regulatory requirement to use such information and materials. It should assume the confidentiality liability
but not disclose such information
and materials to any third party, except for below following circumstances:
(1) Disclosure
required by applicable laws and regulations;
(2) Disclosure
required by judicial departments or regulatory agencies in accordance with the law;
(3) When
the borrower fails to repay the loan principal and/or pay interest in full and on time, the lender shall disclose to the lender’s external
professional advisor and allow the lender’s external professional advisor to use it on a confidential basis in order to realize the creditor’s
rights under this
contract;
(4) Reasonable
implementation of other actions to safeguard public interests or the legitimate rights and interests of borrowers;
(5)
The borrower agrees or authorizes the lender to disclose.
13.2 The
borrower confirms that it has signed the Credit Information Inquiry and Provision Authorization. The loaner may inquire, use and
keep the
credit information of the borrower within the scope regulated by the authorization.
13.3 Besides
the circumstance specified in Article 13.1 and Article 13.2, the borrower further agrees Bank of Communications Co., Ltd. to use or
disclose
the information and materials of the borrower under following circumstances, including but not limited to the basic information, credit
transaction
information, adverse information and other relevant information and materials of the borrower, and is willing to assume all
the consequences thereof:
17
Bank
of Communications Co., Ltd. may disclose such information and materials on a confidentiality basis to the business outsourcing institution,
third
party service provider, other financial institutions and other institutions or individuals that the loaner deems necessary, including
but not limited to other
branches or wholly-owned subsidiaries of Bank of Communications Co., Ltd. for the purpose below: ① It
conducts the line of credit business or any relevant
business, such as promoting the line of credit business of Bank of Communications
Co., Ltd., calling for the debt from the borrower and transferring the
creditor’s right of the line of credit business; ②
The loaner provides or may provide the borrower with the new product or service, or further provides the
service.
Whether
Article 13.3 is applicable should be subject to Article 24 of this contract.
Article
14. Applicable Laws and Dispute Solution
Laws
of the People’s Republic of China (for the purpose of this contract, excluding laws of Hong Kong, Macau and Taiwan) apply to this
contract. Any
dispute under this contact should be brought to the competent court at the place of the loaner, unless otherwise regulated
in this contract. Both parties should
continue to perform those articles not involved in the dispute during the period of dispute solution.
Article
15. Effectiveness of the contract, loan nature and contract composition
15.1 This
Contract shall come into force after being signed (or sealed) by the legal representative (principal) or authorized representative of
the Borrower
and affixed with the official seal, and signed (or sealed) by the legal representative (principal) or authorized representative
of the Lender and affixed with the
special seal for contract. If the special seal for contracts affixed by the lender is the special
seal for offshore credit business contracts (or other special seals
for contracts with the word “offshore”), the loans under
this contract are offshore business loans.
15.2 The
Application for Use of Line of Credit and other relevant documents and materials signed under this contract are indispensable
parts of this
contract.
15.3 Application
for Use of Line of Credit is the supplement to this contract. Unless otherwise regulated in the Application for Use of Line of
Credit,
rights, obligations and other matters of the borrower and the loaner should still be subject to this contract.
Article
16. Specific Content of Line of Credit
16.1
Currency of line of credit: RMB; Amount in words: ten million yuan; It can be used in √ currency ☐ line currency
and other currencies acceptable
to the lender; This line belongs to ☐ Revolving line ☐ One time line (can be used for many
times) √ One time line (only used once).
16.2
Purpose of credit line: business turnover.
16.3
The credit term is from May 8, 2023 to May 8, 2024.
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Article
17. Interest Rate
If
the loan currency is other than RMB, US dollar, euro, Hong Kong dollar, Japanese yen and British pound, the applicable pricing benchmark
types,
daily interest rate calculation rules and pricing benchmark value determination rules applicable to the corresponding loan on
the applicable date of the pricing
benchmark and the adjustment date of the loan interest rate are agreed as follows:
___________________________________________/___________________________________
Article
18. Account
18.1
The borrower appoints the following account to be the issuance account. The account ☐ is √ is not the dedicated loan
issuance account opened at
the loaner. If both parties otherwise regulate in the Application for Use of Line of Credit, such Application
for Use of Line of Credit should prevail.
Account name:
CLPS Shanghai Co., Ltd.
Account number:
310066865018010213932
Bank
of deposit: Bank of Communications Zhangjiang Sub-branch
18.2
The borrower appoints that:
(1) The
repayment account:
Account name:
CLPS Shanghai Co., Ltd.
Account number:
310066865018010213932
Bank
of deposit: Bank of Communications Zhangjiang Sub-branch
(2) The
fund collection account:
Account name:
CLPS Shanghai Co., Ltd.
Account number:
310066865018010213932
Bank
of deposit: Bank of Communications Zhangjiang Sub-branch
Article
19. Issuance, Payment and Repayment of Loan
19.1
The period of each loan withdrawn under this contract should be no longer than 12 √ months ☐ days, and the maturity date
of all the loan should be
no later than November 8, 2024
19.2
The limit of independent payment under the Contract is:√ RMB ☐/(foreign currency) zero thousand yuan or equivalent
in other currencies.
19.3
The entrusted payment by loaner is compulsory once any condition below is met:
___________________________________________/__________________________________________
______________________________________________________________________________________
19.4
In the mode of independent payment by the borrower, the borrower should report the payment of loan fund to the loaner within 15 days
since the
issuance of loan.
19
Article
20. Financial Restriction, External Rating, Production and Operation Qualification/License
20.1
Limit on the external investment by the borrower is RMB 90 million; limit on the increase of debt financing is RMB 90 million.
20.2 Specific regulations on
the financial indexes of the borrower:
(1)
________________________________________/___________________________________________
(2)
____________________________________________________________________________________
(3) ____________________________________________________________________________________
20.3 Specific regulations on
the external rating:
(1)
________________________________________/___________________________________________
(2) ____________________________________________________________________________________
20.4 Specific regulations on
the production and operation qualification/license of the borrower:
(1)
________________________________________/___________________________________________
(2) ____________________________________________________________________________________
▲▲Article
21. Repricing of Risk
21.1
This contract adopts the first repricing mode below: (1) Repricing through negotiations; (2) Direct raising the loan interest rate.
21.2
Once the “direct raising the loan interest rate” is adopted:
21.2.1
If the loan currency is RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound,, the increased interest rate plus
(minus) points
shall be: ☐ no point plus or minus ☐ plus percentage points ☐ minus / percentage points. If a loan is otherwise agreed, the increase (decrease) value of the
interest rate after the increase of the loan
shall be subject to the records in the application for the use of the applicable limit.
21.2.2
If the loan currency is other than RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound, the loan interest rate after
the
increase is:
________/_______________
Article
22. Contact Details
Contact
details of the borrower to receive the notice specified in Article 12:
Mailing address:
2F, Building 18, 498 Guoshoujing Road
Addressee:
Yang Xiaofeng
Post code:
201203
Tel:
Mobile:
13701602419
Fax:
E-mail:
paulyang@clpsglobal.com
20
Article
23. Counterparts
This
contract is made with Three copies. Both parties and the guarantor (if any) holds one copy (ies) respectively.
Article
24. Miscellaneous
24.1
Both parties agree that Article 13.3 √applies ☐ does not apply to this contract.
24.2
According to the lender’s environmental and social risk assessment standards, the borrower ☐ belongs to a customer √ not
classified as A or B in
terms of environmental and social risks.
24.3
The payment method of the loan under the Contract shall be subject to the Application for Use of Quota signed by the Lender.
Borrower:
CLPS Shanghai Co., Ltd.
Legal
representative (responsible person): Yang Xiaofeng
Address:
Room 26C01, 828-838 Zhangyang Road, China (Shanghai) Free Trade Area
Loaner:
Bank of Communications Co., Ltd. Shanghai Zhangjiang Branch (Sub-branch)
Responsible
person: Cao Pei
Mailing
address: 560 Songtao Road, Pudong New Area, Shanghai, China
The
borrower has read this contract and the loaner has made detailed descriptions as
required by the borrower. The borrower possesses
no objection or doubt when signing this
contract and understands all the articles, especially the meaning and legal consequence of
those marked with ▲▲.
(This
page is the signature page of the Working Capital Loan Contract, and there is no text below)
21
Borrower: (Seal)
Loaner: (Seal)
(Seal: ChinaLink Professional
Services Co., Ltd.)
(Seal: Line of Credit Business
Contract Seal of Shanghai
Zhangjiang Sub-branch of Bank
of Communications Co., Ltd.)
Legal representative
(responsible
person) or authorized
representative
(Signature or seal)
Legal representative (responsible
person) or authorized
representative
(Signature or seal)
Date:
Nov 3, 2023
Date:
Nov 8, 2023
22
Exhibit 10.24
No.: Z2310LN15659134
Contract
for Loans of Working Capital
Bank
of Communications Co., Ltd.
No.:
Z2310LN15659134
Contract for Loans of Working Capital
Important Notes
Please read the full text of this contract carefully,
especially those articles marked with ▲▲. Please inquire
the loaner in case of any question.
Whereas, the borrower applies
to the loaner for the line of credit of current fund, both parties hereby enter into this contract through negotiations to
clarify the
obligations of each party.
Article 1.
Definition
“Line of credit”
refers to the maximum amount of balance of loan (under the revolving line of credit) or total loan (under the one-time line of credit)
that
the loaner may issue to the borrower according to this contract. Such line of credit may be revolving or one-time (to be used for
one or several times) in
accordance with this contract.
“Revolving line of credit”
refers to the line of credit within which the borrower may apply for the loan for several times according to this contract.
“One time credit “refers
to the borrower’s ability to apply for the use of the limit in one or multiple times as agreed in this contract to obtain a loan, but
the cumulative amount of the loan withdrawn cannot exceed the agreed limit.
“Balance of loan”
refers to the sum of principal of the outstanding loan that the borrower obtains under this contract.
“Balance of line of credit”
refers to the balance of the line of credit deducted with the balance of loan (under the revolving line of credit) or total loan
(under
the one-time line of credit).
“Period of line of credit”
refers to the period for the loaner to issue the loan to the borrower according to the application by the borrower and this
contract that
it is in relation to the occurrence of loan but not the loan itself.
“Period of loan”
refers to the period of each loan that both parties determine in the corresponding Application for Use of Line of Credit of Bank of
Communications (hereinafter referred to as Application for Use of Line of Credit).
“Pricing benchmark”
refers to the benchmark that the borrower and lender can choose to apply to the corresponding loan to determine the corresponding
loan
interest rate, including but not limited to the following specific pricing benchmarks and other types of pricing benchmarks.
“Loan Market Quotation
Rate (LPR)” refers to the loan market quotation rate applicable to RMB loans issued by the National Interbank Funding Center
on the
20th day of each month (postponed in case of holidays).
“Secured Overnight Financing
Rate (SOFR)” refers to the rate managed by Federal Reserve Bank of New York (or other entity taking over the pricing
benchmark) and
displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative page of other
information
service institutions that display the pricing benchmark approved by the lender), Secured overnight financing rate applicable to USD loans.
“Secured overnight financing
interest rate term reference interest rate (SOFR term interest rate)” refers to the interest rate managed by CME Group
Benchmark
Administration Limited (or other entity taking over the pricing benchmark) and issued by CME Group Benchmark Administration Limited (or
any other entity taking over the pricing benchmark), The term SOFR reference rate of the secured overnight financing interest rate applicable
to USD loans
displayed on the corresponding page of Bloomberg/Referentiv financial telecommunications terminal (or the alternative page
of other information service
institutions approved by the lender to display the pricing benchmark).
2
“EURIBOR” refers
to the European Money Markets Institute (or other entity taking over the pricing benchmark) managed and displayed on the
corresponding
page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative page of other information service institutions approved
by the lender to display the pricing benchmark), Euro Interbank Offered Rate applicable to euro loans.
“Hong Kong Interbank
Offered Rate (HIBOR)” refers to the rate managed by the Hong Kong Association of Banks (or other entities that take over the
pricing
benchmark) and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative page
of other
information service institutions that display the pricing benchmark approved by the lender), Hong Kong Interbank Offered Rate
applicable to Hong Kong
dollar loans.
“Tokyo Risk Free Rate”
refers to the Tokyo Risk Free Rate applicable to Japanese yen loans, which is managed by QUICK Benchmarks Co., Ltd. (or
other entities
taking over the pricing benchmark) and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminals
(or
the alternative page of other information service institutions approved by the lender that displays the pricing benchmark).
“Sterling overnight average
index reference term interest rate (TSRR)” refers to the interest rate managed and published by Intercontinental Exchange
Benchmark
Administration Limited (or other entities taking over the pricing benchmark), which is displayed on the corresponding page of
Bloomberg/Refiniv
financial telecommunications terminal (or the replacement page of other information service institutions that display the pricing
benchmark
approved by the lender), Term SONIA Reference Rate for sterling loans.
“London Interbank Offered
Rate (LIBOR)” refers to the rate managed by Intercontinental Exchange, Inc. (or other entities taking over the pricing
benchmark)
and displayed on the corresponding page of Bloomberg/Refiniv financial telecommunications terminal (or the alternative page of other
information
service institutions approved by the lender to display the pricing benchmark), London Interbank Offered Rate applicable to USD loans.
“Business day of bank”
and “business day” refer to the day on which banks at the place of the loaner operate the corporation business, excluding
legal
holidays and rest days (excluding those adjusted to be business days). If any issuance, repayment, interest payment or maturity
of loan lies at any non-
business day, it should be postponed to the next business day.
“Foreign currency working
day” means, with respect to the secured overnight financing rate (SOFR) or the term reference rate of the secured overnight
financing
rate (SOFR term interest rate), the U.S. government bond trading day (excluding Saturday and Sunday) recommended by the Securities Industry
and Financial Markets Association (or its successor organization) to its member’s fixed income department; The London Interbank Offered
Rate (LIBOR) or
the sterling overnight average index reference term rate (TSRR) refers to the opening day (excluding Saturday and Sunday)
for general business of local
commercial banks in London; For the Euro Inter bank Offered Rate (EURIBOR), it refers to the operation date
of Euro payment and clearing of the second
generation pan European real-time automatic clearing system (TARGET2); For the Hong Kong Interbank
Offered Rate (HIBOR), it refers to the open
business day (excluding Saturday and Sunday) for general business of local banks in Hong Kong;
For Tokyo risk-free term interest rate (TORF), it refers to
the opening day for general business of local banks in Tokyo (excluding statutory
holidays and rest days).
“Related person”
refers to the authorized handler, agent, legal representative, responsible person, controlling shareholder or actual controller, beneficial
owner and other direct or indirect related persons of the borrower.
“Business related parties”
refer to all parties to the transaction under the basic transaction contract and other relevant subjects related to the transaction
other
than all parties to the transaction, as well as all parties to the transaction, such transaction parties, their authorized handlers, agents,
legal
representatives, responsible persons, controlling shareholders or actual controllers, beneficial owners, etc.
3
Terms including affiliate,
affiliate transaction and major investor should contain the same meaning with those contained in the Accounting Standards for
Business
Enterprises No.36 – Disclosure of Affiliates (CK [2006] No.3) published by the Ministry of Finance, as well as its subsequent
revisions.
ESG risks: environmental, social,
and governance risks.
Article 2.
Use of Line of Credit
2.1 Each
time when needing to use the line of credit, the borrower should submit the application to the loaner at least 5 business days in advance.
The
borrower should fill in the Application for Use of Line of Credit to obtain the approval by the loaner before using the line
of credit.
▲▲2.2 Use
of the line of credit must meet following conditions:
(1) Balance
of loan (under the revolving line of credit) or total loan (under the one-time line of credit) is within the line of credit;
(2) Amount
of applied loan is within the balance of line of credit;
(3) Application
date and issuance date are within the period of line of credit;
(4) Period
of loan and maturity date of loan comply with this contract;
(5) Guarantee
contract (if any) under this contract is effective and surviving, and while the guarantee contract is in the form of mortgage contract
and/or
pledge contract, the secured real right is already set and surviving;
(6) The
borrower has handled procedures to obtain licenses, approvals and registrations from the government necessary for the application for
the loan,
and such licenses, approvals or registrations are surviving;
(7) No
serious adverse change occurs in the operation status or financial status of the borrower after this contract takes effect;
(8) Application
by the borrower meets relevant rules and regulations of the loaner;
(9) The
borrower does not violate this contract;
(10) Payment
mode of the loan meets this contract and if the loaner is entrusted to make the payment, the loaner should agree with the payment;
(11) If
the loan is provided in any foreign currency, the borrower should provide the certificate providing that the loan meets relevant policies
on the
management of foreign currency, including but not limited to the valid purpose certificate or registration document of foreign
currency;
(12) The
borrower has appointed the dedicated fund withdrawal account as required by the loaner and has signed the account management agreement.
4
▲▲2.3 If
the loaner agrees to issue the loan, the final issuance information should be subject to the column of Application for Use of Line
of Credit
printed by the bank. Application for Use of Line of Credit should be regarded as the Loan Certificate.
▲▲2.4 If
the currency of the Application for Use of Line of Credit is different from that of the line of credit, it should be converted
at the exchange rate
published by Bank of Communications Co., Ltd. in the beginning of each day only for the purpose of recognizing the
balance of line of credit. If there is no
available exchange rate, it should be converted by the exchange rate reasonably determined by
Bank of Communications Co., Ltd.
▲▲2.5 After
the borrower becomes the shareholder of the guarantor or the “actual controller” defined by the Company Law, the loaner
may suspend or
cancel the line of credit not used by the borrower until the guarantor provides the resolution made by its Board of Shareholders
(General Meeting) about
securing the borrower that is acceptable to the loaner.
Article 3.
Interest Rate and Payment of Interest
3.1 Basic
regulations on determining the interest rate
3.1.1 The
annual interest rate (simple interest) of the loan under this contract shall be agreed by both parties in the Application for the Use
of Quota after
negotiation each time the quota is used. If the annual interest rate value is determined according to the pricing benchmark,
the annual interest rate value shall
be calculated according to the pricing benchmark agreed in the Application for the Use of Quota plus
(minus) points (1 basis point is 0.01 percent, and 1
percentage point is 100 basis points).
3.1.2 If
both parties agree to apply the fixed interest rate in the Application for Use of Quota, and the specific value is recorded in the fixed
interest rate
value field, The specific interest rate of each loan shall be subject to the value recorded in the Fixed Interest Rate Value
field of the Application for the Use of
the Quota (where the loan currency is RMB, such specific value shall be determined on the basis
of the specific value of the pricing benchmark applicable on
the applicable date of the pricing benchmark agreed in the Application for
the Use of the Quota (hereinafter referred to as “the pricing benchmark value”) and
according to the plus (minus) point value
agreed in the Application for the Use of the Quota). If no specific value is recorded in the Fixed Interest Rate Value
field, the specific
interest rate of each loan shall be determined based on the applicable pricing benchmark value on the applicable date of the pricing
benchmark
agreed in the Application for the Use of Quota and according to the plus (minus) point value agreed in the Application for the Use of
Quota.
If both parties agree to apply
the floating interest rate in the Application for the Use of Quota, the specific interest rate of each loan shall be determined
on the
basis of the pricing benchmark value applicable to the applicable date of the pricing benchmark agreed in the Application for the Use
of Quota,
according to the plus (minus) point value, interest rate floating rules, interest rate floating cycle, interest rate floating
cycle unit and the floating start date of a
specific date (if necessary) agreed in the Application for the Use of Quota.
3.1.3 If
the currency is RMB, daily interest rate = monthly interest rate/30, monthly interest rate = annual interest rate/12; if the currency
is HKD, GBP
and AUD, daily interest rate = annual interest rate/365; if the currency is USD, Euro, JPN and other foreign currencies accepted
by the loaner, daily interest
rate = annual interest rate/360.
▲▲3.2 Interest
rate of loan
If both parties agree on the
application of fixed interest rate in the Application for the Use of Quota and the fixed interest rate value field records a
specific
value, the interest rate at the time of each loan disbursement shall be subject to the fixed value. If it is agreed in the Application
for Use of Quota that
a fixed interest rate is applicable and no specific value is recorded in the fixed interest rate value field, and
it is agreed in the Application for Use of Quota
that a floating interest rate is applicable, the loan interest rate for each loan is
determined based on the pricing benchmark value applicable to the “Pricing
Benchmark Application Date” agreed in the Application
for Use of Quota and the plus (minus) point value agreed in the Application for Use of Quota. The
“applicable date of pricing benchmark”
shall be taken as the T day, and the pricing benchmark value rules applicable to the T day shall be implemented in
accordance with Article
3.5.1 of the Contract.
5
3.3 Adjustment
of interest rate
3.3.1 Once
the interest rate is recorded in the Application for Use of Line of Credit as fixed, such interest rate should apply to the loan
within the period
of loan.
▲▲3.3.2 Once
the interest rate is recorded in the Application for Use of Line of Credit as fluctuating, the interest rate adjustment date should
be
determined according to the interest rate fluctuation rules, interest rate fluctuation cycle, interest rate fluctuation cycle unit
and specific beginning date of
fluctuation (if necessary) agreed in the Application for Use of Line of Credit, and the adjusted
interest rate should apply since the interest rate adjustment
date.
3.3.2.1 If
the benchmark interest rate is adjusted within the period of loan, the adjustment cycle of interest rate should be calculated by choosing
“fluctuating at bookkeeping date” or “fluctuating at specific date” in the “interest rate fluctuation rules”
since the “bookkeeping date” or “specific date”. The
column of interest rate fluctuation cycle should be filled
with the quantity of interest rate fluctuation cycles, the column of interest rate fluctuation cycle unit
may be filled with day or month.
If the quantity of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “day”, then
the adjustment
date of benchmark interest rate should be the adjustment date of loan interest rate; if the quantity of interest rate fluctuation
cycle is “3” while the interest rate
fluctuation unit is “day”, then the adjustment date of loan interest rate
should be every third day since the “bookkeeping date” or “specific date”; if the
quantity of interest rate fluctuation
cycle is “1” while the interest rate fluctuation unit is “month”, then the adjustment date of loan interest rate
should be the
end of every month since the “bookkeeping date” or “specific date”; if the quantity of interest
rate fluctuation cycle is “3” while the interest rate fluctuation
unit is “month”, then the adjustment date of
loan interest rate should be the end of every third month since the “bookkeeping date” or “specific date”, and
so
on.
3.3.2.2 The
loan interest rate on the loan interest rate adjustment date shall be determined on the basis of the pricing benchmark value applicable
on the
loan interest rate adjustment date. Unless otherwise agreed in the Contract or the two parties agree to adjust the plus (minus)
point value, the plus (minus)
point value of the interest rate shall still be subject to the plus (minus) point value of the interest
rate agreed in the corresponding Application for Use of
Quota of the loan. The “loan interest rate adjustment date” shall be
the T date, and the pricing benchmark value rules applicable to the T date shall be
implemented in accordance with Article 3.5.1 of this
Contract.
▲▲3.3.3 If
the pricing benchmark applicable to the corresponding loan is cancelled or the corresponding issuing agency stops publishing, both parties
shall negotiate and adjust the interest rate of the loan separately, but the adjusted interest rate shall not be lower than the applicable
interest rate at that time; If
the two parties have not reached an agreement on the adjusted interest rate for more than one month since
the pricing benchmark is cancelled or ceased to be
published, the lender has the right to declare that the loan is due ahead of schedule.
▲▲3.3.4 Both
parties may adjust the fluctuation extent or increase (decrease) value of the corresponding loan interest rate through negotiation at
each
adjustment date of loan interest rate.
3.4 The
default interest rate of overdue loans shall be increased by 50% according to the interest rate agreed herein, and the default interest
rate of
misappropriated loans shall be increased by 100% according to the interest rate agreed herein. If the floating rate loan is subject
to adjustment of the loan
pricing benchmark, the lender has the right to adjust the penalty interest rate applicable to each loan accordingly,
and the new penalty interest rate shall apply
from the date of loan interest rate adjustment agreed in the corresponding Application for
Use of Quota.
6
3.5 Calculation
of interest
3.5.1 According
to the different applicable pricing benchmarks, the rules for taking the value of the applicable pricing benchmark value on the T date
(i.e. the “pricing benchmark application date”, “loan interest rate adjustment date” and “repricing date”)
agreed in Article 3.2, 3.3.2.2 and 9.3.3.2 of the
Contract are as follows:
If the pricing benchmark is
the loan market quoted rate (LPR), the pricing benchmark value applicable to T day is the latest published loan market
quoted rate (LPR)
value before T day.
If the pricing benchmark is
the guaranteed overnight financing rate (SOFR), when T day is a foreign currency working day, the pricing benchmark value
applicable to
T day is the value of the guaranteed overnight financing rate (SOFR) corresponding to the fifth foreign currency working day before T
day
displayed on the corresponding financial telecommunications terminal page; If Day T is a non foreign currency working day, the pricing
benchmark value
applicable to Day T is the value of the guaranteed overnight financing rate (SOFR) that should be applied on the latest
foreign currency working day before
Day T (that is, the value of the guaranteed overnight financing rate (SOFR) that is displayed on the
page of the corresponding financial telecommunications
terminal and corresponds to the fifth foreign currency working day before the latest
foreign currency working day).
If the pricing benchmark is
the guaranteed overnight financing interest rate term reference interest rate (SOFR term interest rate), London Interbank
Offered Rate
(LIBOR), Euro Interbank Offered Rate (EURIBOR), Tokyo risk-free term interest rate (TORF) or sterling overnight average index reference
term interest rate (TSRR), when T day is a foreign currency working day, the applicable pricing benchmark value on T day is the corresponding
financial
telecommunications terminal page The pricing benchmark value corresponding to the second foreign currency working day before
T day; If Day T is a non
foreign currency working day, the pricing benchmark value applicable to Day T shall be the pricing benchmark
value applicable to the latest foreign currency
working day before Day T (that is, the pricing benchmark value displayed on the corresponding
financial telecommunications terminal page and
corresponding to the second foreign currency working day before the latest foreign currency
working day).
If the pricing benchmark is
Hong Kong Interbank Offered Rate (HIBOR), and T day is a foreign currency working day, the pricing benchmark value
applicable to T day
is the value of Hong Kong Interbank Offered Rate (HIBOR) corresponding to T day displayed on the corresponding financial
telecommunications
terminal page; When T day is a non foreign currency working day, the applicable pricing benchmark value on T day is the value of Hong
Kong Interbank Offered Rate (HIBOR) displayed on the corresponding financial telecommunications terminal page and corresponding to the
latest foreign
currency working day before T day.
When the pricing benchmark
value displayed on the corresponding financial telecommunication terminal page is greater than or equal to 0, the pricing
benchmark value
used to determine the loan interest rate under this contract shall be determined according to the pricing benchmark value actually displayed
on the corresponding financial telecommunication terminal page; When the pricing benchmark value displayed on the corresponding financial
telecommunication terminal page is less than 0, the pricing benchmark value used to determine the loan interest rate under this contract
shall be determined
by 0.
3.5.2 Normal
interest=interest rate agreed herein × Loan amount × Number of days occupied.
