Filed pursuant to Rule 424(b)(5)
Registration No. 333-264579
Prospectus Supplement
(To Prospectus dated May 31, 2022)
10,514,018 Class A Ordinary Shares
CN ENERGY GROUP. INC.
This is an offering of the securities of CN Energy Group. Inc., a
British Virgin Islands holding company. Unless otherwise stated, as
used in this prospectus, references to “we,” “us,” “our,” “CN
Energy,” and the “Company” are to CN Energy Group. Inc., a company
organized under the laws of the British Virgin Islands.
We are offering 10,514,018 Class A ordinary shares, no par value
(the “Class A ordinary shares”), pursuant to this prospectus
supplement and the accompanying prospectus, at a purchase price of
US$1.712 per share.
We are authorized to issue an unlimited number of Class A ordinary
shares and an unlimited number of Class B ordinary shares, no par
value (the “Class B ordinary shares”), and we have 20,062,658 Class
A ordinary shares and 3,020,969 Class B ordinary shares issued and
outstanding, respectively. Holders of Class A ordinary shares and
Class B ordinary shares have the same rights except for voting and
conversion rights. In respect of matters requiring a vote of all
shareholders, each holder of Class A ordinary shares will be
entitled to one vote per one Class A ordinary share and each holder
of Class B ordinary shares will be entitled to 50 votes per one
Class B ordinary share. The Class A ordinary shares are not
convertible into shares of any other class. The Class B ordinary
shares are convertible into Class A ordinary shares at any time
after issuance at the option of the holder on a one-to-one
basis.
Our Class A ordinary shares are listed on The Nasdaq Capital
Market, or Nasdaq, under the symbol “CNEY.” On September 30, 2022,
the last reported sale price of our ordinary shares on Nasdaq was
US$2.09 per share.
We are an “emerging growth company” as defined in the Jumpstart Our
Business Act of 2012, as amended, and, as such, will be subject to
reduced public company reporting requirements.
The aggregate market value of our outstanding ordinary shares held
by non-affiliates, or public float, as of October 3, 2022, was
approximately US$18.10 million, which was calculated based on
20,032,658 ordinary shares held by non-affiliates as of October 3,
2022 and a per share price of US$2.71, which was the closing price
of our ordinary shares on Nasdaq on August 4, 2022. Pursuant to
General Instruction I.B.5 of Form F-3, in no event will we sell the
securities covered hereby in a public primary offering with a value
exceeding more than one-third of the aggregate market value of our
ordinary shares in any 12-month period so long as the aggregate
market value of our outstanding ordinary shares held by
non-affiliates remains below US$75,000,000. During the 12 calendar
months prior to and including the date of this prospectus, we have
not sold any securities pursuant to General Instruction I.B.5 of
Form F-3.
We are an offshore holding company with no material operations of
our own and not a Chinese operating company. Our operations are
conducted in China by our subsidiaries. This is an offering of the
Class A ordinary shares of the offshore holding company in the
British Virgin Islands, instead of securities of the operating
entities in China. Therefore, you will not directly hold any