The number of days occupied
shall be calculated from the loan granting date (inclusive) to the due date (exclusive). If the due date is not a working day,
it shall
be postponed. The postponed period shall be included in the number of days occupied, and the interest shall still be calculated according
to the
contract.
3.5.3 The
penalty interest of overdue loans and misappropriated loans shall be calculated according to the amount of overdue or misappropriated
loans
and the actual number of days (from the date of overdue or misappropriated loans (inclusive) to the date of principal and interest
settlement (exclusive)).
7
3.5.4 If there are many decimal
places of interest/penalty interest calculated, the lender will retain two decimal places according to the rounding method.
▲▲3.6 If
the borrower repays the loan in advance or the loaner withdraws the loan in advance according to this contract, the corresponding interest
rate
shall still be subject to that specified in this contract.
3.7 If
the loan currency is other than RMB, US dollar, euro, Hong Kong dollar, Japanese yen and British pound, the loan pricing benchmark type,
daily
interest rate calculation rules and the pricing benchmark value determination rules applicable to the pricing benchmark application
date, loan interest rate
adjustment date and repricing date shall be subject to the provisions of Article 17 of the Contract.
Article 4. Payment of Loan
4.1 If
the issuance account appointed by the borrower is the dedicated loan issuance account opened at the loaner, the issuance and payment of
loan
should be handled through the account, which may only be used to issue and externally pay the loan fund and only sell the certificate
of “Application for
Settlement Business” but may not be used to handle any check, draft, bank acceptance or any other settlement.
When handling the allocation of loan fund
independently, the borrower must handle procedures at the counter of the bank of deposit. The
deposit interest of the account should be accounted into the
repayment account of the borrower.
4.2 When
drawing the loan according to this contract, the borrower should clarify the payment mode (entrusted payment by loaner or independent
payment by borrower) and only one mode is applicable in each time of drawing.
4.3 In
the mode of entrusted payment by loaner, the loaner will, after receiving the payment entrustment from the borrower and issuing the loan
according to this contract, pay the loan fund directly to the counterparty of the borrower meeting the purpose specified in this contract
through the account of
the borrower.
If the amount of a single payment
is beyond the limit of the independent payment or any condition specified in Article 19.3, the mode of entrusted
payment should apply.
When choosing the mode of entrusted
payment by the loaner, the borrower should submit the loaner with the Application for Use of Line of Credit,
corresponding payment
entrustment and other materials required by the loaner (including but not limited to the commercial contract, invoice and receipt) to
clarify the amount of loan and the receiver and amount of payment, while the amount of drawn loan should equal to that of the payment.
▲▲ If
the payment planned by the borrower does not comply with this contract or the corresponding commercial contract, or contains any other
defect,
the loaner may refuse to make the payment and return the payment entrustment submitted by the borrower.
▲▲ If
the loaner agrees but fails to make the payment or the payment is returned due to any incorrect information provided by the borrower,
the
borrower should submit relevant documents and materials containing the correct information within the period regulated by the loaner,
and the loaner should
be expected from any liability for any delay or failure of payment.
4.4 In
the mode of independent payment by the borrower, after the loaner issues the loan fund to the account of the loaner according to this
contract, the
borrower pays the fund to the counterparty of the borrower meeting the purpose specified in this contract independently.
8
When choosing the mode of independent
payment by the borrower, the borrower should submit the loaner with the Application for Use of Line of Credit,
description of fund
usage and other materials required by the loaner. The borrower should report the payment situation of the loan fund to the loaner. The
loaner may check whether the loan is paid for the regulated purpose by analyzing the account, verifying the certificate and conducting
the on-site survey, and
the borrower shall cooperate with such verification by the loaner.
Article 5. Repayment of Loan
5.1 The
borrower should make the repayment according to the date and amount specified in the corresponding Application for Use of Line of Credit.
▲▲5.2 Without
the written consent from the loaner, the borrower may not repay the loan in advance.
▲▲5.3 The repayment
schedule of principal and interest agreed by the borrower and the loaner in the Application for Use of Line of Credit is the true
intention of both parties through negotiations on a voluntary basis. Under the repayment arrangement chosen by both parties, the principal
should prior to the
interest in the repayment without influencing the repayment liability of the borrower for the payable interest, and
the borrower may not set up any plea
against the repayment of payable interest. The borrower should be responsible for repaying all the
principal and interest under any repayment arrangement.
▲▲5.4 When the
amount repaid by the borrower is insufficient to cover all the debt of the borrower:
(1) It
should be firstly used to repay the overdue amount. If the principal and interest are overdue for less than 90 days, the balance after
such repayment
should be firstly used to repay the outstanding interest, default interest or compound interest before any overdue principal;
if the principal and interest are
overdue for more than 90 days, the balance after such repayment should be firstly used to repay the
outstanding principal and then the overdue interest,
default interest or compound interest;
(2) If
there are several debts of the borrower (including debts of the borrower owed to the loaner under any other contract), the loaner may
determine the
repayment sequence of each debt, only if such sequence does not violate any applicable law, rule, regulation, system or
any compulsory regulatory provision
of the loaner. The loaner should inform the borrower of the repayment result, unless otherwise regulated.
Article 6. Representation and Guarantee of
Borrower
6.1 The
borrower is legally incorporated and surviving, possesses all the necessary capacities, perform obligations under this contract it its
own name
and assumes civil liabilities.
6.2 Signing
and performing this contract are the true intention of the borrower that they must obtain all the necessary approvals, permissions and
authorizations to contain no legal defect.
6.3 The
borrower conducts production and operation in compliance with laws and regulations, possesses the constant operation capability and legal
repayment source, involves no serious environmental or social risk, possesses no serious adverse credit record and no officer of the borrower
possesses any
adverse record.
6.4 All
the documents, statements, materials and information provided by the borrower to the loaner when signing and performing this contract
are
authentic, accurate, complete and valid. The borrower does not conceal any information that may affect its financial status and solvency,
and there is no
serious adverse change to the financial status of the borrower since the issuance of the latest financial statement.
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▲▲6.5 The borrower
and its related persons and business related parties do not belong to the enterprises or individuals in the sanctions list issued by the
United Nations and relevant countries, organizations and institutions, or in the list of risks related to terrorism and anti money laundering
issued by Chinese
government departments or competent authorities; It is not located in countries and regions sanctioned by the United
Nations and relevant countries,
organizations and institutions.
▲▲
6.6 The borrower guarantees to comply with the national anti money laundering laws, regulations and relevant policies, not to assist others
in
money laundering, terrorist financing, tax evasion, bank debt evasion, cash withdrawal, telecommunications fraud, illegal fund-raising
and other illegal
activities, and actively cooperate with the lender to carry out various anti money laundering work such as customer
identification, transaction record keeping,
customer identity and transaction background due diligence, large sum and suspicious transaction
reports, And provide relevant supporting materials as
required by the lender.
6.7 According to the ESG risks
faced by the borrower’s industry, if the borrower belongs to Class A or Class B customers, the borrower promises:
(1) The borrower’s internal
management documents related to ESG risks comply with laws and regulations and are effectively implemented;
(2) The borrower has no major
litigation cases involving ESG risks;
(3) All behaviors and performances
of the borrower related to ESG risks are compliant.
Article 7. Rights and Obligations of Loaner
7.1 The
loaner may withdraw the principal and interest (including compound interest and default interest of overdue and embezzled loan) of the
loan
according to this contract, collect the payable expense from the borrower, withdraw the loan in advance at its own discretion depending
on the fund status of
the borrower, and may exercise other rights under laws, regulations or this contract.
▲▲7.2 The loaner
only conducts the formal examination of materials provided by the borrower during the performance of this contract that the loaner
should
be exempted from any liability for the failure to complete entrusted payment if the borrower provides any false, inaccurate or uncomplete
material or
the borrower makes the payment in violation to this contract.
▲▲7.3 The loaner
should issue the loan and make the payment according to this contract. The loaner should be exempted from the liability if the loaner
fails to issue the loan or make the payment due to any cause below, but the loaner should send a notice to the borrower in time: the issuance
account
appointed by the borrower is frozen, the account of the receiver is frozen, there is any force majeure, communicaiton or network
fault, or the system fault of
the loaner, unless otherwise regulated in this contract.
▲▲
7.4 According to the regulatory requirements to be followed by the lender, the lender will conduct a dynamic assessment of the borrower’s
risk of
money laundering, terrorist financing, tax evasion and other risks, and has the right to take one or all of the measures agreed
in Article 9.2 when it believes
that the borrower and the borrower’s business involved in the transaction instructions are suspected of
high risk of money laundering, terrorist financing, tax
evasion.
Article 8. Obligations of Borrower
8.1 The
borrower should repay the principal and interest of loan under this contract according to the time, amount, currency and interest rate
specified in
this contract and the corresponding Application for Use of Line of Credit.
The fund collection account
appointed by the borrower should be used to collect the corresponding sales income or planned repayment fund. If the
corresponding sales
income is not settled in cash, the borrower should ensure to allocate it to the fund collection account upon receiving it. The borrower
should provide the cash flow of the fund collection upon the request from the loaner.
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8.2 The
borrower should use the line of credit for the purpose specified in this contract and use the loan for the purpose specified in the corresponding
Application for Use of Line of Credit but may not embezzle the loan for any other purpose, or the investment in fixed assets, equity
or any production or
operation prohibited by the government.
The borrower should draw the
loan fund in the mode agreed by both parties but not avoid the entrusted payment by the loaner by breaking up the whole
into parts; in
the mode of independent payment by the borrower, the borrower should use the loan within the reasonable period required by the regulatory
authority of the loaner, and the payment of loan fund should meeting this contract.
▲▲8.3 The borrower
shall bear the settlement fees (if any) for the loan fund payment (including the lender’s entrusted payment and the borrower’s
independent
payment), and the specific fees shall be subject to the laws, regulations, rules, regulatory provisions and the then effective Directory
of Bank of
Communications Service Fees published by the lender.
If the loan fund payment does
not involve cross-border payment, the lending account is a special loan issuing account. When the loan fund payment
(including the lender’s
entrusted payment and the borrower’s independent payment) is made, if the collection account does not belong to the account opened
in
the Bank of Communications, the fund payment may be made through the People’s Bank of China’s payment system or the local exchange system.
If the
loan granting account is not a special loan granting account, and when the loan fund is paid (including the lender’s entrusted
payment and the borrower’s
independent payment), if the collection account is an account of another bank in another place, the fund payment
is handled through the payment system of
the People’s Bank of China.
If the loan fund payment involves
cross-border payment, the loan fund payment may be handled through the SWIFT system or other systems.
▲▲8.4 The borrower
should cooperate with the loaner in the management of loan payment and the supervision and inspection of the use of loan and
operation
situation of the borrower, provide the financial statement, use record and material of the loan fund, information of affiliate and affiliate
transaction,
environmental and social risk report, other materials and information necessary for the after-loan risk management required
by the loaner, and shall ensure
the authenticity, integrity and accuracy of such documents, materials and information.
▲▲8.5 Under
either circumstance below, the borrower should send a written notice to the loaner at least 30 days in advance and take no action before
repaying the principal and interest under this contract or providing the repayment plan or guarantee recognized by the loaner:
(1) The
borrower sells, presents, leases, lends, transfers, mortgages, pledges or disposes in any other manner all or a large part of the assets
or important
assets;
(2) The
operation mechanism or ownership organization of the borrower suffers from any great change, including but not limited to the contracting,
lease, association, corporate system transformation, joint stock cooperation system transformation, sales, combination (merger), joint
venture (cooperation),
separation of enterprise, establishing of subsidiary, equity transfer, ownership transfer, and decrease of capital.
(3) The
external investment or increase of debt financing of the borrower exceeds the agreed limit.
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▲▲8.6 The borrower
shall notify the lender in writing within 7 days of the occurrence or possible occurrence of the following events and cooperate in
submitting
relevant certificates according to laws and regulations, regulatory provisions and the lender’s requirements:
(1) The
borrower or its affiliate revises the Memorandum of Association, changes the name, legal representative (responsible person), domicile,
mailing
address or business scope of the enterprise, or makes any decision that affects the finance or human resource greatly;
(2) The
borrower, its affiliate or guarantor plans to apply for bankruptcy or may be or has been applied by the creditor for bankruptcy;
(3) The
borrower or its affiliate is involved in any serious lawsuit, arbitration or administrative measure, or its major assets or the guarantee
under this
contract is executed with the property preservation or any other compulsory measure, or the security of its major assets or
the guarantee under this contract is
or may be affected or the value is or may be decreased;
(4) The
borrower or its affiliate provides any guarantee to any third party to affect its economic status, financial status or capability in performing
obligations under this contract significantly;
(5) The
borrower or its affiliate enters into any contract with significant influence on its operation and financial status;
(6) The
borrower repays the immature debt in advance or repay other mature debt firstly, or increases any form of guarantee for any other existing
debt,
or makes any arrangement with the similar effect or enters into any relevant document;
(7) The
borrower, its affiliate or guarantor is shut down, closed, dissolved, suspended, cancelled, or the business license is withdrawn;
(8) The
borrower or its affiliate, major investor of the borrower or its affiliate, legal representative (responsible person), director or officer
of the
borrower or its affiliate is missing or involved in any violation, to any law, regulation or rule of stock exchange, or suffers
from any abnormal change;
(9) The
borrower or its affiliate suffers from serious difficulty or deterioration of financial status in the operation, or there is any other
event with adverse
influence on the operation, financial status, solvency or economic status of the borrower or its affiliate;
(10) There
is any affiliated transaction and its amount reaches or exceeds 10% of the latest audited net assets;
(11) Before
repaying all the debts under this contract, the borrower becomes or may become the shareholder or the “actual controller”
defined by the
Company Law of the guarantor;
(12) The
borrower or its affiliate causes any liability accident or is made public by the media by violating any law, rule, regulation, national
policy or
industrial standard;
(13) The
borrower or its affiliate encounters any safety or environment protection accident;
(14) The
relationship between the affiliate and the borrower is changed;
(15) The
borrower or its affiliate encounters any significant equity change;
(16) The
opinion issued by the external audit of the borrower on its financial statements is not the standard unreserved opinion;
(17) The
borrower is or may be investigated, punished or taken with other similar measures by the competent authority as it violates the law or
rule
and/or regulatory requirement;
(18) The
borrower or its affiliate is listed to be sanctioned by the UN, EU or US, or the country or area where the borrower or its affiliate resides
in is
listed to be sanctioned by the UN, EU or US;
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(19) There is any other event
with serious adverse influence on the solvency of the borrower or its affiliate.
(20) According to the lender’s
environmental and social risk assessment standards, if the borrower is a customer with environmental and social risks
classified as A
or B, the borrower has or may have any of the following events:
①
Various permits, approvals and approvals related to environment, society and risks during commencement, construction, operation and shutdown;
②
The assessment and inspection of the environmental and social risks of the borrower by the environmental and social risk regulatory authority
or its
recognized institution;
③
Supporting construction and operation of environmental facilities;
④
Discharge and compliance of pollutants;
⑤
Safety and health of employees;
⑥
Major complaints and protests from neighboring communities against the borrower;
⑦
Major environmental and social claims;
⑧
Other major circumstances that the lender considers relevant to ESG risks.
▲▲8.7 In case
of any change of guarantee under this contract that is adverse to the creditor’s right of the loaner, the borrower should provide
other
guarantee recognized by the loaner in time.
The “change” specified
here includes but not limited to: merger, separation, shutdown, dissolution, suspension, cancellation, withdrawal of business
license,
and applying or being applied for bankruptcy of the guarantor; significant change of the operation or financial status of the guarantor;
the guarantor is
involved in any serious lawsuit, arbitration or administrative measures, or the major assets is taken with property preservation
or other compulsory measure;
the security of the guarantee is or may be affected; the value of the guarantee is or may be decreased, or
taken with measures of property preservation, such
as sealing; the guarantor or its legal representative (responsible person) or officer
violates any law, regulation or applicable rules of stock exchange; the
guarantor (when it is an individual) is missing or dead (announced
to be dead); the guarantor breaches the guarantee contract; there is any dispute between
the guarantor and the borrower; the guarantor
requires cancelling the guarantee contract; the guarantee contract does not take effect, or is invalid or cancelled;
the secured real
right is not set up or take effect; any other event affecting the security of the creditor’s right of the loaner.
▲▲8.8 The borrower
promises: during the period since the signing date of this contract to the date at which the principal, interest and relevant expenses
of the loan under this contract are paid off, the financial index, external rating, as well as production and operation qualification/license
of the borrower will
always comply with this contract, and such production and operation qualification/license will pass the annual inspection
if necessary.
8.9 The
Borrower guarantees that the Borrower and its employees and agents will not provide, give, ask for or receive any form of material benefits
(including but not limited to cash, physical cards, tourism, etc.) or other non-material benefits other than those agreed herein to the
Lender or its employees in
any form; Do not use the funds or services provided by the lender in any form, directly or indirectly, for
activities related to corruption or bribery; If the
borrower is aware of any violation of this article, it shall provide clues and relevant
information to the lender in a timely, truthful, complete and accurate
manner, and cooperate with the lender on relevant matters as required
by the lender.
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8.10 According
to the lender’s environmental and social risk assessment standards, if the borrower is a customer with environmental and social risks
classified as A or B, the borrower shall assume the following obligations:
(1) Establish and improve the
internal management system of environmental and social risks, and specify the responsibilities, obligations and
punishment measures of
relevant responsible personnel of the borrower;
(2) Establish and improve the
emergency response mechanism and measures for environmental and social risk emergencies;
(3) Establish special departments
and/or designate special personnel to be responsible for environmental and social risks;
(4) Cooperate with the lender
or a third party recognized by the lender in the assessment and inspection of the borrower’s environmental and social risks;
(5) Respond appropriately or
take other necessary actions when the public or other interested parties strongly question the borrower’s performance in
controlling environmental
and social risks;
(6) Urge the borrower’s vital
related parties to strengthen management and prevent the environmental and social risks of related parties from being
transmitted to the
borrower;
(7) Perform other obligations
that the lender considers relevant to the control of environmental and social risks.
▲▲Article 9. Adjustment of Line
of Credit, Acceleration of Maturity and Repricing of Risk
9.1 Any
event below should be deemed as the “early maturity event” of this contract:
(1) The
borrower does not repay the principal or interest of the loan according to the Application for Use of Line of Credit under this
contract;
(2) The
borrower makes any false representation or guarantee under this contract;
(3) Any
event that should be notified as specified in Article 8.6 occurs and influences or may influence the security of the creditor’s
right of the loaner;
(4) Any
law, rule or regulatory policy is changed to the extent that the loaner will or may violate the law or rule if it issues the loan according
to this
contract;
(5) While
performing the contract with the loaner or any third party, the borrower conducts any breach or the debt may be or has been announced
to be
mature in advance;
(6) The
borrower breaches any other article of this contract.
(7) According to the lender’s
environmental and social risk assessment standards, if the borrower’s environmental and social risks are classified as A or
B, the borrower
has any of the following events:
①
The borrower is punished by relevant government departments due to poor environmental and social risk management;
②
The borrower is strongly questioned by the public and/or the media due to poor environmental and social risk management, and it is verified
that there
are relevant situations;
③
The borrower violates the obligations related to environmental and social risk management agreed with the lender in other contracts.
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9.2 In
case of any “early maturity event”, the loaner may take any one, several or all measures below:
(1) To
lower, suspend or cancel the line of credit under this contract;
(2) To
stop issuing the loan unused by the borrower;
(3) To
stop paying the loan unused but already withdrawn by the borrower;
(4) To
require the borrower to supplement the issuance and payment conditions of loan to the loaner with the regulated period;
(5) To
require the borrower to change the payment mode as required by the loaner;
(6) To
reprice against the risk in executing the loan according to Article 9.3;
(7) To
announce that the principal of loan already issued under this contract becomes mature and require the borrower to repay the principal
and interest
of all the mature loan immediately.
9.3 In
view of the production and operation situation of the borrower when signing this contract, both parties have determined the interest rate
and its
adjustment through negotiations. The borrower agrees that in case of any “early maturity event”, the loaner may reprice
against the risk in executing the loan
according to this article.
9.3.1 The
repricing mentioned above consists of two modes, including repricing and directly raising the loan interest rate. The specific mode is
agreed by
both parties in Article 21.
9.3.2 “Negotiated
reprice” means that the loaner may require the borrower to negotiate with the loaner within the regulated period to raise the loan
interest rate and both parties will determine the “repricing date” and relevant interest rate in the form of supplemental
agreement.
9.3.3 “Direct
raise of loan interest rate” means that the loaner may directly raise the loan interest rate according to this article and Article
21.
9.3.3.1 Since
the loan sends a notice of “repricing date” to the borrower, the loan interest rate should be applied to each loan that the
borrower has not
repaid by the “repricing date”.
9.3.3.2 If
the loan currency is RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound, the increased loan interest rate of each
loan
shall be determined according to the plus (minus) point value agreed in Article 21.2.1 on the basis of the applicable pricing benchmark
value on the
“repricing date”. The “repricing date” shall be the T date, and the pricing benchmark value rules applicable
to the T date shall be implemented in accordance
with Article 3.5.1 of the Contract.
9.3.3.3 If the loan currency
is other than RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound, the increased loan interest rate shall
be determined
according to Article 21.2.2.
9.3.4 After the lender executes
risk repricing as agreed above, the new interest rate will be executed from the “repricing date”. On the basis of this
interest
rate, it is still subject to floating adjustment as agreed in Article 3 of this contract. If both parties agree to change relevant agreements,
the agreement
after the change shall prevail. If the loan is overdue (including the borrower’s failure to repay on time or the lender’s
announcement of early maturity) or
misappropriated, the default interest rate for overdue and misappropriated loans shall be determined
on the basis of the new interest rate (including the
interest rate after floating adjustment as agreed in this contract), and the interest
rate for compound interest shall be adjusted accordingly.
9.3.5 The implementation of
“risk repricing” shall not be deemed or interpreted as the lender waiving other rights stipulated by laws and regulations and
agreed in this contract. The Lender has the right to take other measures to protect creditor’s rights in accordance with laws and regulations
and this Contract,
including but not limited to the measures agreed in Article 9.2.
15
▲▲Article 10. Breach
10.1 If
the borrower does not repay the principle or interest of the loan in time or uses the loan for any purpose not included in this contract,
the loaner
will collect the interest at the default interest rate of overdue or embezzled loan, and collect the compound interest of the
outstanding interest. If the default
interest rate is adjusted according to this contract, the compound interest rate should also be adjusted
correspondingly.
10.2 If
the borrower does not repay the principle or interest of the loan in time, it should assume the calling expense, lawsuit expense (or arbitration
expense), preservation expense, announcement expense, execution expense, attorney’s fee, travel expense and other expenses of the
loaner in realizing the
creditor’s right.
▲▲Article 11. Deduction
11.1 The
borrower authorizes that in case of any payable principal, interest, default interest, compound interest or any other expense of the loan,
the
loaner may deduct the fund in any account of the borrower opened at any branch of Bank of Communications Co., Ltd. to repay the amount
mentioned
above.
11.2 After
such deduction, the loaner should inform the borrower of relevant account number, contract number, number of Application for Use of
Line of
Credit, deduction amount and remaining debt.
11.3 If
the deducted fund is insufficient to repay all the debt of the borrower, the debt to be repaid by such fund should be determined according
to this
contract.
11.4 If
the currency of the deducted fund is different from that of the debt to be repaid, the deducted fund should be converted at the exchange
rate
published by Bank of Communications Co., Ltd. at the time of deduction. If any settlement, sales or exchange procedure of foreign
currency is necessary, the
borrower is obliged to assist the loaner and assume the risk in exchange rate.
Article 12. Notice
12.1 Contact
details provided by the borrower in this contract (including mailing address, telephone number and fax number) are all authentic and valid.
In case of any change of any contact detail, the borrower should send/deliver such change to the mailing address offered by the loaner
in this contract
immediately. Such change should take effect when the loaner receives the notice of change.
12.2 Unless
otherwise specified in this contract, the loaner may send a notice to the borrower in any manner below. The loaner may choose the manner
it
thinks fit but is relieved from any liability for the error, omission or delay caused by the postal service, fax, telephone or any
other communication system. If
the loaner chooses several manners, the one delivering the notice to the borrower, the fastest should prevail.
(1) If
the loaner chooses the announcement, the date at which the loaner publishes the announcement on its website, online bank, telephone bank
or
outlet should be deemed as the delivery date;
(2) If
the loaner chooses the personal delivery, the date at which the borrower signs to confirm the reception should be deemed as the delivery
date;
(3) If
the loaner chooses the postal service (including express delivery, ordinary mail and registered mail) to send the notice to the latest
mailing address
of the borrower that the loaner knows, the third day (in the same city)/the fifth day (in different cities) since the
sending date should be deemed as the
delivery date;
(4) Fax,
mobile phone short message or other electronic communication methods shall be delivered to the borrower’s fax number, mobile phone number
or e-mail address designated by the borrower that the lender knows most recently, and the date of sending shall be deemed as the date
of service. The
aforementioned delivery refers to the entry of relevant information into the server terminal of the service provider without
taking the actual display of
relevant information on the client terminal as the standard.
16
12.3 The
borrower agrees that, unless the lender receives the borrower’s written notice on changing the mailing address, the mailing address filled
by the
borrower in this contract is the address where the court serves judicial documents and other written documents to the borrower.
The scope of application of
the above address for service includes but is not limited to the first instance of civil litigation, objection
to jurisdiction and reconsideration, second instance,
retrial, remand for retrial and enforcement procedures.
During the dispute resolution
process of this contract, the court has the right to serve judicial documents and other written documents to the borrower
through any
communication method stipulated in Article 12.2. The court has the right to choose the communication method it deems appropriate, and
is not
responsible for any transmission errors, omissions, or delays that may occur in postal, fax, telephone, telex, or any other communication
system. If the court
chooses multiple communication methods simultaneously, the one that reaches the borrower faster shall prevail.
12.4 This clause is an independent
dispute resolution clause in the contract. If the contract is invalid, canceled or terminated, the validity of this clause
will not be
affected.
▲▲Article 13. Disclosure and Confidentiality
13.1 With respect to the information
and materials of the borrower obtained in the signing and performance of this contract, the loaner may not violate
any law, rule or regulatory
requirement to use such information and materials. It should assume the confidentiality liability but not disclose such information
and
materials to any third party, except for below following circumstances:
(1) Disclosure
required by applicable laws and regulations;
(2) Disclosure
required by judicial departments or regulatory agencies in accordance with the law;
(3) When
the borrower fails to repay the loan principal and/or pay interest in full and on time, the lender shall disclose to the lender’s external
professional advisor and allow the lender’s external professional advisor to use it on a confidential basis in order to realize the creditor’s
rights under this
contract;
(4) Reasonable
implementation of other actions to safeguard public interests or the legitimate rights and interests of borrowers;
(5) The borrower agrees or
authorizes the lender to disclose.
13.2 The
borrower confirms that it has signed the Credit Information Inquiry and Provision Authorization. The loaner may inquire, use and
keep the
credit information of the borrower within the scope regulated by the authorization.
13.3 Besides
the circumstance specified in Article 13.1 and Article 13.2, the borrower further agrees Bank of Communications Co., Ltd. to use or
disclose
the information and materials of the borrower under following circumstances, including but not limited to the basic information, credit
transaction
information, adverse information and other relevant information and materials of the borrower, and is willing to assume all
the consequences thereof:
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Bank of Communications Co.,
Ltd. may disclose such information and materials on a confidentiality basis to the business outsourcing institution, third
party service
provider, other financial institutions and other institutions or individuals that the loaner deems necessary, including but not limited
to other
branches or wholly-owned subsidiaries of Bank of Communications Co., Ltd. for the purpose below: ①
It conducts the line of credit business or any relevant
business, such as promoting the line of credit business of Bank of Communications
Co., Ltd., calling for the debt from the borrower and transferring the
creditor’s right of the line of credit business; ②
The loaner provides or may provide the borrower with the new product or service, or further provides the
service.
Whether Article 13.3 is applicable
should be subject to Article 24 of this contract.
Article 14. Applicable Laws and Dispute Solution
Laws of the People’s
Republic of China (for the purpose of this contract, excluding laws of Hong Kong, Macau and Taiwan) apply to this contract. Any
dispute
under this contact should be brought to the competent court at the place of the loaner, unless otherwise regulated in this contract. Both
parties should
continue to perform those articles not involved in the dispute during the period of dispute solution.
Article 15. Effectiveness of the contract,
loan nature and contract composition
15.1 This
Contract shall come into force after being signed (or sealed) by the legal representative (principal) or authorized representative of
the Borrower
and affixed with the official seal, and signed (or sealed) by the legal representative (principal) or authorized representative
of the Lender and affixed with the
special seal for contract. If the special seal for contracts affixed by the lender is the special seal
for offshore credit business contracts (or other special seals
for contracts with the word “offshore”), the loans under this
contract are offshore business loans.
15.2 The
Application for Use of Line of Credit and other relevant documents and materials signed under this contract are indispensable parts
of this
contract.
15.3 Application
for Use of Line of Credit is the supplement to this contract. Unless otherwise regulated in the Application for Use of Line of
Credit,
rights, obligations and other matters of the borrower and the loaner should still be subject to this contract.
Article 16. Specific Content of Line of Credit
16.1 Currency of line of credit:
RMB; Amount in words: ten million yuan; It can be used in √
currency ☐ line currency and other currencies acceptable
to the
lender; This line belongs to ☐ Revolving line ☐
One time line (can be used for many times) √ One time line (only
used once).
16.2 Purpose of credit line:
business turnover.
16.3 The credit term is from
May 8, 2023 to May 8, 2024.
Article 17. Interest Rate
If the loan currency is other
than RMB, US dollar, euro, Hong Kong dollar, Japanese yen and British pound, the applicable pricing benchmark types,
daily interest rate
calculation rules and pricing benchmark value determination rules applicable to the corresponding loan on the applicable date of the pricing
benchmark and the adjustment date of the loan interest rate are agreed as follows:
/
18
Article 18. Account
18.1 The borrower appoints
the following account to be the issuance account. The account ☐is √is
not the dedicated loan issuance account opened at the
loaner. If both parties otherwise regulate in the Application for Use of Line
of Credit, such Application for Use of Line of Credit should prevail.
Account name:
CLPS Shanghai Co., Ltd.
Account number: 310066865018010213932
Bank of deposit: Bank of Communications
Zhangjiang Sub-branch
18.2 The borrower appoints
that:
(1) The
repayment account:
Account name:
CLPS Shanghai Co., Ltd.
Account number: 310066865018010213932
Bank of deposit: Bank of Communications
Zhangjiang Sub-branch
(2) The
fund collection account:
Account name:
CLPS Shanghai Co., Ltd.
Account number: 310066865018010213932
Bank of deposit: Bank of Communications
Zhangjiang Sub-branch
Article 19. Issuance, Payment and Repayment
of Loan
19.1 The period of each loan
withdrawn under this contract should be no longer than 12√months
☐days, and the maturity date of all the loan should be
no later
than November 8, 2024
19.2 The limit of independent
payment under the Contract is:√ RMB ☐/(foreign currency) zero
thousand yuan or equivalent in other currencies.
19.3 The entrusted payment
by loaner is compulsory once any condition below is met:
/
19.4 In the mode of
independent payment by the borrower, the borrower should report the payment of loan fund to the loaner within 15 days since the
issuance
of loan.
Article 20. Financial Restriction, External
Rating, Production and Operation Qualification/License
20.1 Limit on the external
investment by the borrower is RMB 90 million; limit on the increase of debt financing is RMB 90 million.
20.2 Specific regulations on
the financial indexes of the borrower:
(1)
/
(2)
(3)
19
20.3 Specific regulations on
the external rating:
(1)
/
(2)
20.4 Specific regulations on
the production and operation qualification/license of the borrower:
(1)
/
(2)
▲▲Article 21. Repricing of Risk
21.1 This contract adopts the
first repricing mode below: (1) Repricing through negotiations; (2) Direct raising the loan interest rate.
21.2 Once the “direct
raising the loan interest rate” is adopted:
21.2.1 If the loan currency
is RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound,, the increased interest rate plus (minus) points
shall be:
☐ no point plus or minus ☐
plus percentage points ☐ minus / percentage points.
If a loan is otherwise agreed, the increase (decrease) value of the
interest rate after the increase of the loan shall be subject to the
records in the application for the use of the applicable limit.
21.2.2 If the loan currency
is other than RMB, US dollar, Euro, Hong Kong dollar, Japanese yen and British pound, the loan interest rate after the
increase is:
/
Article 22. Contact Details
Contact details of the borrower
to receive the notice specified in Article 12:
Mailing address:
2F, Building 18, 498 Guoshoujing Road
Addressee:
Yang Xiaofeng
Post code:
201203
Tel:
Mobile:
13701602419
Fax:
E-mail:
paulyang@clpsglobal.com
Article 23. Counterparts
This contract is made with
Three copies. Both parties and the guarantor (if any) holds one copy (ies) respectively.
Article 24. Miscellaneous
24.1 Both parties agree that
Article 13.3 √applies ☐does not apply to this contract.
24.2 According to the lender’s
environmental and social risk assessment standards, the borrower ☐
belongs to a customer √ not classified as A or B in
terms of environmental
and social risks.
20
24.3 The payment method of
the loan under the Contract shall be subject to the Application for Use of Quota signed by the Lender.
Borrower: CLPS Shanghai
Co., Ltd.
Legal representative (responsible
person): Yang Xiaofeng
Address: Room 26C01,
828-838 Zhangyang Road, China (Shanghai) Free Trade Area
Loaner: Bank of Communications
Co., Ltd. Shanghai Zhangjiang Branch (Sub-branch)
Responsible person: Cao
Pei
Mailing address: 560
Songtao Road, Pudong New Area, Shanghai, China
The borrower has read this contract and the loaner has made detailed descriptions as required by the
borrower. The borrower possesses no objection or doubt when signing this contract and understands all the
articles, especially the meaning and legal consequence of those marked with ▲▲.
(This page is the signature page of the Working
Capital Loan Contract, and there is no text below)
21
Borrower: (Seal)
Loaner: (Seal)
(Seal: ChinaLink Professional Services
Co., Ltd.)
(Seal: Line of Credit Business
Contract Seal of Shanghai
Zhangjiang Sub-branch of Bank of
Communications Co., Ltd.)
Legal representative
(responsible
person) or authorized representative
(Signature or seal)
Legal representative (responsible
person) or authorized
representative
(Signature
or seal)
Date: Nov 3, 2023
Date: Nov 8, 2023
22
Exhibit 10.25
Contract No:30241000056
Contract for loans of working capital
(2021 edition)
Special Reminder: This contract is negotiated and
concluded by both parties on an equal and voluntary basis in accordance with the law. All terms of the
contract represent the true intentions
of both parties. In order to safeguard the legitimate rights and interests of the borrower, the lender hereby requests the
borrower to
pay full attention to all clauses related to the rights and obligations of both parties, especially the bolded parts.
第 1 页 共 21 页
Lender: Industrial and Commercial Bank of China Limited
Shanghai Zhangjiang Technology Branch
Person in charge: Lin Zhiqiao Contact person: Li
Siyang
Address: 2nd Floor, 268 Xiangke Road, Pudong New
Area, Shanghai
Postal Code: 201210
Phone: 021-38188076 Fax:/Email: lisiyang_zj@sh.icbc.com.cn
Borrower: CLPS Shanghai Co., Ltd.
Legal representative: Yang Xiaofeng Contact person:
Yang Rui Mobile number: 18621327026
Address: 2nd Floor, Building 18, 498 Guoshoujing
Road, Zhangjiang High tech Park, Pudong New Area, Shanghai
Postal Code: 201210
Phone: 18621327026 Fax:/Email: rita.yang@clpsglobal.com
[Please ensure that the borrower accurately and completely
fills in the above information to ensure timely delivery of relevant notices and legal documents in
the future.]
The borrower and lender have reached an agreement
through equal consultation on the matter of the lender granting the loan to the borrower, and hereby
enter into this contract.
第 2 页 共 21 页
Part I Basic Agreement
Article 1 Purpose of Loan
The loan under this contract shall be used for the
following purposes. Without the written consent of the lender, the borrower shall not use the loan for other
purposes, and the lender
has the right to supervise the use of the funds.
Purpose of Loan: Daily Operating Turnover
Article 2 Loan Amount and Term
2.1 The currency of the loan under this contract
is RMB, and the amount is 19,900,000.00 (in words: nineteen million nine hundred thousand yuan) (in case
of inconsistency between uppercase
and lowercase, the uppercase shall prevail).
2.2 The loan term of this contract is 12 months,
starting from the first withdrawal date under this contract.
2.3 For each withdrawal, the withdrawal date shall
be the actual date when the loan funds are transferred to the loan account, and the maturity date shall be
the repayment date recorded
on the loan receipt (for installment repayment, the maturity date shall be executed according to this contract or the repayment
plan agreed
upon by both parties), and the repayment date of any withdrawal shall not exceed the loan term of this contract.
Article 3 Interest Rate, Interest and Fees
3.1 [Method for Determining RMB Loan Interest
Rate]
The interest rate for RMB loans shall be determined
in the following manner:
The interest rate for each loan is determined by
adding a floating point to the pricing benchmark, where the pricing benchmark is the one-year (1-year/5-year
or more) loan market quoted
interest rate (LPR) published by the National Interbank Funding Center on the working day before the effective date of each
loan contract
(withdrawal date/contract effective date) (the first interest rate determination date), and the floating point is minus (plus/minus) 85
basis points
(one basis point is 0.01%, the same below). The interest rate spread remains unchanged during the loan term. For withdrawals
made in installments, the
interest rate for each withdrawal is calculated separately. If the National Interbank Funding Center does not
publish the corresponding loan market quoted
interest rate for the period one working day before the interest rate determination date,
the loan market quoted interest rate published by the National
Interbank Funding Center on the next working day shall prevail, and so
on. After the first interest rate determination date, regardless of whether withdrawals
have been made at that time, the loan interest
rate should be adjusted in the following A (A/B) ways:
A、 Calculate interest in segments based on
a period of 12 (1/3/6/12) months, with adjustments made for each period. On the corresponding day after the
first interest rate determination
date for the second and subsequent periods, the lender shall adjust the loan interest rate based on the loan market quoted
interest rate
and floating point number for the aforementioned period published by the National Interbank Funding Center on the previous working day.
If
there is no date corresponding to the first interest rate determination date in the month of adjustment, the last day of that month
shall be taken as the
corresponding date.
B、 Not adjusted throughout the entire loan
term.
第 3 页 共 21 页
3.2 [Method for Determining Foreign Currency Loan
Interest Rates]
The interest rate for foreign currency loans shall
be determined in the following/(1/2/3) ways:
(1) Fixed interest rate, with an annual interest
rate of/%, and the interest rate remains unchanged during the validity period of the contract.
(2) Term interest rate, the interest rate for each
loan is determined by the margin of the pricing benchmark, where the pricing benchmark is for each
loan/(withdrawal date/contract effective
date) (the first interest rate determination date), and the applicable term variety is/(week/month/year)/(SOFR term
interest rate/ONIA
term interest rate/EURIBOR term interest rate/TORF term interest rate, etc.), with a margin of/(plus/minus)/basis point (one basis point
is
0.01%). The interest rate spread remains unchanged during the loan term. For withdrawals made in installments, the interest rate for
each withdrawal is
calculated separately. After the first interest rate determination date, regardless of whether withdrawals have been
made at that time, the loan interest rate
shall be adjusted according to the following/(A/B/C) method, and interest shall be calculated
in segments:
A、 Take/(1/3/6/12) months as one period, adjust
one period at a time. The interest rate determination date for the second and subsequent periods shall be
adjusted based on the pricing
benchmark and interest rate spread applicable on the corresponding date after the first interest rate determination date. If there
is
no date corresponding to the first interest rate determination date in the adjustment month, the last day of that month shall be taken
as the corresponding
date.
B、 The first day of each interest period (i.e.
the day after the end of the previous interest period) is used as the interest rate determination date, and from that
day on, the loan
interest rate is adjusted based on the pricing benchmark and spread applicable on that day.
C、 Not adjusted throughout the entire loan
term.
On the aforementioned interest rate determination
date, the applicable pricing benchmark shall be determined in accordance with the relevant
rules in Article 1.1 of Part II.
(3) Floating overnight interest rate, the loan interest
rate is priced based on the overnight financing rate applicable to the borrowing currency on each interest
day during the interest period
(referring to the withdrawal date and each subsequent natural day)/(SOFR/SONIA/€ STR/SARON or TONA, etc.). The interest
rate spread
of plus/minus basis points is determined, and the interest rate spread remains unchanged during the loan term. Subsequent lenders shall
determine
the interest rate for each interest date based on the applicable pricing benchmark and the aforementioned interest rate spread.
The first interest rate
determination date is the withdrawal date for each loan, and the subsequent interest rate determination date is
every interest calculation day after the first
interest rate determination date. Calculate loan interest using a combination of simple
interest and compound interest.
On the aforementioned interest rate determination
date, the applicable pricing benchmark shall be determined in accordance with the relevant
rules in Article 1.1 of Part II.
3.3 The loan under this contract shall accrue interest
on a daily basis and quarterly (monthly/quarterly/semi annual) basis from the actual withdrawal date.
When the loan expires, the remaining
unpaid interest will be settled together with the principal. When the borrowing currency is GBP, AUD, CAD, SGD or
HKD, the daily interest
rate on each interest day is equal to the annual interest rate divided by 365; For other currencies, the daily interest rate on each
interest
day is equal to the annual interest rate divided by 360.
第 4 页 共 21 页
3.4 If the loan currency is RMB, the overdue penalty
interest rate under this contract shall be determined by adding 30% to the original loan interest rate; If
the loan currency is foreign
currency, the overdue penalty interest rate under this contract shall be determined by adding/basis point to the original loan
interest
rate (one basis point is 0.01%). The penalty interest rate for misappropriating loans shall be determined by adding 50% to the original
loan interest
rate.
3.5 In addition to interest, for loans that the borrower
has not yet withdrawn, the borrower shall also pay a commitment fee to the lender. The commitment fee
shall be paid according to the difference
between the loan amount agreed in Article 2 and the borrower's withdrawal amount (daily average balance during
the billing period), and
the annual fee rate of/‰, in the following/(1/2) way:
(1) Make a one-time payment to the lender on the
expiration date of the billing cycle.
(2) After this contract comes into effect, payments
shall be made to the lender in installments on the 20th of each month, quarter, or half year until the billing
period expires.
If the loan under this contract is reusable, the
billing cycle refers to the period of use of the revolving loan limit; If the loan under this contract is not reusable,
the billing cycle
refers to the period between the date of signing this contract and the withdrawal date of the last loan as stipulated in Article 4.
If the commitment fee is paid in installments,
if the borrower fails to pay the commitment fee on time, the lender has the right to stop issuing the
loan or partially or completely
cancel the borrower's outstanding amount.
Article 4 Withdrawal (not applicable to revolving
loans)
4.1 The borrower shall withdraw funds according to
the actual demand for use, using the second (1/2/3) method as follows:
(1) Make a one-time withdrawal of the loan before/year/month/day;
(2) From the effective date of this contract until
April 18, 2024, one or more withdrawals of the loan shall be made;
(3) Withdraw in installments according to the following
schedule. If the borrower needs to change the withdrawal time or amount based on the progress of
the disbursement, they shall obtain the
consent of the lender, but the borrower shall withdraw the loan no later than/year/month/day.
Withdrawal time
Withdrawal amount
/
/
/
/
/
/
第 5 页 共 21 页
4.2 If the borrower fails to withdraw the loan
as agreed, the lender has the right to partially or completely cancel the loan that the borrower has not
withdrawn.
Article 5 Repayment
5.1 The borrower shall repay the loan under this
contract in one (1/2) of the following ways:
(1) The loan will be repaid in one lump sum upon
maturity.
(2) Repay in installments according to the following
repayment plan (if there are many contents, please attach a separate page). If the interest rate is
determined by the floating overnight
interest rate in Article 3.2 (3) of Part I, the equal principal and interest repayment method cannot be used to repay
principal and interest.
Planned repayment time
Planned repayment amount
/
/
/
/
5.2 If the loan under this contract falls under the
following circumstances, the borrower shall immediately repay the loan after the corresponding funds are in
place. Therefore, if early
repayment occurs, the borrower shall not be required to pay a penalty for early repayment:
_______/_________________________________________________________________
_______/_________________________________________________________________
5.3 Except for the circumstances stipulated in Article
5.2, if the borrower repays the loan in advance, they shall pay a prepayment penalty to the lender. The
prepayment penalty shall be calculated
according to the following standard: prepayment amount x remaining loan term (months) x/‰. If the remaining loan
months are less
than one month, it shall be calculated as one month.
第 6 页 共 21 页
Article 6 Special Agreement on Revolving Loans
(Optional Clause, this clause does not apply (Applicable/Not Applicable))
6.1 The loan under this contract can be used in a
revolving manner. The loan amount mentioned in Article 2 above and the loan term of this contract are the
revolving loan limit and the
term of use of the revolving loan limit. The term of use of the revolving loan limit shall be calculated from the effective date of
this
contract.
6.2 The interest rate for RMB revolving loans is
determined by the pricing benchmark plus floating points. The pricing benchmark refers to the loan market
quoted interest rate (LPR) of
the relevant term variety published by the National Interbank Funding Center on the working day before the withdrawal date.
The loan market
quoted interest rate (LPR) and the added or subtracted floating points of each term variety are determined based on the loan term in the
table
below, with the unit of added or subtracted points being the basis point. Specifically:
Loan term range
Corresponding loan market quoted interest rate (LPR) term
variety
Add and subtract points
/
/
/
/
/
/
/
/
/
/
/
/
If the National Interbank Funding Center does not
announce the corresponding loan market quoted interest rate for the period one working day before the
withdrawal date, the loan market
quoted interest rate announced by the National Interbank Funding Center on the next working day shall prevail, and so on.
6.3 If the loan under this contract is reusable,
from the date of signing this contract, if the borrower fails to make any withdrawals for consecutive
months, the lender has the right
to cancel the revolving loan limit.
Article 7 Guarantee
If the loan guarantee under this contract is the
maximum amount guarantee, the corresponding maximum amount guarantee contract is/(1/2/3, multiple
choices are allowed):
(1) Maximum Guarantee Contract (No.:/)
Guarantor:/
(2) Maximum Mortgage Contract (No.:/)
Mortgagor:/
(3) Maximum Pledge Contract (No.:/)
Pledger:/
第 7 页 共 21 页
Article 8 Financial Agreement (Optional Clause,
this clause applies (Applicable/Not Applicable))
During the validity period of this contract, the
borrower shall comply with the following financial indicators:
(1) The asset liability ratio shall not exceed 60%;
(2) Total amount of working capital loans/operating
income in the past four quarters ≤ 30%;
(3) The annual profit and net cash flow from operating
activities are positive.
Article 9 Dispute Resolution
The dispute resolution method under this contract
is 2 (1/2):
(1) Submit the dispute to the arbitration committee
in accordance with the effective arbitration rules of the committee at the time of submitting the arbitration
application, arbitration
shall be conducted at/(place of arbitration). The arbitration award is final and binding on both parties.
(2) Resolve through litigation in the court where
the lender is located.
Article 10 Other
10.1 This contract is made in duplicate, with the
borrower, lender, and/or each holding one copy, and both copies have equal legal effect.
10.2 The following attachments and other attachments
jointly confirmed by both parties constitute an integral part of this contract and have the same legal
effect as this contract:
Attachment 1: Withdrawal Notice (Format)
Attachment 2: Entrusted Payment Agreement
Attachment 3: Account Supervision Agreement
Article 11 Other matters agreed upon by both parties
11.1 The borrower undertakes not to distribute dividends
or bonuses in any form if there are outstanding principal, interest, and other payable amounts due
(including those declared immediately
due) under the loan contract, or if the borrower fails to reserve current principal and interest in the designated
repayment account of
the lender.
11.2 The borrower undertakes not to distribute dividends
and bonuses in any form without the written consent of the lender.
11.3 Borrower's Commitment: Other banks' newly added
financing conditions of the same type shall not be superior to those of the lender, and the borrower's
sales return rate to the lender
shall not be lower than the lender's financing interbank proportion.
11.4 Without the written consent of the lender, the
borrower shall not use its valid operating assets to set up collateral or provide guarantees to external
parties. The borrower shall regularly
report the external guarantee situation to the lender and promise that the information and external guarantee amount
provided to the lender
are complete, true, and accurate. When the borrower's financial indicators during the loan term are lower than the previously agreed
upon
indicators with the lender, the lender has the right to announce the early maturity of the loan, stop issuing outstanding loans, require
the borrower to
repay part or all of the loans already issued in advance, or require the borrower to provide legal and effective guarantees
recognized by the lender.
第 8 页 共 21 页
11.5 If the borrower breaches any financing contract
signed with a financial institution, it shall constitute a breach of this contract, and the lender shall have
the right to declare the
principal debt of the loan to be due in advance.
11.6 If the borrower violates its commitments to
the lender, it shall be deemed as a breach of this contract, and the lender shall have the right to declare the
contract to expire early
and hold the borrower liable for breach of contract.
Part II Specific Terms and Conditions
Article 1 Interest Rate and Interest
1.1 If the loan currency is foreign currency and
the term interest rate or floating overnight interest rate method is selected for pricing, the pricing benchmark
applicable on the interest
rate determination date (T day, if the interest rate determination date is not a working day, the nearest working day before it shall
be
taken as T day) shall be the interest rate value for T-N working days corresponding to the pricing benchmark agreed upon in this contract
displayed on the
terminal page of Refinitiv or Bloomberg Financial Telecommunication. If the interest rate pricing benchmark is negative,
execute it as zero. The above-
mentioned working days refer to the local working days of the loan currency pricing benchmark management
institution. For the applicable term interest rate,
the value of N is 2; For floating overnight rates, the value of N is 5.
For the avoidance of doubt, the SOFR term interest
rate agreed upon in this contract refers to the SOFR term interest rate published by the Chicago
Mercantile Exchange (CME) as recognized
by the Alternative Interest Rate Committee (ARRC) in the United States; The SONIA term interest rate agreed
upon in this contract refers
to the SONIA term interest rate published by Refinitiv.
If there is a significant change in the pricing benchmark,
it shall be handled in accordance with the effective market rules at that time. If the lender requests
the borrower to sign a supplementary
agreement on relevant matters at that time, the borrower should cooperate.
1.2 If the loan under this contract adopts a floating
interest rate, the interest rate adjustment rules shall still be implemented in the original manner after the
loan is overdue.
1.3 For loans with monthly interest payments, the
interest payment date is on the 20th of each month; For quarterly interest settlement, the interest settlement
date is on the 20th day
of the last month of each quarter; For interest payments made every six months, the payment dates are June 20th and December 20th
each
year.
1.4 The first interest period is from the actual
withdrawal date of the borrower to the first interest settlement date; The last interest period is from the day after
the end of the previous
interest period to the final repayment date; The remaining interest periods are from the day after the end of the previous interest
period
to the next interest settlement date.
1.5 Loan interest=Loan principal x Daily interest
rate x Actual usage days.
If the interest rate is determined using the method
specified in Article 3.2 (3) of Part I of this contract and the loan interest is calculated through a
combination of simple interest and
compound interest, the interest calculation rule is as follows: for the portion calculated based on the pricing benchmark,
the interest
for each working day is calculated as follows: (loan principal+total amount of interest owed up to the previous natural day) multiplied
by the
benchmark interest rate applicable on that day; The interest on this portion of non working days is the same as the interest on
the most recent working day
before, but if there is a change in the loan principal, the interest on this portion should be adjusted accordingly
according to the above formula. The portion
calculated based on the spread is calculated using simple interest method. The working days
referred to in this article refer to the local working days of the
borrowing currency pricing benchmark management institution.
第 9 页 共 21 页
If the equal principal and interest repayment
method is adopted, the calculation formula for principal and interest repayment should be as follows:
Principle*Period
interest rate*
Total principal and interest for each period
= (1+Period interest rate)Number of repayment periods
(1+Period interest rate)Number
of repayment periods-1
1.6 If the People's Bank of China adjusts the
loan interest rate determination method and is applicable to the loan under this contract, the relevant
provisions of the People's Bank
of China shall prevail, and the lender will not notify the borrower otherwise.
1.7 At the time of signing this contract, if the
loan interest rate is determined to be reduced by a certain basis point according to the loan market
quotation rate (LPR) published by
the National Interbank Funding Center, the lender has the right to re evaluate the interest rate discount given to
the borrower annually.
Based on national policies, the borrower's credit status, and changes in loan guarantees, the lender may decide to cancel all
or part
of the interest rate discount given to the borrower at their own discretion and notify the borrower in a timely manner.
1.8 Unless otherwise specified, the loan interest
rate in this contract is calculated using the simple interest method and is an annualized interest rate.
Article 2 Loan disbursement and payment
2.1 The borrower must meet the following conditions
before withdrawing the loan, otherwise the lender has no obligation to release any funds to the
borrower, except for the lender agreeing
to release the funds in advance:
(1) Except for credit loans, the borrower has provided
corresponding guarantees as requested by the lender and has completed the relevant guarantee
procedures;
(2) No breach of contract has occurred under this
contract or any other contract signed between the borrower and the lender;
(3) The provided loan purpose proof materials are
consistent with the agreed purpose;
(4) Submit other documents required by the lender.
2.2 The written documents provided by the borrower
to the lender when withdrawing funds must be original documents; If the original document cannot be
provided, a copy stamped with the
borrower's official seal can be provided with the lender's consent.
2.3 The borrower shall submit a withdrawal notice
to the lender at least 5 working days in advance when applying for withdrawal. Once the withdrawal
notice is submitted, it cannot be revoked
without the written consent of the lender. The borrower shall affix the borrower's official seal or financial seal on the
promissory note
in accordance with the reserved account seal specified in the withdrawal notice. The borrower hereby confirms that if the reserved seal
contains both the official seal and the financial special seal, and one or more seals are affixed to the promissory note, it is a valid
promissory note.
第 10 页 共 21 页
2.4 If the lender approves the borrower's withdrawal
after review, the lender shall transfer the loan to the designated borrower's account, which shall be
deemed that the lender has disbursed
the loan to the borrower in accordance with the provisions of this contract.
2.5 According to relevant regulatory regulations
and lender management requirements, for loans exceeding a certain amount or meeting other conditions, the
lender shall adopt the entrusted
payment method, and the lender shall pay the loan to the payment object that meets the agreed purpose of this contract based
on the borrower's
withdrawal application and payment commission. For this purpose, the borrower shall sign a separate entrusted payment agreement with
the
lender as an attachment to this contract, and open or designate a dedicated account with the lender to handle entrusted payment matters.
Article 3 Repayment
3.1 The borrower shall repay the principal, interest,
and other payable amounts of the loan in full and on time as stipulated in this contract. On the repayment
date and one bank working day
before each interest settlement date, the borrower shall fully deposit the current payable interest, principal, and other payable
amounts
into the repayment account opened with the lender. The lender has the right to actively collect the payment on the repayment date or interest
settlement date, or request the borrower to cooperate in handling the relevant transfer procedures. If the funds in the repayment account
are insufficient to pay
the borrower's full due amount, the lender has the right to decide the repayment order.
If the repayment account is reported lost, frozen,
suspended, or cancelled, or if the borrower needs to change the repayment account, the borrower should go
to the lender to handle the
procedures for changing the repayment account. Before the change procedures take effect, if the original repayment account is
unable to
transfer the full amount, the borrower should go to the lender's counter to handle the repayment. If the borrower fails to timely handle
the
procedures for changing the repayment account or fails to repay at the lender's counter in a timely manner, resulting in the failure
to fully repay the due loan
principal, interest, and other expenses on time, the borrower shall bear the liability for breach of contract.
3.2 If the borrower applies for early repayment
of all or part of the loan, they shall submit a written application to the lender 10 working days in
advance, obtain the lender's consent,
and pay the early repayment penalty to the lender in accordance with the standards stipulated in this contract.
3.3 If the borrower agrees to make early repayment
with the lender's consent, the borrower shall pay the loan principal, interest, and other amounts due and
payable according to the terms
of this contract from the early repayment date until the early repayment date. Interest will be calculated using a combination
of simple
interest and compound interest. If the borrower fails to pay the above-mentioned interest when applying for early repayment, the unpaid
interest
will continue to be calculated according to Article 1.5 of Part II on and after the early repayment date until the interest is
fully paid.
3.4 The lender has the right to recover the loan
in advance based on the borrower's fund recovery situation.
3.5 If the actual loan term is shortened due to the
borrower's early repayment or the lender's early recovery of the loan according to the provisions of this
contract, the corresponding
interest rate level will not be adjusted and the original loan interest rate will still be applied.
第 11 页 共 21 页
Article 4 Circular Loan
If the loan under this contract is reusable, during
the term of the revolving loan limit, the sum of the borrower's loan balances at any point shall not exceed
the revolving loan limit,
and the revolving loan limit shall gradually decrease with the repayment arrangement (the repayment amount corresponding to the
situation
stipulated in Article 5 of Part 1 shall be the revolving loan limit that should be deducted at that time).
Article 5 Guarantee
5.1 Except for credit loans, the borrower shall provide
legal and effective guarantees recognized by the lender for the performance of its obligations under
this contract. The guarantee contract
shall be signed separately.
5.2 In the event of damage, depreciation, property
disputes, seizure or attachment of the collateral under this contract, or if the guarantor violates
the provisions of the guarantee contract,
or if the guarantor's financial condition undergoes adverse changes or other changes that are detrimental
to the lender's creditor's rights,
the borrower shall promptly notify the lender and provide other guarantees recognized by the lender.
5.3 The lender has the right to regularly or irregularly
re evaluate the value of the collateral and the guarantor's guarantee ability. If the evaluation
finds that the value of the collateral
has decreased or the guarantor's guarantee ability has decreased, the borrower shall provide additional
guarantee equivalent to the reduced
value or guarantee ability, or may provide other guarantees recognized by the lender.
5.4 If the loan under this contract is secured
by pledging accounts receivable, during the validity period of this contract, if any of the following
situations occur, the lender has
the right to declare the loan to be due in advance, require the borrower to immediately repay part or all of the loan
principal and interest,
or add legal, effective, and sufficient guarantees recognized by the lender:
(1) The bad debt rate of accounts receivable from
the pledger to the payer has been increasing for two consecutive months;
(2) The pledgor of accounts receivable accounts for
more than 5% of the balance of accounts receivable owed to the payer that have not yet been collected
due;
(3) Trade disputes (including but not limited to
disputes over quality, technology, and services) or debt disputes arise between the pledgor of accounts
receivable and the payer or other
third parties, which may result in the inability to pay the accounts receivable on time.
Article 6 Account Management
6.1 The borrower shall designate a dedicated fund
withdrawal account at the lender's location to collect corresponding sales revenue or planned
repayment funds. If the corresponding sales
revenue is settled in a non cash manner, the borrower shall ensure that the funds are promptly
transferred to the fund recovery account
upon receipt of the payment.
6.2 The lender has the right to supervise the fund
withdrawal account, including but not limited to understanding and monitoring the income and expenditure
of funds in the account, and
the borrower should cooperate. If requested by the lender, the borrower shall sign a specialized account supervision agreement
with the
lender.
第 12 页 共 21 页
Article 7 Representations and warranties
The borrower makes the following representations
and warranties to the lender, which shall remain valid during the term of this contract:
7.1 In accordance with the law, the borrower has
the qualification and ability to sign and perform this contract.
7.2 The signing of this contract has obtained all
necessary authorizations or approvals, and the signing and performance of this contract does not violate the
provisions of the company's
articles of association and relevant laws and regulations, and does not conflict with the obligations under other contracts that
should
be undertaken.
7.3 Operate in accordance with laws and regulations,
have a good credit status, have paid off other debts on time, and have no malicious behavior of
defaulting on bank loan principal and
interest.
7.4 There is a sound organizational structure and
financial management system, and no major violations or disciplinary actions have occurred in the
production and operation process in
the past year. The current senior management personnel have no major adverse records.
7.5 All documents and information provided to the
lender are true, accurate, complete, and valid, and there are no false records, significant omissions, or
misleading statements.
7.6 The financial accounting report provided to the
lender is prepared in accordance with Chinese accounting standards, which truthfully, fairly, and
completely reflects the borrower's operating
conditions and liabilities. Since the latest financial accounting report deadline, the borrower's financial condition
has not undergone
any significant adverse changes.
7.7 Not concealing from the lender any litigation,
arbitration, or claims related to it. There are no ongoing lawsuits, arbitrations, other administrative
procedures or claims that may
affect the borrower's signing or performance of this contract and the repayment of debts under this contract.
7.8 Not concealing from the lender any events that
have occurred or are currently occurring that may affect its financial condition and debt repayment ability.
Article 8 Borrower's Commitment
8.1 The loan shall be withdrawn and used in accordance
with the terms and purposes stipulated in this contract. The borrowed funds shall not be
used for fixed asset and equity investments,
and shall not flow into the securities market, futures market, or other purposes prohibited or restricted
by relevant laws and regulations
in any form.
8.2 Repay the principal, interest, and other payable
amounts of the loan in accordance with the provisions of this contract.
8.3 Accept and actively cooperate with the lender's
inspection and supervision of the use of loan funds, including their purpose, through account analysis,
voucher inspection, on-site investigation,
etc., and regularly summarize and report the use of loan funds as required by the lender.
第 13 页 共 21 页
8.4 Accept the lender's credit inspection, provide
financial accounting information such as balance sheets, income statements, and other materials reflecting
the borrower's debt paying
ability as requested by the lender, actively assist and cooperate with the lender's investigation, understanding, and supervision of
its
production, operation, and financial situation.
8.5 If there are outstanding loan principal, interest,
and other payable amounts due (including those declared immediately due) under this contract, no
dividends or bonuses shall be distributed
in any form.
8.6 When carrying out mergers, divisions, capital
reductions, equity changes, equity pledges, major asset and debt transfers, major external investments,
substantial increases in debt
financing, and other actions that may have adverse effects on the rights and interests of the lender, prior written consent from the
lender
or arrangements satisfactory to the lender shall be made for the realization of the lender's debt.
8.7 In the event of any of the following circumstances,
notify the lender promptly:
(1) Changes in the company's articles of association,
business scope, registered capital, and legal representative;
(2) Closure, dissolution, liquidation, suspension
for rectification, revocation of business license, revocation or application for bankruptcy;
(3) Involving or potentially involving major economic
disputes, litigation, arbitration, or property being lawfully seized, detained, or supervised;
(4) Shareholders, directors, and current senior management
personnel are suspected of major cases or economic disputes.
8.8 Timely, comprehensively, and accurately disclose
related party relationships and related transactions to the lender.
8.9 Promptly sign for all notices sent or otherwise
delivered by the lender.
8.10 Do not dispose of its own assets in a way that
reduces its ability to repay debts; Providing guarantees to third parties does not harm the rights and
interests of the lender.
8.11 If the loan under this contract is disbursed
by credit, complete, truthful, and accurate external guarantee information shall be regularly reported to the
lender, and an account supervision
agreement shall be signed according to the lender's requirements. If providing external guarantees may affect the
performance of its obligations
under this contract, written consent from the lender is required.
8.12 Bear the expenses incurred by the lender in
realizing the creditor's rights under this contract, including but not limited to lawyer fees, auction fees, etc.
8.13 The repayment order of the debts under this
contract shall take priority over the borrower's debts to its shareholders, and shall be at least on an equal
footing with the borrower's
similar debts to other creditors.
8.14 If the borrower's repayment funds (including
but not limited to the funds obtained by the lender through deduction or disposal of collateral, etc.) are
insufficient to repay all of
its debts to the lender under this contract and other contracts, the lender has the right to decide the repayment order.
8.15 Strengthen environmental and social risk management,
and accept supervision and inspection from lenders in this regard. As requested by the lender,
submit an environmental and social risk
report to the lender.
第 14 页 共 21 页
Article 9 Lender's Commitment
9.1 Issue the loan to the borrower in accordance
with the provisions of this contract.
9.2 Keep confidential the non-public information
and data provided by the borrower, except as otherwise provided by laws and regulations and as stipulated
in this contract.
Article 10 Breach of Contract
10.1 If any of the following circumstances occur,
it shall constitute a breach of contract by the borrower:
(1) The borrower fails to repay the principal, interest,
and other payable amounts under this contract as agreed, or fails to fulfill any other obligations under
this contract, or violates any
representations, warranties, or commitments under this contract;
(2) If there is a change in the guarantee under this
contract that is unfavorable to the creditor's rights of the lender, or if the guarantor violates the provisions
of the guarantee contract
and the borrower fails to provide other guarantees recognized by the lender;
(3) If the borrower fails to repay any other debt
after maturity (including being declared early due), or fails to perform or violates its obligations under other
agreements, which has
or may affect the performance of its obligations under this contract;
(4) The borrower's financial indicators such as profitability,
debt paying ability, operating ability, and cash flow exceed the agreed standards, or deteriorate,
which has or may affect the performance
of its obligations under this contract;
(5) The borrower's equity structure, production and
operation, external investment, etc. have undergone significant adverse changes that have or may affect
the performance of its obligations
under this contract;
(6) The borrower is involved or may be involved in
major economic disputes, litigation, arbitration, or assets are seized, detained, or enforced, or is lawfully
investigated or punished
by judicial or administrative authorities, or is exposed by the media for violating relevant national regulations or policies, which has
or may affect the performance of its obligations under this contract;
(7) The borrower's main investors, key management
personnel, abnormal changes, disappearance, or legal investigation or restriction of personal freedom by
judicial authorities have already
or may affect the performance of their obligations under this contract;
(8) The borrower uses false contracts with related
parties to embezzle funds or credit from the lender through transactions without actual transaction
background, or intentionally evades
the lender's creditor's rights through related transactions;
(9) The borrower has already or may have ceased operations,
dissolved, liquidated, suspended business for rectification, had its business license revoked,
been revoked, or applied for bankruptcy;
(10) The borrower has caused liability accidents,
major environmental and social risk events due to violations of laws, regulations, regulatory provisions or
industry standards related
to food safety, safety production, environmental protection and other environmental and social risk management, which have or
may affect
the performance of its obligations under this contract;
(11) If the loan under this contract is disbursed
by credit, and the borrower's credit rating, profitability, asset liability ratio, net cash flow from operating
activities, and other
indicators do not meet the lender's credit loan conditions; Or the borrower, without the written consent of the lender, sets up
mortgage/pledge
guarantees or provides external guarantee guarantees with its valid operating assets to others, which has or may affect the performance
of its
obligations under this contract;
(12) Other circumstances that may adversely affect
the realization of the lender's creditor's rights under this contract.
第 15 页 共 21 页
10.2 If the borrower defaults, the lender has
the right to take one or more of the following measures:
(1) Require the borrower to rectify the default behavior
within a specified period of time;
(2) Stop issuing loans and other financing funds
to the borrower based on this contract and other contracts between the lender and the borrower, and partially
or completely cancel the
borrower's outstanding loans and other financing funds;
(3) Announce that the outstanding loans and other
financing amounts under this contract and other contracts between the lender and borrower shall
immediately become due and immediately
recover the outstanding payments;
(4) Request the borrower to compensate for the losses
caused to the lender due to their breach of contract;
(5) Other measures required by laws and regulations,
as stipulated in this contract, or deemed necessary by the lender.
10.3 If the borrower fails to repay the loan upon
maturity (including being declared immediately due), the lender shall have the right to charge
penalty interest at the penalty interest
rate agreed upon in this contract from the date of overdue payment. The interest (including penalty interest)
that the borrower fails
to pay on time shall be compounded at the overdue penalty interest rate. The interest settlement rules for penalty
interest/compound interest
shall apply to the interest settlement rules agreed upon in this contract.
10.4 If the borrower fails to use the loan for the
purpose specified in this contract, the lender shall have the right to charge penalty interest on the
misappropriated portion at the penalty
interest rate specified in this contract from the date of misappropriation. The interest (including penalty interest) that is
not paid
on time during the period of misappropriation shall be compounded at the penalty interest rate specified in this contract. The interest
settlement rules
for penalty interest/compound interest shall apply to the interest settlement rules agreed upon in this contract.
10.5 If the borrower experiences the situations described
in Article 10.3 and 10.4 at the same time, the penalty interest rate shall be determined by the heavier
of the two and cannot be imposed
simultaneously.
10.6 If the borrower fails to repay the loan principal,
interest (including penalty interest and compound interest) or other payable amounts on time, the lender
has the right to announce and
collect through the media.
10.7 If there is a change in the control or controlled
relationship between the borrower's affiliated parties and the borrower, or if the borrower's affiliated
parties encounter any other circumstances
other than those mentioned in Article 10.1 (1) and (2), which have or may affect the borrower's performance of its
obligations under this
contract, the lender has the right to take all measures stipulated in this contract.
第 16 页 共 21 页
Article 11 Automatic Cancellation of Loan Commitment
11.1 If the borrower's credit condition deteriorates,
the lender may automatically cancel all commitments to the borrower's outstanding loans without prior
notice.
11.2 If the borrower falls under any of the circumstances
described in Article 10.1 and 10.7 of Part II of this Agreement, it shall constitute a deterioration of
the borrower's credit condition.
Article 12 Deduction
12.1 If the borrower fails to repay the debts due
(including those declared immediately due) under this contract as agreed, the borrower agrees that the lender
shall deduct the corresponding
amount from all domestic and foreign currency accounts opened by the borrower at Industrial and Commercial Bank of China
for repayment
until all debts under this contract are fully repaid.
12.2 If the deducted amount is inconsistent with
the currency of this contract, it shall be converted at the exchange rate applicable to the lender on the
deduction date. The interest
and other expenses incurred during the period from the deduction date to the repayment date (the date when the lender converts
the deducted
amount into the currency of this contract and actually repays the debt under this contract in accordance with national foreign exchange
management policies), as well as the difference caused by exchange rate fluctuations during this period, shall be borne by the borrower.
Article 13 Transfer of Rights and Obligations
13.1 The lender has the right to transfer part
or all of its rights under this contract to a third party, and the lender's transfer does not require the
borrower's consent. Without
the written consent of the lender, the borrower shall not transfer any of its rights and obligations under this contract.
13.2 The lender or Industrial and Commercial Bank
of China Limited ("ICBC") may authorize or entrust other branches of ICBC to perform the rights and
obligations under this contract
according to the needs of business management, or transfer the loan claims under this contract to other branches of ICBC for
undertaking
and management. The borrower agrees to this, and the lender does not need to obtain the borrower's consent for the above actions. Other
branches of Industrial and Commercial Bank of China that undertake the rights and obligations of the lender have the right to exercise
all rights under this
contract, and have the right to file a lawsuit, submit for arbitration or apply for compulsory enforcement in the
name of the institution for disputes under this
contract.
第 17 页 共 21 页
Article 14 Effectiveness, Amendment and Termination
14.1 This contract shall come into effect from the
date of affixing the official seal or contract specific seal, and shall terminate on the date when the borrower
fulfills all obligations
under this contract.
14.2 Any changes to this contract shall be agreed
upon by all parties through consultation and made in writing. Any changes to the terms or agreements shall
constitute a part of this contract
and shall have the same legal effect as this contract. Except for the modified parts, the remaining parts of this contract remain
valid,
and the original terms remain valid until the modified parts take effect.
14.3 The amendment and termination of this contract
shall not affect the rights of the contracting parties to claim compensation for losses. The termination of
this contract shall not affect
the validity of the dispute resolution clauses.
Article 15 Application of Law and Dispute Resolution
The formation, validity, interpretation, performance,
and dispute resolution of this contract shall be governed by the laws of the People's Republic of China.
Any disputes or controversies
arising from or related to this contract shall be resolved through consultation between the parties. If consultation fails, they
shall
be resolved in accordance with the provisions of this contract.
Article 16 Confirmation of Delivery Address for
Litigation/Arbitration Documents
16.1 The borrower confirms that the address recorded
on the first page of this contract shall be used as the delivery address for litigation/arbitration
documents related to disputes under
this contract. Litigation/arbitration documents include but are not limited to subpoenas, notices of hearing, judgments,
rulings, mediation
agreements, notices of performance deadlines, etc.
16.2 The borrower agrees that the arbitration institution
or court may use the fax or email recorded on the first page of this contract to deliver
arbitration/litigation documents.
16.3 The above service agreement applies to all stages
of arbitration and litigation proceedings, including first instance, second instance, retrial, and
enforcement. For the above delivery
address, the arbitration institution or court may directly mail it for delivery.
16.4 The borrower shall ensure the authenticity
and validity of the address, contact person, fax, email and other information recorded in this
contract. If there are any changes to the
relevant information, the borrower shall promptly notify the lender in writing. Otherwise, the delivery
made according to the original
address information shall still be valid, and the borrower shall bear the legal consequences arising therefrom.
Article 17 Complete Contract
The first part "Basic Agreements" and the
second part "Specific Terms" of this contract together constitute a complete "Working Capital Loan Agreement",
and
the same words in both parts have the same meaning. The borrower's loan is subject to the joint constraints of the above two parts.
第 18 页 共 21 页
Article 18 Notice
18.1 All notices to be given by both parties under
this contract shall be in writing. Unless otherwise agreed, both parties designate the domicile specified in
this contract as their communication
and contact address. If either party's mailing address or other contact information changes, they shall promptly notify the
other party
in writing.
18.2 If either party to this contract refuses to
sign or encounters other situations where delivery cannot be made, the notifying party may use notarization or
public announcement to
deliver.
Article 19 Special provisions on value-added tax
19.1 The interest and fees paid by the borrower to
the lender under this contract are inclusive of tax.
19.2 If the borrower requests the lender to issue
a value-added tax invoice, they should first register the information with the lender, including the borrower's
full name, taxpayer identification
number or social credit code, address, telephone number, bank account and account number. The borrower shall ensure that
the relevant
information provided to the lender is true, accurate, and complete, and provide relevant supporting materials as requested by the lender.
Specific
requirements shall be announced by the lender through branch notifications or website announcements.
19.3 If the borrower receives the VAT invoice on
its own, it shall provide the lender with a power of attorney stamped with the seal, designate the recipient,
and specify the recipient's
ID number number and other information. The designated recipient shall receive the VAT invoice with the original ID card; If there
is
a change in the designated recipient, the borrower shall issue a new authorization letter stamped with the seal to the lender. If the
borrower chooses to
collect value-added tax invoices by mail, they should also provide accurate and deliverable mailing information; If
there is any change in the mailing
information, the lender should be notified in writing in a timely manner.
19.4 If the lender is unable to issue value-added
tax invoices in a timely manner due to force majeure such as natural disasters, government actions, social
abnormal events, or tax authority
reasons, the lender has the right to delay invoicing and shall not bear any responsibility.
19.5 If the value-added tax invoice is lost, damaged,
or overdue due to reasons other than the lender's fault, resulting in the borrower being unable
to receive the corresponding copy of the
value-added tax invoice or being unable to offset the overdue amount, the lender shall not be responsible
for compensating the borrower
for any related economic losses.
19.6 In the event of sales returns, suspension of
taxable services, incorrect invoicing, inability to authenticate deduction and invoice copies, etc., it is
necessary to issue a value-added
tax special invoice in red. According to relevant laws, regulations, and policy documents, if the borrower needs to submit
the "Information
Form for Issuing Red Value Added Tax Special Invoices" to the tax authority, the borrower should submit the "Information Form
for Issuing
Red Value Added Tax Special Invoices" to the tax authority. After the tax authority reviews and notifies the lender,
the lender will issue a red value added tax
special invoice.
19.7 During the performance of the contract, in the
event of a national tax rate adjustment, the lender has the right to adjust the price agreed upon in this
contract based on the change
in national tax rate.
第 19 页 共 21 页
Article 20 Other
20.1 If the lender fails to exercise, partially exercises
or delays in exercising any right under this contract, it shall not constitute a waiver or change of such
right or other right, nor shall
it affect its further exercise of such right or other right.
20.2 The invalidity or unenforceability of any provision
of this contract shall not affect the validity and enforceability of other provisions, nor shall it affect
the validity of the entire
contract.
20.3 The terms "related party", "related
party relationship", "related party transaction", "individual major investor", "key management personnel"
and other
terms mentioned in this contract have the same meaning as those in the "Enterprise Accounting Standards No. 36- Disclosure
of Related Parties" (Finance
and Accounting [2006] No. 3) issued by the Ministry of Finance and subsequent revisions to this standard.
20.4 The environmental and social risks referred
to in this contract refer to the hazards and related risks that the borrower and its important affiliates may
bring to the environment
and society in their construction, production, and business activities, including environmental and social issues related to energy
consumption,
pollution, land, health, safety, resettlement, ecological protection, climate change, etc.
20.5 The lender shall prepare and retain the documents
and vouchers related to the loan under this contract in accordance with its business rules, which shall
constitute valid evidence to prove
the creditor debtor relationship between the borrower and the lender, and shall be binding on the borrower.
20.6 During the validity period of this contract,
if any laws, regulations, national policies, or regulatory provisions are promulgated or modified that prevent
the lender from continuing
to perform this contract or any part of its terms, the lender has the right to cancel the outstanding loan and take other measures
deemed
necessary by the lender in accordance with relevant regulations.
20.7 In this contract, any reference to this contract
shall include modifications or supplements to this contract; ⑵ The title of the clause is for reference only
and does not constitute
any interpretation of this contract, nor does it limit the content and scope under the title.
Both parties confirm that they have fully negotiated
all terms of this contract. The lender has reminded the borrower to pay special attention to all terms
related to the rights and obligations
of both parties, to have a comprehensive and accurate understanding of them, and has provided explanations and
clarifications on the relevant
terms as requested by the borrower. The borrower has carefully read and fully understood all the terms of the contract (including
the
first part "Basic Agreement" and the second part "Specific Terms"), and both parties have a completely consistent
understanding of the terms of this
contract and have no objections to the content of the contract.
第 20 页 共 21 页
Lender (seal): Industrial and Commercial Bank of
China Limited Shanghai Zhangjiang Technology Branch
Date：
Year
Month
Day
Borrower (seal):
Date：
Year
Month
Day
I, as the legal representative/authorized representative
of the borrower, hereby confirm that the borrower has borrowed money from the lender in accordance
with the provisions of this contract
and the seal used on this contract is genuine and valid, and has completed all necessary procedures for the loan.
Borrower's legal representative/authorized representative
(signature):
第 21 页 共 21 页
Exhibit 10.26
July 2023 edition
20231213125150-110317
Contract for loans of
working capital
Contract number: DD6232023130
Lender：Industrial
Bank Co., Ltd Shanghai Pudong Branch
Address：No. 710 Dongfang Road,
China (Shanghai) Pilot Free Trade Zone
Legal
representative/person in charge：Jianping
Meng
Borrower：JAJI
(Shanghai) Co., Ltd.
Address：
Room 5107, Building 5, No. 555 Dongchuan Road, Minhang District, Shanghai
Legal representative/person in charge: Jian
Xu
Contract
signing location： Jin’an
District, Shanghai
第 1 页 共 33 页
Important Notice for Signing
In order
to protect your rights, please carefully read, check and confirm the following matters before signing this contract：
1、You and your company have the right to
sign this contract. If it is necessary to obtain the consent of others according to law, you and your company
have obtained full authorization;
If it involves processing the personal information of others, you and your company have obtained written consent from
others for the processing
of their personal information by Industrial Bank of China；
2、You
and your company have carefully read and fully understood the terms of the contract, and have paid special attention to the content related
to the
assumption of responsibility, exemption or reduction of Industrial Bank’s responsibility, and personal information processing that
have a significant interest
in you and your company, as well as the content in bold font；
3、You
and your company have fully understood the meaning and corresponding legal consequences of the contract terms, and are willing to accept
these terms and conditions；
4
、You and your company have paid special attention to the provisions regarding
your and your company’s use of credit funds for the purposes
specified in the contract, the prohibition of misappropriation of credit
funds (including but not limited to purchasing or investing credit funds in real estate),
and the requirement to issue a commitment letter
for the use of funds to Industrial Bank. You and your company are fully aware and understand that
Industrial Bank will take measures such
as early loan collection, cessation of disbursement of loans/financing not yet issued under this contract, cessation of
payment of loans/financing
not yet paid under this contract, reduction or cessation of credit to Industrial Bank, and hold you and your company legally
responsible
for the consequences of misappropriation of credit funds；
5、By
signing this contract, you and the relevant individuals agree and authorize Industrial Bank to process your and your personal information
and
keep it for the period specified by Industrial Bank; You and related individuals are aware that you have the right to be informed,
make decisions, withdraw
consent, restrict or refuse third-party processing rights in the processing of personal information. Industrial
Bank has provided information and decision-
making services for personal information processing through diversified means (including but
not limited to on-site notification); If you and related
individuals intend to revoke, restrict or refuse the authorization of Industrial
Bank to process personal information, they may handle it in accordance with the
provisions of this contract or the management procedures
of Industrial Bank.；
6、The
contract text provided by Industrial Bank is only a demonstration text, with blank lines left after the relevant clauses of the contract,
and
“supplementary clauses” added at the end of the contract for all parties to modify, supplement or delete the contract;
7、If
you and your company have any questions about this contract, or if you and your company find that there are illegal and irregular situations
in the
contract and the business fees under the contract, please call the phone number of Industrial Bank in a timely manner or directly
complain or consult with the
operating branch of Industrial Bank, contact number: 95561.
第 2 页 共 33 页
Upon the borrower’s application, the lender has reviewed and agreed
to grant the borrower a working capital loan. In order to clarify the rights and
obligations of both parties, abide by their promises,
and in accordance with relevant laws and regulations of the People’s Republic of China, through equal
consultation, both parties hereby
sign this contract for mutual compliance.
The lender and the borrower confirm that the loan under this contract
falls under the circumstances stipulated in Article 23, Special Provisions, and
Clause 3 of this contract.
Article 1 Definition and Interpretation
Unless otherwise agreed in writing by both parties, the following terms
in this contract shall be defined and interpreted as follows:
1、“Working
capital loans” refer to local and foreign currency loans applied by borrowers to lenders for daily production and operation turnover.
2、“Debt”
or “main debt” refers to the debt formed by the borrower (debtor) submitting an application to the lender (creditor), and the
lender providing
financing to the borrower according to this contract after review and approval (including principal, interest, penalty
interest, compound interest, liquidated
damages, damages, and the cost of realizing the debt by the creditor, etc.). The creditor’s rights
against the borrower owned by the lender under this contract
correspond to the borrower’s obligations to the lender under this contract.
The cost of realizing creditor’s rights refers
to the litigation (arbitration) fees, lawyer’s fees, travel expenses, execution fees, preservation fees, and other
expenses paid by the
lender to realize creditor’s rights through litigation, arbitration, and applying to a notary public for an execution certificate.
3、Article
5 of this contract defines and interprets the following terms as follows:
“Fixed interest rate” refers to the interest rate that remains
unchanged during the loan term. For example, if the loan is disbursed in installments, it means
that the interest rate remains unchanged
between the actual disbursement date of each disbursement and the maturity date of the loan under this contract.
“Floating interest rate”
refers to the interest rate that varies within the loan term according to the agreed cycle and magnitude between the borrower and
lender.
“Floating cycle”
refers to the frequency of changes in the loan interest rate agreed upon by both parties. Within a floating period, the loan interest
rate is
calculated and determined based on the pricing benchmark interest rate according to the pricing method stipulated in the contract,
and the loan interest rate
remains unchanged during the floating period; When one floating cycle expires and enters the next floating
cycle, the loan interest rate is calculated and
determined based on the pricing benchmark interest rate of the new floating cycle according
to the pricing method agreed in the contract, and the loan interest
rate remains unchanged during the floating cycle.
“Pricing benchmark
interest rate” refers to the interest rate standard used to determine the loan interest rate under this contract, including but
not limited
to the quoted interest rates published in China or relevant countries, regions, and markets, such as LPR SHIBOR, SOFR, SOFR
term interest rates、∈STR、
SONIA、TSRR、TONA、SARON、HIBOR、SIBOR、 The
central bank’s benchmark interest rate for RMB deposits, etc.
第 3 页 共 33 页
“LPR” refers to the loan market quoted
interest rate calculated and published by the National Interbank Funding Center authorized by the People’s Bank
of China. According to
banking practices, both parties agree to determine the pricing benchmark interest rate rule under this contract as the T-1 day LPR,
where
“T” is the day when the loan interest rate is determined, and “T-1” is the previous working day of that day.
“SHIBOR” refers to the Shanghai Interbank
Offered Rate published by the National Interbank Funding Center and applicable on the same day.
“SOFR” refers to the secured overnight
financing rate in US dollars. According to banking practices, both parties agree to determine the pricing
benchmark interest rate rule
under this contract as the T-5 day SOFR, where “T” is the day the loan interest rate is determined, and “T-5” is the
first five
working days of that day.
“SOFR term rate” refers to the Chicago
Mercantile Exchange’s forward-looking mortgage financing rate, denominated in US dollars. According to
banking practices, both parties
agree to determine the pricing benchmark interest rate rule under this contract as the T-2 day SOFR term interest rate, where
“T”
is the day the loan interest rate is determined, and “T-2” is the first two working days of that day.
“∈STR” refers to the short-term
interest rate in euros, denominated in euros. According to banking practices, both parties agree to determine the pricing
benchmark interest
rate rule under this contract as T-5 days ∈ STR, where “T” is the day when the loan interest rate is determined, and “T-5”
is the first five
working days of that day.
“SONIA” refers to the overnight average
index of pounds, denominated in pounds. According to banking practices, both parties agree to determine the
pricing benchmark interest
rate rule under this contract as the T-5 day SONIA, where “T” is the day the loan interest rate is determined, and “T-5”
is the first
five working days of that day.
“TSRR” refers to the term interest
rate of the overnight average index of GBP, denominated in GBP. According to banking practices, both parties agree
to determine the pricing
benchmark interest rate rule under this contract as the T-2 day TSRR term interest rate, where “T” is the day the loan interest
rate is
determined, and “T-2” is the first two working days of that day.
“TONA” refers to the average overnight
interest rate in Tokyo, denominated in Japanese yen. According to banking practices, both parties agree to
determine the pricing benchmark
interest rate rule under this contract as the T-5 day TONA, where “T” is the day the loan interest rate is determined, and “T-
5”
is the first five working days of that day.
“SARON” refers to the overnight average
interest rate in Switzerland, denominated in Swiss francs. According to banking industry practices, both
parties agree to determine the
pricing benchmark interest rate rule under this contract as T-5 SARON, where “T” is the day when the loan interest rate is
determined,
and “T-5” is the first five working days of that day.
第 4 页 共 33 页
“HIBOR” refers to the Hong Kong interbank
lending rate for Hong Kong dollars in the financial markets. According to banking practices, both parties
agree to determine the pricing
benchmark interest rate rule under this contract as HIBOR on the T-2 day, where “T” is the day when the loan interest rate is
determined, and “T-2” is the first two working days of that day.
“SIBOR” refers to the Singapore Interbank
Offered Rate, which is applicable only to Singapore dollars. According to banking practices, both parties
agree to determine the pricing
benchmark interest rate rule under this contract as the T-2 day SIBOR, where “T” is the day when the loan interest rate is
determined,
and “T-2” is the first two working days of that day.
“The central bank’s benchmark interest rate
for RMB deposits” refers to the RMB deposit benchmark interest rate published by the People’s Bank of
China and applicable on the
same day,
Among them, the currencies and specific values
of “LPR”, “SHIBOR”, “SOFR”, “SOFR term interest rate”, “∈ STR”, “SONIA”,
“TSRR”, “TONA”,
“SARON”, “HIBOR”, “SIBOR” and “central bank RMB deposit benchmark
interest rate” determined according to the applicable pricing benchmark interest
rate rules under this contract shall be subject
to the query results of the core system of Industrial Bank.
The loan interest rate determination date can
be the actual loan disbursement date, contract signing date, or repricing date.
“Loan interest rate” refers to the interest
rate for the execution of this contract, which is determined by both parties through negotiation and in
accordance with the pricing formula
of the loan interest rate in this contract. It is based on the pricing benchmark interest rate on the date of determining the
loan interest
rate in this contract, and is formed by floating the number of points added or subtracted.
4、
The “major transaction” stipulated in Article 13 of this contract refers
to (including but not limited to) any transaction that is determined to occur or
is likely to seriously affect the basic structure of
the borrower’s company, changes in company shareholders, contingent liabilities, cash flow, profitability,
core trade secrets, core competitiveness,
important assets of the company, significant creditor’s rights and debts of the company, repayment ability, and
ability to perform this
contract, or any other transaction that the lender and/or borrower deems to constitute a major transaction.
5、The
“major events” stipulated in Article 13 of this contract refer to (including but not limited to) any determined or potential
events that will
seriously affect the ability of senior management personnel of the borrower company to perform their duties, the employment
and termination of employees
engaged in core business of the company, core trade secrets of the company, core competitiveness of the company,
basic structure of the company, changes in
shareholders of the company, contingent liabilities of the company, survival of the company,
legality of the company’s business operations, company
stability, development, profitability, debt repayment ability of the company, and
the ability of the company to perform this contract, as well as other events
deemed by the lender and/or borrower to constitute significant
events.
6、In
this contract, “working days” refer to working days outside of statutory holidays and weekends in China (excluding Hong Kong,
Macao, and
Taiwan). “Business Day” in this contract refers to the business day of the lender’s bank. During the performance
of the contract, if a withdrawal or repayment
date is not a business day, it shall be postponed to the next business day.
第 5 页 共 33 页
Article 2 Loan Amount
The lender agrees to provide the borrower with the
loan currency and amount as specified in Article 23, Special Agreement Clause 4 of this contract.
Article 3 Purpose of Loan
The purpose of this loan is stipulated in Article
23 of this contract, specifically Article 5. Without the written consent of the lender, the borrower shall not
use the loan for any other
purpose.
Article 4 Term of loan
1、The
loan term is stipulated in Article 23, Special Agreement Clause 6 of this contract.
2、For
a one-time loan, the loan disbursement date shall be based on the actual disbursement date recorded in the loan receipt and loan voucher.
If the
actual disbursement date is later than the loan disbursement date recorded in the preceding paragraph, the loan maturity date shall
be correspondingly
extended.
3
、The loan allocation plan is stipulated in Article 23, Special Agreement
Clause 7 of this contract.
The borrower shall apply to the lender for withdrawal
procedures three working days before each withdrawal date or at any other time requested in
writing by the lender.
If the borrower fails to withdraw the loan in accordance
with the agreed installment period and amount, the lender has the right to demand that the
borrower pay a penalty in accordance with the
provisions of Article 23, Special Agreement Clause 7 of this contract. If the borrower belongs to small and
micro enterprises that comply
with national regulations, policies, etc., no penalty will be charged for this breach of contract.
4、Subject to the conditions precedent for
withdrawal as stipulated in Article 6 of this Agreement, the lender shall pay the loan funds in accordance with
the provisions of Article
7 of this Agreement.
5、The lender has the right to adjust the
loan allocation plan appropriately based on whether the loan meets the provisions of relevant laws, regulations,
policies, and the withdrawal
prerequisites stipulated in this contract, the payment conditions of the loan funds, the signing and processing time of the
corresponding
guarantee contract and guarantee procedures in this contract, as well as other factors deemed necessary by the lender.
6、If the loan is used in installments, the
actual disbursement date recorded in the loan receipt or loan voucher shall prevail for each disbursement date,
and the same maturity
date shall be implemented. That is, for each disbursement of loans, the maturity date determined in the loan receipt or loan voucher for
the first disbursement shall be the same maturity date.
7、If the lender receives the loan in advance
according to the circumstances stipulated in this contract, it shall be deemed that the loan maturity date has
been correspondingly advanced.
第 6 页 共 33 页
Article 5 Loan Interest Rate and Interest Collection
1、Loan
interest rate (referring to the annualized interest rate calculated using the simple interest method, the same below)
(1) The benchmark interest rate for pricing shall
be executed in accordance with the provisions of Article 23, Special Agreement Clause 8 of this
contract.
(2) The pricing formula for the loan interest rate
is specified in Article 23, Special Provisions 9 of this contract.
(3) The loan interest rate shall be executed in
accordance with the provisions of Article 23, Special Provisions 10 of this contract.
(4) The pricing benchmark interest rate corresponding
to the loans used under this contract shall be determined based on the actual disbursement date (or
repricing date, if any) of each loan.
During the loan period, unless otherwise agreed in the contract, if the loan interest rate is adjusted according to the
contract, the
borrower will not be notified.
(5) If China or relevant countries/regions cancel
the pricing benchmark interest rate under this contract, or the market no longer publishes the pricing
benchmark interest rate, or regulatory
authorities require the loan issued under this contract, the lender has the right to re determine the loan interest rate
based on the
same period’s interest rate policies of China or relevant countries/regions, in accordance with the principles of fairness and good faith,
and
referring to industry practices, interest rate conditions, and other factors, and notify the borrower. If the borrower has objections,
they should negotiate with
the lender. If the negotiation fails within five working days from the date of the lender’s notification, the
lender has the right to receive the loan in advance,
and the borrower shall immediately repay the remaining loan principal and interest.
If the lender requests or national or regulatory policies require the
borrower to sign a supplementary agreement on relevant matters at
that time, the borrower should cooperate.
2、Loan
interest repayment method
(1) Calculation of loan interest.
The principal of domestic and foreign currency loans shall bear interest from the date when the lender transfers it to the
borrower’s
account in accordance with the provisions of this contract. Daily accrued interest on loans=daily loan balance x daily interest rate.
The conversion
of daily interest rates to annual interest rates shall be carried out in accordance with the regulations of the People’s
Bank of China and international
conventions.
(2) The repayment method of loan interest shall
be executed in accordance with the provisions of Article 23, Special Provisions, Article 11 of this
contract.
3、Penalty
interest and compound interest
(1) If the borrower
fails to use the loan for the purpose specified in this contract, the lender shall have the right to charge penalty interest on the
misappropriated loan from the date of misappropriation. The penalty interest rate shall be as stipulated in Article 23, Special
Agreement Clause 12 of this
contract; If the borrower fails to repay the loan on time and does not reach an agreement with the
lender regarding the extension, i.e. the loan is overdue, the
lender has the right to charge penalty interest on the overdue loan
from the date of overdue. The penalty interest rate is specified in Article 23, Special
Agreement 13 of this contract; The lender
has the right to charge compound interest at the loan overdue penalty interest rate agreed upon in this contract for
the interest
not paid on time (including interest before and after the loan maturity, misappropriation penalty interest, and overdue penalty
interest). If the same
loan is overdue and not used for the purpose specified in the contract, the penalty interest rate shall be
calculated based on the higher one.
第 7 页 共 33 页
(2) If the loan interest rate is fixed, the penalty
interest rate is also fixed; If the loan interest rate adopts a floating interest rate, the penalty interest rate is
also a floating interest
rate, and its floating period is consistent with the floating period of the loan interest rate.
(3) The collection of penalty interest and compound
interest shall be carried out in accordance with the loan interest repayment method stipulated in this
contract.
Article 6 Conditions Precedent for Withdrawal
1、The borrower may apply to the lender for
the disbursement of the loan under this contract only after meeting the following withdrawal prerequisites
required by the lender：
(1)
The borrower has delivered the following documents to the lender, and the information
stated in the documents has not changed and remains valid, or
the borrower has provided satisfactory explanations and clarifications to
the lender regarding the changes：
① A loan
application form, which mainly includes but is not limited to: loan project name, amount, purpose, term, repayment plan, and
repayment
source;
② The
borrower’s legal and valid business license, company articles of association, loan card and password/credit code, legal
representative and board
members and main responsible persons registered and filed with the industrial and commercial administration
department, list and signature samples of
financial responsible persons, valid identification documents of the legal representative
or its authorized representative, written documents of the legal
representative or its authorized representative and relevant
natural persons agreeing to the lender’s processing of their personal information, and other
company documents deemed
necessary by the lender;
③ The borrower
shall convene a resolution of the board of directors or shareholders in accordance with legal procedures, which has been passed by a
vote of a quorum of directors or shareholders, and is true, legal, and valid. The resolution of the board of directors or
shareholders or other documents
deemed necessary by the lender regarding agreeing to apply for loans under this contract from the
lender, clarifying the purpose of the loan, and accepting all
loan conditions requested by the lender;
④ Annual reports
for the past three years (with audit reports and notes) recognized by the lender, financial statements for the most recent period
and the
same period last year. Borrowers who have been established for less than three years shall submit annual statements since
their establishment;
⑤ Related party
information;
⑥ For applying for
temporary working capital loans, relevant contracts, vouchers or materials such as purchase contracts, order contracts, debt
certificates, etc. must be provided;
⑦ If the
mortgage/pledge guarantee method is to be adopted, proof of ownership of the mortgage/pledge property rights, evaluation value
report must be
provided, and the mortgage/pledge registration procedures required by relevant laws and regulations have been
properly handled. The original copies of
relevant ownership proof documents, registration proof documents, etc. have been handed
over to the lender for storage as required by the lender; To adopt a
third-party guarantee, relevant guarantee materials must be
provided in accordance with the requirements of items 2 to 4 above, and the
guarantee contract
has become effective; The above guarantee shall remain valid and effective;
第 8 页 共 33 页
⑧
If the lender requests to handle insurance for the mortgaged/pledged property, the insurance procedures with the lender as the first
beneficiary have
been completed and the original insurance policy has been handed over to the lender for safekeeping; And the
insurance shall remain in effect; If the
borrower provides mortgage/pledge, the borrower hereby transfers the right to claim
insurance benefits due to the occurrence of insurance events to the
lender；
⑨ Special industry enterprises must provide
special industry production and operation licenses or enterprise qualification level certificates issued by
authorized departments for
approval;
⑩ If either party to this contract requests
notarization or other procedures, the relevant notarization procedures have been completed;
⑪ The borrower has opened an account at
the lender’s request and voluntarily accepts the lender’s credit supervision and payment settlement
supervision;
⑫ The borrower applying for a foreign exchange
project loan must provide a valid proof of the purpose of the foreign exchange loan and approval from
relevant departments, and comply
with relevant foreign exchange management policies；
⑬ Value added tax, business tax, and income
tax declaration forms requested by the lender;
⑭The borrower has issued a commitment letter
for the use of credit funds as requested by the lender;
⑮ The borrower and relevant natural persons
have issued a written document agreeing to the lender’s processing of their personal information as
requested by the lender;
⑯ Other documents,
reports, vouchers, and other materials requested by the lender.
(2) The borrower is
established in accordance with the law, has legal and compliant production and operation, has the ability to continue operating, and
has a legitimate source of repayment;
(3)
The purpose of the loan is clear, legal and compliant；
(4) The statements and
commitments made by the borrower in Article 11 of this contract shall remain true and valid; No default or potential default has
occurred on or prior to the date of loan application;
(5) The borrower has
completed the loan receipts or vouchers related to the loan disbursement. The promissory note or loan voucher is an integral part of
this contract and has the same legal effect as this contract. If there is any inconsistency between the loan amount, loan term, loan
interest rate, etc. under this
contract and the record on the loan receipt or loan voucher, the record on the loan receipt or loan
voucher shall prevail;
(6) The borrower has a
good credit condition and no major bad records; If the borrower is a newly established legal entity, its controlling shareholder
should have good credit standing (the borrower should provide a written document from the natural person controlling shareholder
agreeing to the lender’s
handling of their personal information), and there should be no significant adverse records;
第 9 页 共 33 页
(7) Other withdrawal
prerequisites requested by the lender.
2、The
lender’s performance of obligations under this contract is conditional on the satisfaction of the withdrawal conditions stipulated in
this clause.
The lender has the right to unilaterally decide to reduce or waive a partial withdrawal prerequisite, and the borrower or
guarantor shall not use this condition
as a defense against the lender.
3、The
lender has the right to adjust the loan disbursement appropriately based on factors such as whether the financing project meets relevant
laws,
regulations, policies, and the withdrawal prerequisites required by the lender, the signing of the corresponding guarantee contract
under this contract, and the
processing time of guarantee procedures.
4、
The borrower hereby agrees that, after the signing of this contract, if any withdrawal
by the borrower fails to meet the conditions precedent for
withdrawal or payment of loan funds as stipulated in this contract, the lender
has the right to stop disbursement, stop payment of loan funds, or terminate this
loan contract. The borrower shall bear the responsibility
or losses arising from this. The lender shall notify the borrower of the termination of the contract,
and the borrower’s objection period
shall be five working days, calculated from the date when the termination notice is delivered to the borrower in the
manner stipulated
in this contract. If the borrower does not raise any objections, this contract shall be automatically terminated upon the expiration of
the
objection period. If the borrower has objections but both parties fail to reach an agreement within five working days after the expiration
of the objection
period, the lender has the right to receive the loan in advance according to the provisions of this contract.
5、After
review by the lender, if the borrower meets the prerequisite conditions for withdrawal as stipulated in this contract, the lender shall
pay the loan
funds in accordance with Article 7 of this contract.
Article 7 Account Monitoring and Loan Fund
Payment
1、
Account monitoring
According to relevant national laws, regulations,
and regulatory requirements, the borrower promises to meet the withdrawal prerequisites stipulated in
the contract before applying for
loan disbursement, and accept the lender’s supervision on the use of loan funds for the agreed purposes. The lender has the
right to monitor
the basic deposit account, general deposit account, and special deposit account opened by the borrower, and supervise and control the
disbursement, payment, and repayment of loan funds in accordance with the contractual provisions.
The borrower shall designate a dedicated fund withdrawal
account as stipulated in Article 23, Special Agreement Clause 14 of this contract, and the
borrower shall promptly provide information
on the inflow and outflow of funds from the account.
The lender may
negotiate and sign a separate account management agreement with the borrower based on their credit status, financing situation,
etc.,
specifying the management of the inflow and outflow of funds from the designated account. The lender has the right to recover
the loan in advance based on
the borrower’s fund recovery situation.
第 10 页 共 33 页
2、
Payment of borrowed funds
(1)
The lender has the right to manage and control the payment of loan funds through entrusted payment by the lender or self payment by the
borrower.
① “Entrusted
payment” by the lender refers to the borrower authorizing the lender to pay the loan funds to the borrower’s
counterparty that meets the
purpose specified in this contract.
If the borrower adopts the entrusted payment method,
before the disbursement of the loan funds, the borrower shall provide relevant transaction
information that meets the purpose specified
in this contract. After being reviewed and approved by the lender, the loan funds shall be promptly paid to the
borrower’s counterparty
through the borrower’s account.
If the borrower adopts the method of entrusted payment
by the lender, and after the loan funds are paid to the borrower’s counterparty, if the loan funds
are returned due to reasons such as
revocation, termination, or invalidity of the underlying transaction contract, the lender has the right to receive the returned
loan funds
in advance in accordance with Article 12 of this contract.
② “Self
payment” by the borrower refers to the act of the lender disbursing the loan funds to the borrower’s account, and the
borrower making the self
payment to the borrower’s counterparty that meets the agreed purpose of this contract.
If the borrower adopts the self payment method,
the borrower should regularly summarize and report the payment of the loan funds to the lender
(2) Entrusted payment
The payment of loan funds that fall under one
of the circumstances stipulated in Article 23 of this contract, specifically Article 15, shall be made through
the entrusted payment method
of the lender.
(3)
In the process of loan disbursement and payment, if the borrower encounters the
following situations, they shall supplement the loan disbursement
and payment conditions as requested by the lender. The lender has the
right to adopt stricter loan disbursement and payment conditions, and has the right to
stop the disbursement and payment of loan funds.
Corresponding measures shall be taken in accordance with Article 14 (2) of this contract:
① A decline in
credit status;
② The main business
has weak profitability;
③ Abnormal use of
borrowed funds;
④ Other situations deemed by the lender.
第 11 页 共 33 页
Article 8 Repayment of Loan Principal and Interest
1、
The principal of the loan under this contract shall be repaid in the manner specified
in Article 23, Special Agreement 16 of this contract.
2、
The borrower shall repay the principal and interest of the loan under this contract
to the lender in full and on time on the repayment date and interest
payment date specified in this contract.
3、
If the repayment date falls on a non lender’s business day, the repayment shall
be postponed to the next lender’s business day, and such non lender’s
business day shall be counted as the actual number of days occupied
by the loan. When the borrower repays the principal of the last installment of the loan,
the interest shall be settled along with the
principal and shall not be bound by the interest payment date stipulated in Article 5 of this contract.
4、
If the borrower fails to repay the loan under the loan contract on time and needs
to extend the repayment period, they shall submit a written loan
extension application to the lender in advance in accordance with the
provisions of Article 23, Special Agreement Clause 17 of this contract. If approved by
the lender, both parties shall sign a separate
“Loan Extension Contract” as a supplementary contract to this contract.
5、
Early repayment
The borrower shall repay the principal and interest
of the loan on the date specified in this contract.
If the borrower requests to repay the principal
and interest of the loan in part or in full in advance, they shall notify the lender in writing in accordance
with the provisions of Article
23, Special Agreement 18 of this contract, and obtain the lender’s written consent. With the written consent of the lender, after
the
borrower repays a portion of the loan principal and interest in advance, the borrower shall negotiate with the lender to determine the
number of repayment
periods, repayment time, and repayment amount thereafter. Interest shall be charged on the principal of the loan repaid
in advance based on the actual usage
period and the loan interest rate agreed upon in this contract. The lender will no longer adjust
the loan interest calculated and collected before the early
repayment.
If the borrower requests early repayment, the lender
has the right to demand the borrower to pay a penalty in accordance with the provisions of Article
23, Special Provisions 18 of this contract.
If the borrower belongs to small and micro enterprises that comply with national regulations, policies, etc., no
penalty will be charged
for this breach of contract.
6、If
the borrower fails to fulfill its obligations as stipulated in this contract, the borrower hereby irrevocably authorizes the lender to
directly deduct
funds from any account opened by the borrower with the lender and all branches and subsidiaries of Industrial Bank without
going through judicial
procedures, including but not limited to loan principal and interest (including principal, interest, penalty interest,
compound interest), liquidated damages,
damages, and expenses incurred by the lender in realizing the creditor’s rights. The borrower
agrees that the lender has the right to determine the specific
order of deduction. If the currency of the funds in the account is inconsistent
with the loan currency, the lender has the right to convert them into the loan
currency for deduction based on the middle price announced
by the lender on the day of deduction. If any account specified in this clause involves wealth
management products or structural deposits,
the borrower hereby irrevocably authorizes the lender to directly initiate relevant product redemption
applications or take other necessary
measures on behalf of the lender to ensure the smooth deduction of the above-mentioned funds. The borrower shall
provide all necessary
cooperation.
第 12 页 共 33 页
Article 9 Guarantee
1、
The guarantee contract of this contract is stipulated in Article 23, Special
Provisions 19 of this contract.
2、
In addition to the signed guarantee contracts mentioned above, in the event of
exchange rate fluctuations or any other events that the lender believes
may affect the borrower or guarantor’s ability to perform, the
lender has the right to request the borrower to supplement the security deposit or provide new
guarantees, and sign relevant guarantee
contracts. The borrower shall cooperate as requested by the lender.
3 、
Before the signing of the guarantee contract under this contract and the completion
of the guarantee procedures, the lender has the right to
temporarily refuse to fulfill all obligations such as loan disbursement under
this contract.
Article 10 Rights and Obligations of Both Parties
1、
Rights and obligations of the lender
(1)
Rights of the lender:
① The borrower has the right to request
genuine information, including personal information, from the borrower;
② The borrower has
the right to demand timely repayment of the loan principal and interest;
③ Have the right to request the borrower
to provide various information related to the loan;
④ Have the right to
understand the borrower’s production, operation, and financial situation;
⑤ Have the right to
supervise the borrower to use the loan for the purposes specified in this contract;
⑥ Have the right to
supervise the use of loans and make requests;
⑦ If the borrower
bears multiple debts of the same type to the lender, and the borrower’s payment is insufficient or may not be sufficient to
repay all the
debts, the lender shall determine the specific order of repayment or deduction during the repayment process;
⑧ The borrower has
the right to deduct the loan principal and interest (including principal, interest, penalty interest, compound interest), liquidated
damages, damages, and the lender’s expenses for realizing the creditor’s rights from any account opened by the borrower
with the lender and all branches and
subsidiaries of Industrial Bank without going through judicial procedures. The borrower agrees
that the lender has the right to decide on the specific
deduction order. If the currency of the funds in the account is different
from the loan currency, the lender has the right to convert them into the loan currency
for deduction based on the middle price
announced by the lender on the deduction day; If any account specified in this clause involves wealth management
products or
structured deposits, the borrower hereby irrevocably authorizes the lender to directly initiate relevant product redemption
applications or take
other necessary measures on behalf of the lender to ensure the smooth deduction of the above-mentioned
funds;
第 13 页 共 33 页
⑨ The lender has
the right to transfer all the creditor’s rights and security interests under this contract to a third party at any time
without obtaining the
borrower’s consent. The lender transfers the loan and security interests under this contract, and the
borrower still assumes all obligations under this contract;
⑩ If the borrower
fails to repay the loan principal and interest in accordance with the contract, or fails to implement the repayment of principal and
interest, or violates any obligations stipulated in this contract, the lender has the right to report and disclose the
borrower’s breach of trust information to the
People’s Bank of China and its established or approved credit reporting
agencies and credit reporting systems, or banking associations, banking supervision
agencies, or other
administrative/judicial/supervisory departments and their established or recognized information management systems or news media,
and
take legal measures such as collection, litigation, arbitration, or applying to a notary public to issue an execution
certificate. At the same time, the lender may
take or cooperate with other banking and financial institutions to reduce or stop
credit, stop opening new settlement accounts, and suspend the borrower’s
legal representative/borrower’s new credit
cards, etc. Disciplinary and rights protection measures;
⑪ The right to
unilaterally decide to receive the loan in advance based on the borrower’s fund withdrawal situation;
⑫ When there are
exchange rate fluctuations or other situations that creditors believe may affect their creditor’s security, the debtor has the
obligation to
supplement collateral such as margin as requested by the creditor, or implement other risk mitigation measures
recognized by the creditor;
⑬ The right to
enjoy other rights stipulated by laws, regulations, rules or as stipulated in this contract.
(2)
Obligations of the lender:
① disburse and pay the loan funds in accordance with the provisions of this contract;
② Keep
the borrower’s debts, finances, production, and business operations confidential, except for the following situations:
Legal and regulatory provisions;
Regulatory regulations or requirements;
Disclose information to the cooperating parties
of the lender.
2、
Rights and obligations of the borrower
(1)
The borrower has the following rights:
① The
right to withdraw and use all loans in accordance with the provisions of this contract;
② The
lender has the right to demand that they assume confidentiality obligations for the information provided in accordance with the provisions
of
this contract.
(2) Borrower’s
Obligations：
① The borrower
shall truthfully provide the required documents and materials, including all account opening banks, account numbers, deposit and loan
balances, as well as relevant personal information, and cooperate with the lender’s investigation, review, and inspection;
② Accept the lender’s
supervision or inspection of its use of credit funds and related production, operation, and financial activities, and promptly take
reasonable
measures to address the lender’s suggestions or requirements;
第 14 页 共 33 页
③ The loan shall
be used for the purpose agreed in this contract, not for other purposes, and shall not be used for fixed assets investment; Engaging in
equity investments without borrowing; Not used in areas and purposes prohibited by the state for production/operation; No need to borrow
money to
speculate or invest in financial products such as stocks, securities, futures, and wealth management products; No need to borrow
money to purchase property
or engage in/invest in the real estate industry, etc; Engaging in borrowing activities between enterprises
or between enterprises and individuals without
borrowing money; No need to borrow money to seek illegal income; Not to use illegal means
to obtain credit funds, and not to occupy or misappropriate
loans in other ways; Not borrowing to engage in other illegal activities or
other fields that violate national laws and policies; And engaging in areas where
regulatory agencies prohibit the entry of bank credit
funds without borrowing;
④ According to
Article 7 of this contract, accept the lender’s monitoring of the borrower’s account and management of loan fund payments;
⑤ The principal
and interest of the loan shall be repaid in full and on time in accordance with the provisions of this contract；
⑥ Without the
written consent of the lender, the debt under this contract shall not be transferred in whole or in part to a third party;
⑦ Not reducing
registered capital in any way; Without the written consent of the lender, the subscription period for registered capital shall not be
extended;
⑧ Before any major
events such as merger, division, equity transfer, external investment, or substantial increase in debt financing occur, the borrower
shall
notify the lender in writing at least 30 working days in advance and obtain the lender’s written consent. The borrower shall actively
implement the
guarantee measures for timely and full repayment of the loan principal and interest under this contract in accordance with
the lender’s requirements. The
above major issues include but are not limited to:
Applying for loans or liabilities
from banks or other third parties, or providing loans to third parties, or providing guarantees for the debts of third
parties, which
substantially increases debt financing and affects or may affect the repayment of loan principal and interest;
Make significant changes
in property rights and adjustments to business operations (including but not limited to signing joint venture or cooperation
contracts
with foreign investors, Hong Kong, Macao, and Taiwan merchants; revoking, closing, stopping production, or transferring production; separating,
merging, merging, or being merged; restructuring, forming, or transforming into a joint-stock company; external investment; investing
in fixed assets such as
houses, machinery and equipment, or intangible assets such as trademarks, patents, proprietary technologies, land
use rights, or investing in joint-stock
companies or investment companies, and conducting property rights and management rights transactions
through leasing, contracting, joint ventures, custody,
etc.);
The change of equity meets
the circumstances stipulated in Article 23, Special Provisions, and Article 20 of this contract.
⑨ The borrower
shall notify the lender in writing within 7 working days from the date of occurrence or possible occurrence of the following
situations,
and actively implement the guarantee measures for timely and full repayment of the loan principal and interest under
this contract in accordance with the
lender’s requirements:
Significant financial losses,
asset losses, or other financial crises occur;
第 15 页 共 33 页
In the event of suspension
of business, revocation or cancellation of business license, application or application for bankruptcy, dissolution, etc;
If there is a significant
crisis in the operation or finance of its controlling shareholders and other affiliated companies, which affects its normal
operation;
The borrower’s legal representative,
directors, or senior management personnel undergo personnel changes that affect their normal operations;
The guarantor’s equity has
changed to meet the circumstances stipulated in Article 23, Special Provisions, and Article 21 of this contract;
There is a significant related
party transaction between the borrower and its controlling shareholder or other related companies, which affects its
normal operation;
Any litigation, arbitration,
criminal or administrative penalty that has a significant adverse effect on its business or property condition;
Other significant events
that may affect its ability to repay debts occur.
⑩ At the request of
the lender (which request to notify the borrower in advance in a reasonable manner, unless prior notice is not required due to the
occurrence of a breach or potential breach or due to specific circumstances), representatives of the lender are allowed to engage in
the following activities
during normal office hours:
Visit the location where the borrower conducts
business activities;
Visit the location where the borrower conducts
business activities;
Query the borrower’s account book records and
all other records;
Inquire with the borrower’s
employees, agents, contractors, and subcontractors who are aware or may be aware of the relevant information required
by the lender.
⑪ The borrower
guarantees to maintain its current assets and net asset value, asset liability ratio, asset current ratio, and other financial
conditions within
the scope specified in Article 23, Special Provisions 22 of this contract during the loan period.
⑫ For the
collection letter or document sent or otherwise delivered by the lender to the borrower, the borrower must sign for it and hand over
the receipt
to the lender.
Article 11 Declaration
and Commitment of the Borrower
The borrower voluntarily makes
the following statements and commitments, and assumes legal responsibility for the authenticity of their content:
1、 The borrower is a
legal entity established and validly existing under the laws of the People’s Republic of China, with full civil capacity. The
borrower
guarantees to provide relevant certificates, permits, certificates, and other documents as requested by the lender.
2、 The borrower has
sufficient ability to fulfill all obligations and responsibilities under this contract, and shall not be relieved or exempted from its
repayment responsibility due to any instructions, changes in financial status, or agreements signed with any unit.
第 16 页 共 33 页
3 、 The borrower
has full authorization and legal rights to sign this contract. The borrower has obtained and completed all internal approvals,
authorizations, or other related procedures required for the signing and performance of this contract, and has obtained and
completed all necessary approvals,
registrations, authorizations, approvals, permits, or other related procedures from any
government department or other authority required for the signing and
performance of this contract. All approvals, registrations,
approvals, permits, authorizations, and other related procedures required for the signing of this
contract shall remain fully legal
and valid.
4、 The borrower’s signing
of this contract fully complies with the borrower’s relevant articles of association, internal decisions, and resolutions of the
shareholders’
meeting and board of directors, and undertakes that such internal decisions, shareholders’ meeting and board of directors resolutions
fully
comply with national laws and regulations and the company’s articles of association, and there is no invalidity, non establishment
or revocability. This
contract also does not conflict or violate any of the borrower’s articles of association, internal decisions, shareholder
meetings, board resolutions, or borrower
policies.
5、 The signing and performance
of this contract is based on the borrower’s true expression of intention. The loan financing meets the requirements of
laws and regulations,
and the signing and performance of this contract do not violate any binding laws, regulations, rules or contractual provisions on the
borrower. This contract is legal, valid, and enforceable. If the borrower’s rights defects during the signing and performance of this
contract render this
contract invalid, the borrower will immediately and unconditionally compensate the lender for all losses.
6、 All documents, financial
statements, and other information provided by the borrower to the lender under this contract are true, complete, accurate,
and valid,
and shall continue to maintain all financial indicators required by the lender.
7、 The borrower agrees
that the loan business under this contract shall be bound by the lender’s regulations, practices, and practices. The lender has the
right
to recover the loan in advance based on the borrower’s fund recovery situation.
8、 If the borrower bears
multiple debts of the same type to the lender, and the borrower’s payment is insufficient or may not be sufficient to repay all
the debts,
the lender shall decide on the specific order of repayment or deduction.
9、If the borrower fails
to fulfill its obligations as stipulated in this contract, the borrower hereby authorizes the lender to directly deduct the loan
principal
and interest (including principal, interest, penalty interest, compound interest), liquidated damages, damages, and the lender’s expenses
for realizing
the creditor’s rights from any account opened by the borrower with the lender and all branches and subsidiaries of Industrial
Bank without going through
judicial procedures. The borrower agrees that the lender has the right to decide on the specific order of deduction.
If the currency of the funds in the account
is different from the borrowing currency, the lender has the right to convert them into the
borrowing currency for deduction based on the middle price
announced by the lender on the deduction day. If any account specified in this
clause involves wealth management products or structured deposits, the
borrower hereby irrevocably authorizes the lender to directly initiate
relevant product redemption applications or take other necessary measures on behalf of
the lender to ensure the smooth deduction of the
above-mentioned funds, and the borrower shall provide all necessary cooperation.
10、Regardless of whether
before or after the signing of this contract, if the borrower submits any documents related to specific transactions to the
lender for
review, the borrower guarantees the authenticity of all documents, and the lender will only make a decision on the surface authenticity
of the
transaction documents. The lender neither participates in nor is aware of the substance of the specific transactions engaged in
by the borrower, nor assumes
any responsibility.
第 17 页 共 33 页
11、 The borrower confirms
that, except as disclosed in writing to the lender, the borrower has not concealed any of the following events that have
occurred or are
about to occur that may cause the lender to disagree with the disbursement of the loan under this contract:
(1) The debts
or contingent liabilities borne by the borrower, including but not limited to any undisclosed mortgages, pledges, liens, and other debt
burdens established on the borrower’s assets or earnings;
(2) Significant
violations of discipline, law, or claims related to the borrower or the borrower’s key management personnel;
(3) The borrower
breaches the debt contract between the borrower and any other creditor;
(4) The borrower
has not engaged in, and there is no outstanding or, to the best of the borrower’s knowledge, possible litigation, arbitration or
administrative
penalty against it or its property, and no liquidation, closure or other similar proceedings have occurred against the borrower, whether
voluntarily or by a third party;
(5) Other factors
that may affect the borrower’s financial condition and solvency.
12、 The borrower undertakes
to use the loan for the purposes specified in this contract and shall not misappropriate it for any other purpose or be used
for any purpose
that violates the provisions of this contract. Accept and cooperate with the lender at any time for loan payment management, post loan
management, and related inspections, and cooperate with the lender to supervise, inspect, and count the borrower’s use of loan funds,
production and
operation, financial activities, material inventory, assets and liabilities, bank deposits, cash inventory, and other necessary
or appropriate requirements as
deemed by the lender.
13、 Provide sufficient,
valid or other acceptable guarantees recognized by the lender as appropriate. If the guarantee under this contract involves real
estate
mortgage, the borrower shall promptly fulfill the obligation to inform the lender when they become aware of the information that the mortgaged
property will be demolished; If the mortgaged property is demolished and the form of compensation through property rights exchange is
adopted, the lender
has the right to demand the borrower to repay the debt in advance, or to re establish the mortgage and sign a new
mortgage agreement. After the original
mortgaged property is lost but before the new mortgage registration is processed, a guarantor with
sufficient guarantee conditions should be provided as
collateral; For the demolished real estate compensated through compensation, the
borrower is responsible for requesting the mortgagor to continue providing
collateral for the main creditor’s rights by opening a special
deposit account or deposit certificate for the demolition compensation.
14、 The borrower shall
not reduce the registered capital in any way. Without the prior written consent of the lender, the debt under this contract shall
not
be transferred in whole or in part to a third party. Before the full repayment of the debts under this contract, without obtaining the
written consent of the
lender, no debt between the borrower and other creditors (excluding other branches of Industrial Bank) shall be
repaid in advance.
15、 Promptly notify
the lender of any significant adverse events that may affect the borrower’s ability to repay debts, and obtain written consent from
the
lender before conducting major events such as mergers, divisions, equity transfers, external investments, or substantial increases in
debt financing.
16 、 If the lender is
involved in litigation, arbitration or other disputes with the borrower or any third party related to the borrower due to the
performance
of obligations under this contract, resulting in the lender being forced to become involved in disputes between the borrower and any third
party,
the lender shall bear all litigation, arbitration fees, lawyer fees and other expenses paid by the lender as a result.
第 18 页 共 33 页
17、 Due to the settlement
business under this contract, the borrower must handle it through the settlement account opened with the lender.
18、 The borrower promises
that the information disclosed in the national enterprise credit information disclosure system is true, complete, legal and
valid, and
promises to continuously agree to the lender’s inquiry of the information disclosed or not disclosed by the enterprise in the system.
If the lender
requests capital verification, the borrower agrees to conduct the verification in accordance with the lender’s requirements
and provide a capital verification
report issued by a professional institution.
19、 The borrower hereby
declares and authorizes that the lender has the right to conduct necessary investigations into the borrower’s credit situation in
accordance
with national laws, regulations, and relevant policies, including querying the borrower’s credit information from the financial credit
information
basic database established by the state. The lender may also submit relevant credit information to the national financial
credit information basic database
according to the needs of the People’s Bank of China for credit reporting of construction enterprises
and individuals, and hereby allows relevant information
to be lawfully queried within the authorized scope.
20 、 The borrower hereby
declares and authorizes that the lender has the right to submit information related to this contract and other relevant
information to
the administrative/judicial/supervisory departments, banking regulatory authorities, banking associations, and other relevant information
management work needs to the above-mentioned departments, institutions, and their established or recognized information management systems,
and hereby
allows relevant information to be lawfully queried.
21、 If the borrower
breaches this contract or encounters situations that may endanger the realization of the lender’s creditor’s rights, the lender has the
right to request the borrower’s shareholders to accelerate the expiration of their subscribed capital obligations, and the borrower promises
that their
shareholders shall subscribe to capital in a timely manner as required by the lender. The lender has the right to demand that
the borrower and its shareholders
do not distribute dividends.
22、 The borrower promises
that the transaction background of this loan business is true and legal, and has not been used for illegal purposes such as
money laundering.
23、 The borrower hereby
irrevocably undertakes that in the event of a breach of any contractual obligations under this contract, the lender may submit
and disclose
the borrower’s breach of trust information to the People’s Bank of China and its established or approved credit reporting agencies and
systems,
or to banking associations, banking regulatory agencies, or other administrative/legal/supervisory departments and their established
or approved information
management systems or news media.
The borrower irrevocably authorizes
the relevant banking association to share and even publicly disclose the borrower’s dishonest information among
banking and financial
institutions through appropriate means.
The borrower is aware that
the lender has the right to take various measures in accordance with the provisions of this contract, and is aware that the
lender has
the right to take or the lender and other banking and financial institutions have the right to jointly take measures such as reducing
or stopping
credit, stopping the opening of new settlement accounts, suspending the operation of the borrower’s legal representative/borrower’s
new credit card, and
other joint dishonesty and rights protection measures.
24、 Other matters declared
and promised by the borrower can be found in Article 23 of this contract, Special Provisions 23.
第 19 页 共 33 页
Article 12: Advance Loan Collection
1、 During the loan period,
if the borrower or guarantor (including but not limited to the guarantor, mortgagor, or pledgor, the same below) encounters
any of the
following situations, the lender has the right to unilaterally decide to stop paying the unused loan of the borrower, and to recover part
or all of the
loan principal and interest in advance. The loan to be repaid in installments shall be considered as early due if the lender
has received the loan in advance
according to the provisions of this contract for one of the loans, and other unexpired loans shall be
deemed as early due:
(1) Providing
false materials or concealing important business and financial facts, any proof or document submitted to the lender, as well as any
statement
or commitment in Article 11 of this contract, is proven to be untrue, inaccurate, incomplete or intentionally misleading;
(2) Without
the written consent of the lender, changing the original purpose of the loan, misappropriating the loan, or engaging in illegal or irregular
transactions using the loan;
(3) Using false
contracts with related parties to discount or pledge creditor’s rights such as notes receivable and accounts receivable without actual
trade
background to the lender, in order to obtain the lender’s funds or credit;
(4) Refusing
to accept the lender’s supervision and inspection of the use of their credit funds and related business and financial activities；
(5) Major events
such as merger, division, acquisition, restructuring, equity transfer, external investment, substantial increase in debt financing, etc.
that
the lender believes may affect the safety of the loan;
(6) Intentionally
evading the creditor’s rights through related party transactions;
(7) The credit
situation has deteriorated, and the solvency (including contingent liabilities) has significantly weakened;
(8) If the
borrower or its affiliated enterprises, as well as the guarantor or guarantor’s affiliated enterprises, encounter cross breach situations
as stipulated
in Article 15 of this contract;
(9) The borrower
fails to repay the principal and interest of the loan under this contract on time;
(10) The borrower
stops repaying its debts, or is unable or indicates that it is unable to repay its due debts;
(11) The borrower’s suspension of business, closure
of business, declaration of bankruptcy, dissolution, revocation of business license, revocation,
deterioration of financial condition,
etc;
(12) The borrower fails to fulfill the obligations
stipulated in Article 10 and Article 13 of this contract, as well as other obligations stipulated in this
contract, or the guarantor fails
to fulfill the obligations stipulated in the guarantee contract;
(13) The collateral used for guarantee, the value
of the collateral has significantly decreased or may significantly decrease, or the right to pledge must be
redeemed before the loan expires;
(14) The borrower or guarantor’s legal representative,
individual investors, directors, supervisors, or senior management personnel undergo abnormal
changes, disappearance, or are subject to
legal investigation or restriction of personal freedom by judicial authorities, which has already or may affect the
performance of obligations
under this contract;
(15) The borrower/guarantor or the controlling
shareholder, actual controller or its affiliates of the borrower/guarantor are involved in significant
litigation, arbitration or other
disputes, or their significant assets are sealed, frozen, deducted, enforced or other measures with similar effects are taken,
which may
endanger or damage the rights and interests of the lender;
(16) Other events stipulated in this contract,
or based on the borrower’s fund withdrawal situation, or other events that endanger, damage, or may
endanger, damage the rights and interests
of the lender.
第 20 页 共 33 页
2、 If the above
situation of early loan collection occurs, the lender may unilaterally decide whether to grant the borrower a certain grace period
based
on the borrower’s production and operation, financial status, and fund recovery. If the lender grants the borrower a grace
period and the borrower fails to take
remedial measures or the remedial measures taken do not meet the lender’s requirements during
the grace period, the lender has the right to unilaterally
decide to receive the loan in advance; The lender can also decide to
receive the loan in advance without giving the borrower a grace period.
3、 When receiving the
loan in advance, the lender has the right to take corresponding measures in accordance with the provisions of Article 14 (2) of
this contract.
Article 13 Obligations of the borrower to disclose
major transactions and events to the lender
1、 The borrower shall
promptly report in writing to the lender any significant transactions and events that have occurred.
2 、 If the borrower belongs
to a group customer, the borrower shall promptly report to the lender related transactions of more than 10% of the
borrower’s net assets
in accordance with relevant regulations, including but not limited to:
(1) The related relationships between
the parties involved in the transaction;
(2) Transaction items and transaction
nature;
(3) The amount or corresponding
proportion of the transaction;
(4) Pricing policy (including transactions
with no or only symbolic amounts).
3、 If there is a significant
change in the basic conditions of the contract that cannot be foreseen at the time of signing the contract and does not belong
to commercial
risks, and it is necessary to renegotiate, the lender should be notified in a timely manner within three working days after the change
occurs.
Article 14 Liability for Breach of Contract
1、 After this contract
takes effect, both the borrower and the lender shall fulfill the obligations stipulated in this contract. If either party fails to perform
or fully performs the obligations stipulated in this contract, they shall bear corresponding breach of contract responsibilities.
2、 If the borrower fails
to use the loan for the purpose specified in this contract, fails to make payment of the loan funds in the agreed manner, fails to
comply
with the declaration and commitment matters, distorts the information in the loan application documents, exceeds the agreed financial
indicators,
experiences significant cross breach events, and fails to fulfill any of the provisions of this contract, the lender has the
right to take one or more of the
following measures:
(1) Requesting
a deadline to rectify the breach of contract;
(2) Suspend the
disbursement of outstanding loans under this contract and cease payment of outstanding loan funds under this contract;
(3) Request the
borrower to provide additional loan disbursement and payment conditions that meet the lender’s requirements, or cancel the borrower’s
use of the loan through “self payment”;
(4) Unilateral
decision to advance the maturity of all or part of the debt;
(5) Unilateral
termination or termination of this contract, requiring the borrower to repay the principal and interest of the loan due or not yet due,
and to
pay or compensate for related losses；
(6) If the loan
is overdue, require the borrower to pay overdue penalty interest; If the borrower misappropriates the loan, demand that the borrower pay
the misappropriation penalty interest; Require the borrower to pay compound interest on unpaid interest (including interest before and
after loan maturity,
misappropriation penalty interest, and overdue penalty interest);
(7) Request the
borrower to add or replace the guarantor, collateral, collateral/pledge rights;
(8) Implement
or realize any rights under any guarantee related to the loan;
第 21 页 共 33 页
(9) Without going
through judicial procedures, the borrower may directly deduct funds from any account opened by the borrower with the lender and all
branches and subsidiaries of Industrial Bank, or entrust the borrower’s account opening bank to deduct funds from its account,
including but not limited to
loan principal and interest (including principal, interest, penalty interest, compound interest),
liquidated damages, damages, and expenses incurred by the
lender in realizing the creditor’s rights. The borrower agrees that the
lender has the right to decide the specific order of deduction. If the currency of the funds
in the account is inconsistent with the
loan currency, the lender has the right to convert them into the loan currency for deduction at the midpoint published
by the lender
on the day of deduction; If any account specified in this clause involves wealth management products or structured deposits, the
lender has the
right to directly initiate relevant product redemption applications or take other necessary measures on behalf of the
lender to ensure the smooth deduction of
the above-mentioned funds;
(10) Initiate
a lawsuit, arbitration, or apply to a notary public for an execution certificate, requiring the borrower to repay the principal and interest
of the
loan, and the cost of realizing the creditor’s rights shall be borne by the borrower;
(11) The lender
has the right to seize or retain any movable or immovable, tangible or intangible property of the borrower under the lender’s control
and
possession, or take other measures deemed appropriate by the lender;
(12) The lender
has the right to report and disclose the borrower’s breach of credit information to the People’s Bank of China and its established or
approved
credit
reporting
agencies
and
systems,
or
to
the
banking
industry
association,
banking
regulatory
agencies,
or
other
administrative/judicial/supervisory
departments and their established or recognized information management systems or news media. At the same time, the
lender may take or
jointly with other banking and financial institutions to reduce or stop credit, stop opening new settlement accounts, suspend the
borrower’s
legal representative/borrower’s new credit card, and other joint measures to punish and protect the borrower’s credit;
(13) Other measures
as required by laws and regulations, agreed upon in this contract, or deemed appropriate by the lender.
3 、If the lender fails
to provide the loan on the agreed date and amount, and causes losses to the borrower in accordance with the withdrawal
prerequisites and
loan payment conditions stipulated in this contract, the lender shall compensate the borrower for the direct economic losses incurred
as a
result. However, regardless of the circumstances, the lender shall not be liable for any foreseeable or unforeseeable indirect losses
incurred by the borrower
as a result.
4、During the performance
of this contract, if the materials provided by the borrower are untrue, inaccurate, incomplete, or have other defects, resulting
in the
lender’s entrusted payment error, untimely payment, the borrower’s violation of the provisions of this contract in handling autonomous
payment, or
other losses, the lender shall not be held responsible.
5、If the loan disbursement
account or payment recipient account specified in this contract is frozen or other reasons result in loan disbursement and
payment disputes
or other losses, the lender shall not be held responsible.
6、If the guarantor
(i.e. guarantor, mortgagor, pledgor) under this contract encounters the following reasons, the lender has the right to take measures in
accordance with the provisions of the second paragraph of this article:
(1) The guarantor
fails to fulfill the provisions of the guarantee contract, or the credit status deteriorates, or other events that weaken the guarantee
ability
occur;
(2) The mortgagor
fails to fulfill the provisions of the mortgage contract, intentionally damages the mortgaged property, or the value of the mortgaged
property may or has significantly decreased, or other events that harm the lender’s mortgage right;
(3) The pledgor
fails to fulfill the provisions of the pledge contract, or the value of the pledged property has significantly decreased or may significantly
decrease, or the pledged right must be redeemed before the loan is repaid, or other events that damage the mortgage right of the loan
hostage.
第 22 页 共 33 页
Article 15 Cross breach
Any of the following situations
shall be deemed as a simultaneous breach of this contract by the borrower or its affiliated enterprises, as well as the
guarantor or its
affiliated enterprises. The lender shall have the right to receive the loan in advance in accordance with Article 12 of this contract
and demand
the borrower to bear the liability for breach of contract in accordance with Article 14 of this contract:
(1) Any borrowing,
financing, or debt that may default or be declared prematurely due;
(2) Any guarantee
or similar obligation is not fulfilled, or there is a possibility of non fulfillment;
(3) Failure to
perform or violate legal documents or contracts related to debt guarantees and other similar obligations, or the possibility of failure
to
perform or violation;
(4) There is
or is about to be an inability to repay due debts or mature loans/financing;
(5) Declared
or about to be declared bankrupt through legal proceedings;
(6) Transfer
its assets or property to other creditors;
(7) Other situations
that endanger the safety of the principal and interest of the loan under this contract.
Article 16 Continuity
of Obligations
All obligations of the borrower
under this contract are continuous and have full and equal binding force on their heirs, agents, receivers, assignees, and
their merged,
restructured, or renamed entities.
Article 17 Accelerated
Maturity of Principal and Interest Clause
The borrower agrees that
once the borrower fails to fulfill the declaration and commitment in Article 11 of this contract, or fails to fulfill any of its
obligations
under this contract, the lender has the right to decide that any other obligations of the borrower to the lender, including the repayment
obligation
of all principal and interest (including penalty and compound interest) due and not yet due under this contract, will immediately
become due.
Article 18 Subrogation
Rights
The borrower hereby declares
that regardless of whether the lender’s debt has expired or not, the borrower’s debt or any related rights related to the debt
are about
to expire during the statute of limitations for litigation or fail to declare bankruptcy claims in a timely manner, or if the borrower
breaches the
contract or is unable to repay the borrower’s advance payments (including but not limited to principal, interest, and expenses)
that have reached the
repayment period, which affects the realization of the lender’s debt, the lender has the right to exercise subrogation
rights against any third party’s debt,
accounts receivable, and other property rights related to the aforementioned rights, including
but not limited to subrogation to request the borrower’s
counterpart to perform, declare to the bankruptcy administrator, or take other
necessary actions, and the borrower waives all defenses.
Article 19 Application
of Law, Jurisdiction and Dispute Resolution
1、The formation, effectiveness,
performance, termination, interpretation, and dispute resolution of this contract shall be governed by the laws of the
People’s Republic
of China (excluding the laws of the Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan for the
purpose
of this contract).
2、Any disputes arising
from this contract shall be resolved through friendly consultation between the borrower and the lender; If friendly negotiation
fails,
both parties agree to resolve the issue in the manner stipulated in Article 23, Special Provisions, and Clause 24 of this contract.
3、During the dispute
period, the provisions of this contract that do not involve disputed parts shall still be fulfilled.
第 23 页 共 33 页
Article 20: Document
exchange, communication, and notification
1、 The borrower agrees and confirms that
the address specified in Article 23, Special Provisions, and Article 25 of this contract shall serve as the notice
for matters under this
contract, as well as legal documents related to litigation (arbitration), notarization, etc. in the event of disputes (including but not
limited to various notices and documents from the contracting parties; lawsuit (or arbitration application) and evidence served by the
court or arbitration
tribunal, subpoena, notice of response, notice of proof, notice of hearing, payment order, judgment (award), ruling,
mediation, execution notice, notice of
limited performance, and other legal documents for litigation or arbitration proceedings, realization
of security interests, and enforcement stage legal
documents; The delivery address for various notices and legal documents delivered by
notary institutions, and further agree that the lender, notary institution,
court and other judicial organs, as well as other notices
and legal documents, have the right to choose paper or electronic methods of delivery. The electronic
delivery methods include but are
not limited to email, China Judicial Process Information Disclosure Network, National Unified Delivery Platform, Local or
Specialized
Court Network Service Platform, as well as the electronic network platform and electronic APP of the delivery party.
2、 The applicable period for the delivery
address specified in the first paragraph of this article includes all stages, including non litigation stage and
dispute entering arbitration,
first instance, second instance, retrial, execution after litigation proceedings, realization of security interests procedure,
supervision
procedure, and compulsory execution notarization. If there is a change in the delivery address mentioned above, the borrower shall notify
the
lender in writing in advance (during litigation or arbitration, the arbitration tribunal or court shall also be notified in writing
in advance, and if compulsory
notarization has been completed, the original notary office shall be notified in writing) to reconfirm the
delivery address and obtain a receipt. If no prior
notice is given, it shall be deemed that there has been no change, and the corresponding
legal consequences shall be borne by the borrower. The delivery
address specified in the first paragraph of this article shall still be
deemed as a valid delivery address.
3、 Any document, communication, notice,
or legal document sent to any address specified in the first paragraph of this article shall be deemed to have
been delivered on the following
dates (delivery to the designated recipient shall be deemed to have been delivered to the recipient):
(1) By mail
(including express delivery, regular mail, and registered mail), the fifth working day after the date of mailing shall be deemed as the
delivery
date;
(2) Fax, email,
mobile SMS, WeChat QQ or other electronic communication address, the date of sending shall be deemed as the delivery date;
(3) Delivery
shall be made by dedicated person, and the date of receipt by the recipient shall be deemed as the date of delivery. If the recipient
refuses,
the delivery person may take photos or videos to record the delivery process, and keep the document, which is also considered
as delivery.
4、 If the delivery address provided or
confirmed by the borrower is inaccurate or untrue, or if the delivery address is changed and the other party,
arbitration institution,
people’s court, or notary office is not notified in a timely manner, resulting in the inability to actually deliver, the borrower shall
bear
the corresponding legal consequences and be deemed to have effectively delivered:
(1) If delivered by mail, the date
of return of the document shall be deemed as the date of delivery;
(2) If delivered by a dedicated
person, the delivery date shall be the day when the delivery recipient records the situation on the delivery receipt on the
spot;
(3) If delivered electronically,
the date of transmission shall be considered as the delivery date.
第 24 页 共 33 页
5、 The lender
shall use the domicile specified in the contract as the delivery address. If the lender sends a notice by publishing an announcement
on its
website, online banking, telephone banking, or business outlet, the date of publication of the announcement shall be deemed
as the date of delivery. The
lender shall not be liable for any transmission errors, omissions, or delays in postal, fax, telephone,
or any other communication system under any
circumstances.
6、 The parties agree that their official
seals, office seals, financial seals, contract seals, receiving and sending seals, and lender’s credit business seals
are all valid seals
for notification or contact, legal document delivery, and letter exchanges. All staff members of the borrower’s unit are authorized
signatories
for document exchanges, communications, and notifications.
7、 This provision is an independent clause
in the contract and shall not be affected by the validity of this contract or any other provisions of the
contract.
Article 21 Contract Validity
and Other Matters
1、 This contract shall come into effect
from the date of signature, seal or fingerprint by both parties.
2、 During the effective period of this
contract, any tolerance, grace or delay granted by the lender to the borrower or guarantor in exercising the rights
or interests enjoyed
in this contract shall not prejudice, affect or limit all the rights and interests that the lender should enjoy in accordance with relevant
laws
and regulations and this contract. It shall not be regarded as a waiver of the lender’s rights and interests under this contract,
nor shall it affect any obligations
of the borrower under this contract.
3、 If there are changes in national laws,
regulations or regulatory policies that result in the lender’s failure to fulfill the loan obligations as stipulated in
this contract
in compliance with laws, regulations or regulatory requirements, the lender has the right to unilaterally terminate the contract, announce
the
early maturity of all loans already issued, and the borrower shall immediately repay them as requested by the lender. If the lender
is unable to perform or
perform as agreed in the contract due to such reasons, the lender shall not bear any legal responsibility.
4、 If the loan is not disbursed or paid
on time due to force majeure, communication or network failures, or system failures of the lender, the lender shall
not be held responsible,
but shall promptly notify the borrower.
5、 The lender has the right to authorize
or entrust other branches of Industrial Bank to perform the rights and obligations under this contract (including
but not limited to authorizing
or entrusting other branches of Industrial Bank to sign relevant contracts) according to business management needs, or transfer
the loan
under this contract to other branches of Industrial Bank for management. The borrower acknowledges this and does not need to obtain the
borrower’s consent for the above actions.
6、 The borrower agrees that the lender
has the right to unilaterally reduce or cancel the unused loan amount under this contract based on factors such as
the borrower’s production
and operation situation, repayment situation, and credit status of other financial institutions. If the lender decides to reduce or
cancel,
they shall notify the borrower five working days in advance, but do not need to obtain the borrower’s consent separately.
7、 If at any time, any provision of this
Agreement is or becomes illegal, invalid, or unenforceable in any respect, the legality, validity, or enforceability
of the other provisions
of this Agreement shall not be affected or diminished in any way.
8、 The lender
has reminded the borrower to pay special attention to the “important signing instructions” in the contract. The borrower
has carefully
read and fully understood all the rights and obligations of both parties in the contract, as well as the
“important signing instructions”. The lender has provided
sufficient explanations and clarifications to the relevant terms
and personal information processing rules as requested by the applicant. Both parties have a
completely consistent understanding of
the various terms of this contract and have no objections to the contract content.
第 25 页 共 33 页
9、 The subheadings of this contract are
added for convenience of reading only and shall not be used for the interpretation or any other purpose of this
contract.
10、 The attachments to this contract are
an integral part of this contract and have the same legal effect as the main text of this contract.
11、 The total number of copies of this
contract and the number of copies held by each party are specified in Article 23 of this contract, specifically
Article 26. Each contract
has equal legal effect.
Article 22 Notarization
and voluntary acceptance of compulsory enforcement
1、If either party to this contract requests
notarization, the other party agrees to notarize it at a nationally designated notary institution as requested by
the other party.
2 、A contract that has been notarized for
compulsory execution has the effect of compulsory execution. When the borrower fails to perform or
improperly performs the debt, or when
the lender realizes the creditor’s rights as stipulated in laws and regulations or this contract, the borrower agrees to the
lender to
apply to a notary institution for an execution certificate with compulsory execution effect. The borrower voluntarily accepts the compulsory
execution measures directly applied by the lender to the people’s court with jurisdiction with the execution certificate, and is aware
of the corresponding legal
consequences. The borrower promises not to raise any objection or defense.
3、All parties agree that before the notary
public issues the execution certificate, they have the right to use postal, telephone, fax, email, mobile SMS,
WeChat, and other methods
in accordance with the terms of “document exchange, communication, and notification” stipulated in this contract QQ、
Verify
any breach of contract related to the borrower’s failure or improper performance of debts through any one or more methods such
as personal delivery and
face-to-face interviews. If verification is made through phone or face-to-face communication, it shall be deemed
delivered upon completion of the interview
or call; Using mailing, fax, email, mobile SMS, WeChat QQ、 If verified through personal
delivery or other means, the delivery date shall be in accordance
with the provisions of this contract on “document exchange, communication,
and notification”.
4、If the borrower has any objections to
the verified breach of contract as mentioned above, they shall provide written evidence and sufficient evidence
to the notary public within
five working days from the date of delivery. If the borrower fails to provide evidence on time or the notary public believes that the
evidence is insufficient to support their claim, it shall be deemed that the borrower confirms the relevant breach of contract such as
non performance or
inappropriate performance of the debt, and agrees to the notary public to issue an execution certificate based on the
lender’s application. If the notary public
has other regulations on the verification method and the period of proof, the regulations of
the notary public shall be followed.
Article 23 Special Provisions
1、 Explanation to the contracting party
Lender: Industrial Bank Co., Ltd. Shanghai Pudong
Branch
Address: No. 710 Dongfang Road, China (Shanghai)
Pilot Free Trade Zone
Legal representative/person in charge: Meng Jianping
Borrower: JAJI (Shanghai) Co., Ltd.
Address: Room 5107, Building 5, No. 555 Dongchuan
Road, Minhang District, Shanghai
Legal representative/person in charge: Xu Jian
第 26 页 共 33 页
2、If you find that there are illegal and
irregular charges in the contract and the business charges under the contract, you can call the complaint hotline of
Industrial Bank to
file a complaint about illegal and irregular charges. The complaint hotline for charges is 95561.
3、The lender and the borrower confirm that
the loan under this contract belongs to the second situation as follows:
(1) This contract is between the lender and the
borrower/ Year/ Month/ The sub contract of the Credit Limit Contract (i.e. the General Contract) with the
number of [insert number] signed
on [insert date]. The amount of this loan is included in the credit limit under the Credit Limit Contract. Among them, the
amount of foreign
currency loans shall be converted into RMB and included in the credit limit according to the middle price announced by the lender on the
day of signing this contract.
(2) This contract is an independent legal document
signed between the lender and the borrower.
4、The lender agrees
to lend the borrower a loan in RMB (amount in words): Ten million yuan.
5、This loan is used
for daily business turnover such as upstream procurement and payment of employee salaries. Without the written consent of the
lender,
the borrower shall not use the loan for other purposes.
6、The loan term is
12 months, from January 22, 2024 to January 21, 2025.
7、The loan allocation
plan is as follows:
/ Year / Month / Day / Yuan
The borrower shall apply
to the lender for withdrawal procedures three working days before each withdrawal date or at any other time requested in
writing by the
lender.
If the borrower fails to
withdraw the loan according to the agreed installment period and amount, the lender has the right to demand that the borrower
pay a penalty
of ten thousand of the loan amount that should be withdrawn for the current period. If the borrower belongs to small and micro enterprises
that
comply with national regulations, policies, etc., no penalty will be charged for this breach of contract.
8、The pricing benchmark
interest rate shall be executed according to the first of the following agreements:
(1) LPR_one-year term level.
(2) SHIBOR/Deadline level.
(3) SOFR.
(4) SOFR term interest rate/term grade.
(5) ESTR.
(6) SONIA.
第 27 页 共 33 页
(7) TSRR/Term level.
(8) TONA.
(9) SARON.
(10) HIBOR/Deadline Level.
(11) SIBOR/Deadline level.
(12) The central bank’s benchmark interest rate/maturity
level for RMB deposits.
Among them, RMB fixed rate loans should choose
LPR as the pricing benchmark interest rate. The pricing benchmark interest rate should be used
within the currency range specified in
the first article “Definition and Interpretation”.
9、Pricing formula
for loan interest rate: Loan interest rate=Pricing benchmark interest rate+./% Or - 0.45 _%.
10、The loan interest
rate shall be executed according to the first of the following agreements:
(1) Fixed interest rate.
The interest rate is determined in the following way B:
A、 The loan interest rate shall be determined
based on the pricing benchmark interest rate and pricing formula on the actual disbursement date, and the
interest rate shall remain unchanged
between the actual disbursement date and the maturity date of the loan under this contract.
B、According to the pricing benchmark interest
rate and pricing formula on the date of contract signing, the fixed loan interest rate is 3.00% annualized.
If there is an adjustment
to the pricing benchmark interest rate on the actual disbursement date, the corresponding adjustment points in the pricing formula
will
be adjusted. The annualized interest rate agreed upon in this contract remains unchanged.
(2) Floating interest
rates. Determine the loan interest rate based on the actual disbursement date and repricing date pricing benchmark interest rate and
pricing formula, and calculate interest in segments. The repricing day shall be executed in the following manner:
A、 The floating period is/ (Month/quarter/half
year/year), the corresponding day of each cycle from the actual disbursement date of the loan shall be
the contract repricing date. If
there is no corresponding day in the current month, the last day of that month shall be the corresponding day.
B、Regarding the use of SOFR ESTR, SONIA,
TONA, and SARON are used as pricing benchmark interest rates, and each interest date within the
interest period (i.e. each natural day
during the loan period) is used as the contract repricing date.
(3) Other interest rate
methods:
11、The repayment method
of loan interest shall be executed according to the first of the following provisions:
(1) The loan agreement in this contract stipulates
that the 21st day of the end of each quarter (month/quarter/half year/year-end) shall be the interest
payment date. The borrower shall
pay the current loan interest to the lender on the interest payment date and settle the remaining principal and interest when
the loan
is due.
第 28 页 共 33 页
(2) From the actual disbursement date of the loan,
every full term shall apply/ The corresponding day of (month/quarter/half year/year) (if there is no
corresponding day in the current
month, the last day of that month shall be the corresponding day) is the interest payment date for each period. The borrower
shall pay
the current loan interest to the lender on the interest payment date and settle the remaining principal and interest when the loan is
due.
(3) The first interest payment date is/year/month/day,
and from the first interest payment date, each corresponding day of/(month/quarter/half year/year)
(if there is no corresponding day in
the current month, the last day of that month shall be the corresponding day) shall be the interest payment date for each
period,
The borrower shall pay the current loan interest
to the lender on the interest payment date and settle the remaining principal and interest when the loan
expires.
(4) Other repayment
methods:/.
12、If the borrower
fails to use the loan for the purpose specified in this contract, the lender shall have the right to charge penalty interest on the
misappropriated
loan from the date of misappropriation, with the penalty interest rate being an increase in the loan interest rate 100%.
13、If the borrower
fails to repay on schedule and does not reach an agreement with the lender regarding the extension, i.e. the loan is overdue, the
lender
has the right to charge penalty interest on the overdue loan from the date of overdue, with a penalty interest rate of 50% higher than
the loan interest
rate.
14 、According to relevant
national laws, regulations, and regulatory requirements, the borrower promises to meet the withdrawal prerequisites
stipulated in the
contract before applying for loan disbursement, and accept the lender’s supervision on the use of loan funds for the agreed purposes.
The lender has the right to monitor the basic
deposit account, general deposit account, and special deposit account opened by the borrower, and supervise and
control the disbursement,
payment, and repayment of loan funds in accordance with the contractual provisions.
The borrower designates the following account
as a dedicated fund withdrawal account and promptly provides information on the inflow and outflow of
funds in that account:
Account Name:
Account:
Opening Bank:
The lender may negotiate and sign a separate account
management agreement with the borrower based on their credit status, financing situation, etc.,
specifying the management of the inflow
and outflow of funds from the designated account. The lender has the right to use the borrower’s funds
Early recovery of loans due to withdrawal situation.
第 29 页 共 33 页
15、The payment of
loan funds under any of the following circumstances should be made through the lender’s entrusted payment method:
(1) If the borrower
establishes a new credit business relationship with the lender and the borrower’s internal rating level at the lender is below
B3
(inclusive), “newly established credit business relationship” refers to the lender establishing a credit business
relationship with the borrower for the first time
or not having a credit business relationship within 2 years;
(2) Working capital
loans for exchange;
(3) The payment
recipient is clear and the single payment amount to a certain trading partner of the borrower exceeds RMB 10,000,000 (for foreign
currency loans, the middle price announced by the lender on the payment date shall be used for conversion);
(4) Others
16、The loan principal
under this contract shall be repaid using the second repayment method as follows:
(1) Repay the loan principal in installments,
with the following repayment amount and date:
Repay ∠ yuan on ∠ year ∠month∠day
If the lender adjusts the loan installment plan,
the installment repayment date and amount stipulated in this clause shall remain unchanged, and the
borrower shall repay the loan principal
on schedule.
(2) The loan principal shall be fully repaid in
one lump sum on the maturity date of the loan.
(3) Other repayment
methods for loan principal:/
17、If the borrower
fails to repay the loan under the loan contract on time and needs to extend the repayment period, they should submit a written loan
extension
application to the lender 10 working days before the maturity date of the loan. If approved by the lender, both parties shall sign a separate
“Loan
Extension Contract” as a supplementary contract to this contract.
18、The borrower shall
repay the principal and interest of the loan on the date specified in this contract.
If the borrower requests partial
or full repayment of the loan principal and interest in advance, they should do so in advance Notify the lender in writing
within 10 working
days and obtain the lender’s written consent. With the written consent of the lender, after the borrower repays a portion of the loan
principal and interest in advance, the borrower shall negotiate with the lender to determine the number of repayment periods, repayment
time, and repayment
amount thereafter. Interest shall be charged on the principal of the loan repaid in advance based on the actual usage
period and the loan interest rate agreed
upon in this contract. The lender will no longer adjust the loan interest calculated and collected
before the early repayment.
If the borrower requests early
repayment, the lender has the right to demand that the borrower pay a penalty of /% of the early repayment amount. If the
borrower belongs
to small and micro enterprises that comply with national regulations, policies, etc., no penalty will be charged for this breach of contract.
19、The guarantee contract
of this contract includes but is not limited to the following contracts:
(1) The Guarantee Contract (Contract
Name) with the number BZHQ001 is guaranteed by CLPS Shanghai Co., Ltd. in the form of guarantee;
(2) The “∠” (contract
name) with number ∠, the guarantor is ∠, and the guarantee method is∠;
20、Before the
borrower’s equity changes to∠% (including but not limited to equity transfer, custody, custody, pledge, etc.), they shall notify
the lender
in writing at least 30 working days in advance and obtain the lender’s written consent. They shall actively implement the
guarantee measures for timely and
full repayment of the loan principal and interest under this contract in accordance with the
lender’s requirements.
第 30 页 共 33 页
21、The borrower shall
be responsible for any changes in the equity of the guarantor that occur Within 7 working days from the date of the occurrence
or possible
occurrence of L% (including but not limited to equity transfer, custody, custody, pledge, etc.), the lender shall be notified in writing,
and actively
implement the guarantee measures for timely and full repayment of loan principal and interest under this contract in accordance
with the lender’s
requirements.
22、The borrower guarantees
to maintain its financial condition, including current assets and net asset value, asset liability ratio, and asset current ratio,
within
the following range as required by the lender during the loan period:/
23、Other matters declared
and promised by the borrower:/
24、Any disputes arising
from this contract shall be resolved through friendly consultation between the borrower and the lender; If friendly negotiation
fails,
both parties agree to resolve the issue in the third way as follows:
(1) Bring a lawsuit to the people’s court of the
lender’s domicile.
(2) Apply for arbitration to the Shanghai Arbitration
Commission and resolve disputes in accordance with the effective arbitration rules of the
commission at the time of arbitration. Within
the scope allowed by the arbitration rules, both parties agree to use the simplified procedure for the trial. The
arbitration award is
final and binding on both parties. The arbitration tribunal shall hold its hearing in Shanghai.
(3) Other methods: file a lawsuit with the people’s
court in the place where this contract is signed.
25、The borrower agrees
and confirms that the following address shall be used as a notice for matters under this contract, as well as legal documents
related
to litigation (arbitration), notarization, etc. in the event of disputes (including but not limited to various notices and documents from
the contracting
parties; complaint (or arbitration application) and evidence served by the court or arbitration tribunal, subpoena, response
notice, evidentiary notice, hearing
notice, payment order, judgment (award), ruling, mediation letter, execution notice, deadline performance
notice, and other legal documents for litigation or
arbitration proceedings, realization of security interest procedures, and execution
stage; The effective delivery address for various notices and legal
documents delivered by notary institutions, and further agree that
the lender, notary institution, court and other judicial organs, as well as other notices and
legal documents, have the right to choose
paper or electronic delivery methods. The electronic delivery methods include but are not limited to email, China
Judicial Process Information
Disclosure Network, National Unified Delivery Platform, local or specialized court network service platforms, as well as the
electronic
network platform and electronic APP of the delivery party:
(1) Borrower’s address:
①
Name of borrower: JAJI (Shanghai) Co., Ltd.
Borrower’s address: Room 511, North Building,
iSpace, No. 2966 Jinke Road, Pudong New Area, Shanghai;
Postal code: 201203; Contact phone number: 15721320032;
Contact person: Dai Panpan
② Name of designated agent (if any):
Recipient’s address:
Postal code: Contact phone number:/
第 31 页 共 33 页
(2) The borrower agrees and confirms that any
of the following electronic communication addresses is also a valid delivery address:
① Fax reception, number:/
② Email address:/
③ Mobile SMS, receiving number: 15721320032
④ WeChat, WeChat number:/
⑤ QQ, number:/
⑥ Other electronic communication addresses:/
26、This contract is made in duplicate,
with the lender holding four copies and the borrower holding one copy, all of which have equal legal effect.
27、Supplementary clauses
第 32 页 共 33 页
This page is the signature page of the “Working
Capital Loan Contract” numbered DD6232023130.
Lender (Seal): Responsible person or authorized person (signature and
seal):
Year Month Day
Borrower(Seal): Legal representative
or authorized person (signature/fingerprint):
Year Month Day
Contract
signing date：Year__Month__ Day
Contract
signing place：Jing’an District, Shanghai
第 33 页 共 33 页
Exhibit 11.1
As adopted on July ___, 2018
CLPS INCORPORATION
内部交易和信息披露政策
本政策于
2018 年7月__日起实施
制度编号：
序号
制度版本
变更说明
更新人/
提审日期
审批人/
审批日期
合规人/
审批日期
1
V1.0
新建
徐建/2018
林明辉/2018
2
V2.0
1.
首段介绍中修改 CFO的名字；
2. 政策适用性中能获取到内部信息的表
述；
3. 信息泄露中举例的第一条表述；
4. 内部交易责任的表述；
5. 信息泄露责任的表述;
6. 开放窗口期表述；
7. 例外条款的表述；
8. 信息披露的表述；
CLPS No Trading Calendar删除，加入条
款“具体窗口期可咨询CFO或公司秘书”
杨卉/2021.01.25
林明辉/2021.01.28
徐建/2021.01.27
3
V2.1
1. 删除“例外条款”
杨卉/2021.04.16
林明辉/2021.04.26
徐建/2021.04.18
1/12
INTRODUCTION
This
Policy
explains
the
requirements
and
procedures
to
be
followed
by
employees,
officers,
and
directors
of
CLPS
Incorporation (the “Company” or “CLPS”)
when trading in CLPS securities (and,in some cases,the securities of other companies) and in responding to
questions about, and requests
for, confidential information about CLPS’ business and affairs.
Contact Rita Yang, the Company’s CFO
if you have questions about this Policy or its application to any situation in which you wish to trade
CLPS securities.
介绍
本政策对CLPS公司（“本公司”或“CLPS”）的员工、管理人员和董事在交易CLPS证券（在某些情况下也包括其他公司的证券）时，以及回答有
关CLPS公司业务和事务的机密信息的问题和要求时，应遵循的要求和程序进行了解释。
如果您对该政策本身或在交易CLPS证券的过程中如何应用有任何疑问，请联系本公司首席财务官杨瑞。
APPLICABILITY OF POLICY
This Policy applies to all transactions in CLPS’ securities
that it may issue from time to time. It applies to all officers of CLPS, all members
of CLPS’ Board of Directors,
and all employees, consultants and contractors of CLPS who receive or have access to Inside Information (as defined below)
regarding CLPS.
This group of people, members of their immediate families, and members of their households are sometimes referred to in this Policy
as “Insiders.” This
Policy also applies to any person who receives Inside Information from any Insider.Any person who possesses Inside Information
regarding CLPS is
an Insider for so long as the information is not publicly known. Any employee can be an Insider from time to time, and would at those
times be subject to this Policy.
政策适用性
本政策适用于CLPS证券的所有交易，包括所有可能不定期发行的证券，适用于所有CLPS的管理人员、董事会成员，以及所有接受或有权获取关
于CLPS”内部信息”（定义见下文）的CLPS员工、顾问和客户及供应商。在这项政策中，以上人员以及他们的直系亲属和家庭成员，有时被称为“内
部人士”。这一政策也适用于任何从内部得到信息的人。只要这些信息不为公众所知，任何拥有关于CLPS内部信息的人都是内部人士。任何员工都
可能成为内部人士，并且在那时也成为本政策的受众。
2/12
INSIDER TRADING AND TIPPING
United Stated federal and state securities laws prohibit:
(a) the purchase or sale of securities while in possession of material non-public information
(“Inside Information”); or (b)
the selective disclosure of Inside Information to others who then trade in securities (“Tip” or “Tipping”).
内部交易和信息泄露
美国联邦和州证券法禁止:(a)在拥有重要的非公开信息（“内部信息”）时购买或出售证券的行为；或(b)有选择地向其他将会进行证券交易的人员
披露内部信息（“信息泄露”）的行为。
CLPS POLICY
No CLPS Insider shall:
●
Buy or sell CLPS securities or the securities of other companies
with which CLPS does business, including customers and suppliers, during any
period commencing with the date that he or she possesses
Inside Information and ending at the close of business on the second Trading Day
following the date on which that information is publicly
disclosed. As used in this Policy, the term “Trading Day” means a day on which national
stock exchanges and the
New York Stock Exchange are open for business.
●
Tip Inside Information to outsiders, including family members
and others who then trade in CLPS securities or those securities of another company
with which CLPS does business on the basis of that
information.
●
Answer questions or provide information, including Inside
Information, about CLPS and its affairs to outsiders unless specifically authorized to do
so.
There are no exceptions or waivers to this policy, even
for transactions that seem necessary or justifiable (such as the need to raise money for a personal
financial emergency).
3/12
CLPS 政策
CLPS内部人士不得:
●
从其拥有内部信息之日开始直至该信息被公开披露后的第二个交易日结束，在此期间，对CLPS证券或与CLPS有业务往来的其他公司（包括
客户和供应商）的证券进行购买或出售。本政策中所使用的“交易日”一词是指国家证券交易所和纽约证券交易所营业的日子。
●
向外部人士提供内部信息，包括家庭成员以及其他将要对CLPS证券或在该信息中提到将与CLPS有业务往来的其他公司的证券进行交易的人
士。
●
未经授权回答外部人员的问题或向外部人员提供信息，包括关于CLPS及其事务的内部信息。
这项政策没有例外或豁免，即使是看起来必要或正当的交易（比如为个人财政紧急情况筹集资金）。
MATERIAL NON-PUBLIC INFORMATION (INSIDE INFORMATION)
Inside Information is material non-public information.
Under applicable securities laws, “material” information is: (a) any information that a reasonable
investor would
likely consider important in deciding whether to buy, sell, or hold stock; or (b) any information that might affect the market for a company’s
securities. Either positive or negative information may be material.“Non-public” information is any information that
has not been disclosed generally to the
marketplace. Effective disclosure of such information comes through public filings with the
U.S. Securities and Exchange Commission (“SEC”) and other
regulatory bodies, press releases and public meetings with analysts
and the press.All information that you learn about CLPS or its business plans is
potentially Inside Information until CLPS publicly discloses
it. Similarly, information received about any other company with which CLPS does business,
including customers, vendors and suppliers
that is not yet in general circulation is also potentially Inside Information. Rumor and speculation in the public or
media about
material information, absent official statement, is not a sufficient basis to trade on Inside Information.
The following are examples of Inside Information:
●
CLPS’ historical or projected financial results,
sales results, earnings, losses, liquidity and other similar financial information.
●
Possible action related to stock, such as a dividend declaration,
stock split, or anticipated public or private offerings of CLPS securities.
●
The fact that CLPS is evaluating or considering an acquisition
candidate, business unit divestiture, joint venture, tender offer, or restructuring
activity, that discussions or negotiations are in
progress, or that such a transaction is being undertaken.
4/12
●
News of significant changes in products or services, the
gain or loss of a significant customer or supplier, and other major marketing changes.
●
Changes in management or control.
●
Any significant actual or threatened litigation, dispute,
or government investigation.
●
News regarding actual or potential reductions in force.
非公开资料（内部资料）
内部信息是非公开的重要信息。根据适用的证券法，“重要”信息指：(a)任何合理投资者在决定是否购买、出售或持有股票时可能认为重要的信
息；或(b)任何可能影响公司证券市场的资料。正面或负面的信息都可能是重要的。“非公开”信息是指所有尚未向市场披露的信息。信息的有效披露
只有通过向美国证券交易委员会(SEC)和其他监管机构提交公开文件、新闻稿或与分析师和媒体召开公开会议才得以实现。您所了解到的所有有关
CLPS或其业务计划的信息，在CLPS公开披露之前，都属于潜在的内部信息。同样，任何与CLPS有业务往来的其他公司的信息，包括客户、供应商
和供应商，都可能是内部信息。在公众或媒体上关于重要信息的谣言和猜测，没有官方声明，并不构成交易内部信息的充分依据。
以下是内部信息的例子:
●
历史或预期的财务数据、销售数据、盈利、亏损、流动性和其他类似的CLPS的财务信息。
●
可能与股票相关的行为，如股利声明、股票分割、或预期的CLPS证券的公开或私人发行。
●
CLPS正在讨论或谈判的事件或正在进行的交易，如对候选收购对象进行评估或考虑、业务单位剥离、合资企业、投标报价或重组活动，等
等。
●
关于产品或服务的重大变化、重要客户或供应商的损益以及其他重大营销变化的新闻。
●
管理或控制方面的变化。
●
任何重大的正在或即将发生的诉讼、纠纷或政府调查。
●
关于正在或即将裁员的新闻。
5/12
TIPPING
Insiders, in addition to being forbidden from using Inside
Information to trade in securities for their own advantage, are also prohibited from Tipping
Inside Information to an outsider, who
then trades on that information. An outsider is any person other than a CLPS employee, officer, or director, and
includes friends, business
associates, spouses, or family members. Under the securities laws, both the discloser and recipient of Inside Information are liable
for
violations and you will be held accountable for trading by your immediate family and others living in your household.
Inside Information must be protected. Common sense applies.
Avoid inadvertent communication. For example:
●
Do not discuss new developments, which could constitute Inside
Information, in public places such as elevators, hallways, restaurants, airplanes,
taxicabs, or any place where you can be overheard.
●
Do not gossip or speculate with other employees or non-employees
regarding any Inside Information.
●
Do not read documents with Inside Information in public places
or discard them where others can retrieve them.
●
Do not carry documents with Inside Information in public
places in an exposed manner.
●
Cover documents with Inside Information on your desk before
you leave your office or room and do not leave them where visitors can read them.
●
Do not copy documents with Inside Information for personal
use, without the express consent of a supervisor.
●
If documents containing Inside Information are to be disposed
of, they should be securely shredded or otherwise destroyed.
信息泄露
内部人士除了被禁止利用内部信息进行证券交易以谋取自身利益外，还被禁止向外部人士透露内部信息，然后由外部人士利用这些信息进行交
易。外部人士是除CLPS员工、官员或董事之外的任何人，包括朋友、商业伙伴、配偶或家庭成员。根据证券法，内部信息的披露人和接收人都要对
违规行为负责，你的直系亲属和其他家庭成员将对你的交易行为负责。
内部信息必须得到保护。以常识作为判断标准。避免无意触犯。例如：
●
不要在公共场合，如电梯、走廊、餐厅、飞机、出租车或任何你可能被他人听到的地方谈论公司新的成就突破等可能成为内部信息的内容；
6/12
●
不要与其他员工或非员工就任何内部信息进行八卦或猜测；
●
不要在公共场所阅读带有内部信息的文档，也不要将其丢弃在其他人可以检索到的地方；
●
不要在公共场所以暴露的方式携带有内部信息的文件；
●
在离开办公室或房间之前，把办公桌上含有内部信息的文件遮挡好，不要放在访客可以阅读的地方；
●
未经主管明确同意，不得私自复制带有内部信息的文件；
●
如果需要丢弃包含内部信息的文件，应该以粉碎或其他安全方式进行销毁。
POTENTIAL CRIMINAL AND CIVIL LIABILITY AND/OR DISCIPLINARY ACTION
●
Liability for Insider Trading. Pursuant to federal
and state securities laws, Insiders may be subject to criminal and civil fines and penalties as well
as imprisonment for engaging in
transactions in CLPS’ securities at a time when they have knowledge of Inside Information regarding CLPS. While
the regulatory
authorities concentrate their efforts on individuals who trade, or who tip inside information to others who trade, the federal securities
laws also impose potential liability on CLPS and other “controlling persons” if they fail to take reasonable steps
to prevent insider trading by
CLPS’ Insiders.
●
Liability for Tipping. Insiders may also be liable
for improper transactions by any person (commonly referred to as a “tippee”) to whom they have
disclosed Inside Information
regarding the Company or to whom they have made recommendations or expressed opinions on the basis of such
information as to trading
in the Company’s securities. The SEC has imposed large penalties even when the disclosing person did not profit from the
trading.
The SEC, the stock exchanges and Financial Industry Regulatory Authority (“FINRA”) use sophisticated electronic surveillance
techniques
to uncover insider trading.
●
Possible Disciplinary Actions. Employees who
violate this Policy shall be subject to disciplinary action, which may include ineligibility for future
participation in CLPS’ equity
incentive plans or termination of employment.
可能要承担的刑事、民事责任或纪律处分
●
内部交易责任。根据联邦和州证券法的规定，在知悉CLPS内部消息的情况下，内部人士进行CLPS证券交易，可能会受到刑事、民事罚款和
监禁。尽管监管当局将精力集中在交易者或者向其他交易人提供内部信息的个人身上，但联邦证券法同时对未能采取合理的措施来阻止
CLPS内部人士进行内部交易的CLPS及其他“监管人员”施加潜在责任
7/12
●
信息泄露责任。内部人士还可能因有人（通常被称为“泄露者”）向其披露公司内部信息，或根据公司证券交易等信息向其提出建议或表达意
见而进行的不正当交易承担责任。即使披露人没有从中获利，美国证券交易委员会（SEC）仍将对进行不正当交易的内部人士及披露人处以
巨额罚款。美国证券交易委员会、证券交易所和金融行业监管局（FINRA）使用复杂的电子监控技术来揭露内部交易。
●
可能的纪律处分。违反本政策的员工将受到纪律处分，其中包括剥夺未来参与CLPS股权激励计划的资格或终止雇佣。
RECOMMENDED GUIDELINES - TIMING OF SECURITIES TRADING AND WINDOW
PERIODS
Investment by CLPS employees and directors in CLPS securities
is encouraged. However, there are restrictions regarding the timing of trading in CLPS
securities.
推荐准则-证券交易的时间和窗口期
鼓励CLPS的员工和董事的投资CLPS证券。然而，对于CLPS证券的交易时间有一些限制。
Closed Window Period
To ensure compliance with this Policy and applicable securities
laws, Insiders should refrain from conducting any transactions in CLPS’ securities during
ten (10) business (trading)
days prior to the ending upon each half year period (i.e., December 31st)
and prior to the ending of the fiscal year (i.e., June 30th),
and continuing for two (2) business (trading) days after the public release of the financial results for such period (the “Closed
Window Period”).Certain
material corporate events may also require that the trading window be closed on a case by case basis.
In those circumstances, the CFO shall notify all Insiders
of the commencement of a Closed Window Period.
关闭窗口期
为确保遵守本政策及适用的证券法，内部人士应避免从每个财年的半年前（即6月30日）及每个财年结束前（即12月31日）的10个交易日内到在
该期间财务业绩公布后的两个完整交易日内进行交易（“关闭窗口期”）。某些重大的公司事件也可能作为特例而要求交易窗口进行关闭。在这种情
况下，首席财务官应将窗口期关闭的时间通知所有内部人员。
8/12
Open Window Period
The safest period for trading in CLPS’ securities,
assuming the absence of Inside Information, is generally the first few days following the opening of the
trading window, which shall open
on the third (3rd)business (trading) day after the public release
of the financial results for such periods (the “Open Window
Period”). Trading in CLPS’ securities during an
Open Window Period should not be considered a “safe harbor” if an Insider is in possession
of Inside
Information.Even after Inside Information is disclosed by CLPS in connection with an earnings release, for example, sufficient
time must pass to permit the
market and outside investors to digest the information and make investment decisions before Insiders can
trade in CLPS’ securities.
Regulatory authorities scrutinize securities trading with
hindsight. Consequently, before trading in CLPS securities, you should carefully consider how
the authorities, in the future, might view
your trading with the benefit of hindsight.
Every Insider has the individual responsibility
to comply with this Policy against insider trading, regardless of whether CLPS has recommended
an Open Window Period to that
Insider or any other Insiders of CLPS. The guidelines set forth in this Policy are guidelines only, and appropriate
judgment should
be exercised in connection with any trade in CLPS’ securities.
To prevent inadvertent violations and avoid even the appearance
of an improper transaction (e.g., when an officer trades while unaware of a pending
major development) and to ensure the proper filing
of SEC reports, the following procedure must be followed:
All transactions in CLPS securities (acquisitions,
dispositions, transfers, etc.) by Insiders, including all directors, officers, employees reporting
directly to Officers, and by other
employees designated from time to time by CLPS who may have access to Inside Information, must be pre-cleared
by the CFO with in
consultation with the Company’s legal counsel.
9/12
开放窗口期
如果没有内部信息，CLPS证券最安全的交易期通常是交易窗口开放后的最初几天，即财务业绩公开发布后的第三个交易日（“开放窗口期”）。
如果内部人士掌握内部信息，在开放窗口期内买卖CLPS证券仍不应被视为“安全港”。即使是在CLPS披露了内部信息之后，也必须在内部人士交易
CLPS证券之前给市场和外部投资者留出足够的时间，让他们能够消化这些信息并做出投资决定。
监管部门会对证券交易进行事后审查。因此，在交易CLPS证券之前，您应该仔细考虑当局将会如何看待您的交易。
无论CLPS是否向内部人士或任何其他CLPS内部人士建议开放窗口期，任何内部人士都有责任遵守这项针对内部交易的政策。本政策所载的指
引仅为指引，有关CLPS证券的任何交易，内部人士均须作出适当的判断。
为了避免无意的违规行为以及甚至可能出现的不当交易（例如，当一名管理人员在不知道即将发生的重大发展时进行交易），并确保恰当地提
交SEC报告，必须遵循以下程序：
内部人士，包括所有董事、管理人员、直接向管理人员汇报的员工，和其他可能会被指定并获得CLPS内部信息的员工所进行的所有CLPS证券
交易（包括收购、配置、转移等），必须由首席财务官事先与公司的法律顾问协商后进行预先排除。
LIABILITY OF SUPERVISORY PERSONS FOR TRADING BY SUBORDINATES
Under U.S. securities laws, CLPS and its directors,
officers, or supervising employees may be liable for significant penalties if they do not take
appropriate action to prevent a person
directly or indirectly under their control from trading in securities on the basis of Inside Information – or if they
recklessly disregard the likelihood that such trading would take place.If Inside Information is inadvertently disclosed, no matter what
the circumstances, the
person making or discovering that disclosure should immediately report the facts to CLPS’ Corporate
Secretary.
监察人对下属交易的责任
根据美国证券法，CLPS及其董事、管理人员或监督员工，如果不采取适当的措施防止他人在掌握内部信息的基础上直接或间接地控制证券交
易，或者鲁莽无视这样的交易发生，则可能承担重大处罚。如果不小心泄露了内部信息，无论在什么情况下，泄密者或发现泄露的人都应该立即向
CLPS企业秘书报告。
10/12
DISCLOSURE OF INFORMATION
CLPS has developed and continues to develop proprietary,
confidential and non-public information. In the course of business operations, you may
become aware of such information. You may not disclose
or otherwise use any proprietary, confidential or nonpublic information of any kind acquired as a
result of your association with CLPS
except, of course, for or on behalf of CLPS. This obligation applies whether that information relates to CLPS or another
organization
(such as a customer or supplier) and continues even after you are no longer associated with CLPS. In the event any officer, director or
employee
receives any inquiry from outside of CLPS, such as a stock analyst, for information (particularly financial results and/or projections)
that may be Inside
Information, the inquiry should be referred to the Company’s CFO, who is responsible for coordinating and overseeing
the release of such information to the
investing public, analysts and others in compliance with applicable laws and regulations.If you
have a question as to whether information is proprietary,
confidential or nonpublic, you should contact the Corporate Secretary. You must
abstain from disclosing or otherwise using such information until you are
informed that its disclosure or other use is permitted.Further,
do not answer questions from news media reporters, securities analysts, or stockholders about
CLPS business, policies, or practices, either
directly or through another person. Instead, refer such inquiries to the Chief Financial Officer or Corporate
Secretary.
信息披露
在业务操作过程中，您可能会接触到CLPS已经开发并继续开发专有、机密和非公开信息。当然，除非是为了代表CLPS，您可能不被允许公布或
以其他方式使用与CLPS相关的任何类型的专有、机密或非公开信息。该义务适用于CLPS或其他组织（如客户或供应商）相关的信息，并且即使您
不再与CLPS相关，该义务仍将继续。如果任何管理人员、董事或员工收到CLPS以外的可能有关内部信息的任何调查，如股票分析师的询问（特别
是财务业绩和/或预测），应该告知公司负责协调和监督向投资大众公开信息的财务总监、分析师和其他符合适用的法律和法规的人员。如果你不确
定某些信息是否私有、机密或非公开，你应该联系公司秘书。未经许可禁止对信息进行披露或使用。此外，不要回答新闻媒体记者、证券分析师或
股东亲口或转述的关于CLPS业务、政策或实践的问题。相反，向首席财务官或公司秘书询问这些问题。
11/12
INSIDER TRADING AND INFORMATION DISCLOSURE
POLICY CERTIFICATION
The undersigned hereby acknowledges receipt of CLPS INCORPORATION’s
Insider Trading and Information Disclosure Policy and certifies that the
undersigned has read it, understands it, and will comply with
it.
Date: _________________
Signature:
Print Name:
Title:
Division:
Location:
For more information regarding to CLPS No Trading Calendar, please
consult CLPS’ CFO or Corporate Secretary.
内部交易和信息披露政策认证
下述签署人特此承认已收到CLPS公司的内部交易和信息披露政策，并证明签署人已阅读、理解并将遵守该政策。
日期: _________________
签名:
姓名:
职务:
部门:
所在地:
关于窗口期更多信息请咨询CLPS首席财务官或公司秘书。
12/12
Exhibit 12.1
Certification
Pursuant to Rule 13a-14(a) of the Exchange Act
I, Raymond Ming Hui Lin, certify that:
1.
I have reviewed this annual report on Form 20-F of CLPS Incorporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over
financial reporting.
Date: October 18, 2024
By:
/s/ Raymond Ming Hui Lin
Name: Raymond Ming Hui Lin
Title:
Chief Executive Officer
(Principal Executive Officer)
Exhibit 12.2
Certification
Pursuant to Rule 13a-14(a) of the Exchange Act
I, Rui Yang, certify that:
1.
I have reviewed this annual report on Form 20-F of CLPS Incorporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over
financial reporting.
Date: October 18, 2024
By:
/s/ Rui Yang
Name: Rui Yang
Title:
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 13.1
Certification
Pursuant to 18 U.S.C. Section 1350
Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley
Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code),
each of the undersigned officers of
CLPS Incorporation (the “Company”), does hereby certify, to such officer’s knowledge, that the Annual Report on Form
20-F for
the year ended June 30, 2024 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934
and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results
of operations of the Company.
CLPS Incorporation
October 18, 2024
By:
/s/
Raymond Ming Hui Lin
Name: Raymond Ming Hui Lin
Title:
Chief Executive Officer
(Principal Executive Officer)
October 18, 2024
By:
/s/ Rui Yang
Name: Rui Yang
Title:
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 21.1
Name of the Entity
Jurisdiction
Qinheng Co., Limited
Hong Kong
Qiner Co., Limited
Hong Kong
Shanghai Qincheng Information Technology Co., Ltd.
PRC
CLPS Shanghai Co., Ltd.
PRC
CLPS Dalian Co., Ltd.
PRC
CLPS Beijing Hengtong Co., Ltd.
PRC
JAJI (Shanghai) Co., Ltd.
PRC
JAJI (Shanghai) Human Resource Co., Ltd.
PRC
Ridik Technology (Australia) Pty. Ltd.
Australia
CLPS Technology (Singapore) Pte. Ltd.
Singapore
CLPS Technology (HK) Co., Ltd.
Hong Kong
CLPS Shenzhen Co., Ltd.
PRC
CLPS Guangzhou Co., Ltd.
PRC
CLPS Technology (US) Ltd.
Delware
CLPS Technology (California) Inc.
California
CLPS Hangzhou Co. Ltd.
PRC
Ridik Pte. Ltd.
Singapore
Ridik Consulting Private Limited
India
Ridik Sdn. Bhd.
Malaysia
Ridik Software Solutions Pte. Ltd.
Singapore
CLPS Technology Japan
Japan
Qinson Credit Card Services Limited
Hong Kong
Hainan Qincheng Software Technology Co.Ltd
PRC
CLPS Xian Co., Ltd.
PRC
Shanghai Chenqin Information Technology Services Co., Ltd.
PRC
Growth Ring Ltd.
BVI
Arabian Jasmine Ltd.
BVI
Noni (SINGAPORE) PTE. LTD.
Singapore
CLPS-Beefinance Holding Limited
BVI
LinkCrypto Finance Technology Limited
Hong Kong
Qinson Ltd.
BVI
LQE Ltd.
BVI
CLPS Technology (Philippines) Corp
Philippines
MSCT Investment Holdings Limited
BVI
MNYC HOLDINGS (HK) LIMITED
Hong Kong
Haikou Huaqin Minshang Software Development Co., Ltd
PRC
CLPS Chengdu Co., Ltd.
PRC
CLPS Investment Management Ltd
BVI
Ridik Technology Canada Limited
Canada
JAJI Global Incorporation
Cayman Islands
JAJI Singapore Pte. Ltd.
Singapore
Qinson Singapore Pte. Ltd
Singapore
Shanghai Yingjia Technology Limited
PRC
College of Allied Educators Pte. Ltd
Singapore
Purple Potato Finance Limited
Hong Kong
Shell Infotech Pte. Ltd
Singapore
Shell Infotech Consulting Sdn. Bhd
Malaysia
Ridik Technology Ltd
Dubai
Exhibit 23.1
Consent of Independent Registered Public Accounting
Firm
We consent to the incorporation by reference in
the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-271860) pertaining to the 2023 Equity Incentive Plan of CLPS
Incorporation and Post-Effective
Amendment No. 1 to the Registration Statement (Form S-8 No. 333-271860) of CLPS Incorporation,
(2) Registration Statement (Form F-3 No. 333-254910) and Amendment No.1 to the Registration Statement (Form
F-3 No. 333-254910) of CLPS
Incorporation, and
(3) Registration Statement (Form F-3 No. 333-266951) and Amendments No.1, No.2, No.3 and No.4 to the Registration
Statement (Form F-3 No. 333-
266951) of CLPS Incorporation;
of our report dated October 18, 2024, with respect
to the consolidated financial statements of CLPS Incorporation included in this Annual Report (Form 20-
F) of CLPS Incorporation for the
year ended June 30, 2024.
/s/ Ernst & Young Hua Ming LLP
Shanghai, The People’s Republic of China
October 18, 2024
Exhibit 97.1
CLPS Incoproration (“the Company”)
CLAWBACK POLICY
Introduction
The Board of Directors of the Company (the “Board”)
believes that it is in the best interests of the Company and its shareholders to create and maintain a
culture that emphasizes integrity
and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Board has
therefore adopted this
policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from
material
noncompliance with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is
designed to comply with Section
10D of the Securities Exchange Act of 1934 (the “Exchange Act”).
Administration
This Policy shall be administered by the Board or, if so designated
by the Board, the Compensation Committee, in which case references herein to the Board
shall be deemed references to the Compensation
Committee. Any determinations made by the Board shall be final and binding on all affected individuals.
Covered Executives
This Policy applies to the Company’s current and former executive officers,
as determined by the Board in accordance with Section 10D of the Exchange Act
and the listing standards of the national securities exchange
on which the Company’s securities are listed, and such other senior executives/employees who
may from time to time be deemed subject to
the Policy by the Board (“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement
of its financial statements due to the Company’s material noncompliance with any
financial reporting requirement under the securities
laws, the Board will require reimbursement or forfeiture of any excess Incentive Compensation received
by any Covered Executive during
the three completed fiscal years immediately preceding the date on which the Company is required to prepare an
accounting restatement.
Incentive Compensation
For purposes of this Policy, Incentive Compensation means any of the
following; provided that, such compensation is granted, earned, or vested based wholly
or in part on the attainment of a financial reporting
measure:
●
Annual bonuses and other short- and long-term cash incentives.
●
Stock options.
●
Stock appreciation rights.
●
Restricted stock.
●
Restricted stock units.
●
Performance shares.
●
Performance units.
Financial reporting measures include:
●
Company stock price.
●
Revenues.
●
Net income.
●
Earnings before interest, taxes, depreciation, and amortization (EBITDA).
●
Earnings per share.
●
“Non-GAAP financial measures” for purposes of Exchange Act Regulation G and 17CFR 229.10
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation
paid to the Covered Executive based on the erroneous data over the Incentive
Compensation that would have been paid to the Covered Executive
had it been based on the restated results, as determined by the Board.
If the Board cannot determine the amount of excess Incentive Compensation
received by the Covered Executive directly from the information in the
accounting restatement, then it will make its determination based
on a reasonable estimate of the effect of the accounting restatement.
Method of Recoupment
The Board will determine, in its sole discretion, the method for recouping
Incentive Compensation hereunder which may include, without limitation:
(a) requiring reimbursement of cash Incentive Compensation previously
paid;
(b) seeking recovery of any gain realized on the vesting, exercise,
settlement, sale, transfer, or other disposition of any equity-based awards;
(c) offsetting the recouped amount from any compensation otherwise
owed by the Company to the Covered Executive;
(d) cancelling outstanding vested or unvested equity awards;
and
(e) taking any other remedial and recovery action permitted by
law, as determined by the Board.
No Indemnification
The Company shall not indemnify any Covered Executives against the
loss of any incorrectly awarded Incentive Compensation.
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Interpretation
The Board is authorized to interpret and construe this Policy and to
make all determinations necessary, appropriate, or advisable for the administration of this
Policy. It is intended that this Policy be
interpreted in a manner that is consistent with the requirements of Section 10D of the
Exchange Act and any applicable rules or standards adopted by the Securities
and Exchange Commission or any national securities exchange on which the
Company’s securities are listed.
Effective Date
This Policy shall be effective as of the date it is adopted by the
Board (the “Effective Date”) and shall apply to Incentive Compensation that is approved,
awarded or granted to Covered
Executives on or after that date. This Policy shall apply to any excess Incentive Compensation received by Covered
Executives during the
three immediately completed fiscal years preceding the date on which a company is required to prepare an accounting restatement.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion
and shall amend this Policy as it deems necessary to reflect final regulations adopted by
the Securities and Exchange Commission under
Section 10D of the Exchange Act and to comply with any rules or standards adopted by a national securities
exchange on which the Company’s
securities are listed. The Board may terminate this Policy at any time.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent
of the law. The Board may require that any employment agreement, equity award
agreement, or similar agreement entered into on or after
the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered
Executive to agree to abide by the
terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or
rights of
recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award
agreement, or similar agreement and any other legal remedies available to the Company.
Impracticability
The Board shall recover any excess Incentive Compensation in accordance
with this Policy unless such recovery would be impracticable, as determined by
the Board in accordance with Rule 10D-1 of the Exchange
Act and the listing standards of the national securities exchange on which the Company’s
securities are listed.
Successors
This Policy shall be binding and enforceable against all Covered Executives
and their beneficiaries, heirs, executors, administrators or other legal
representatives.
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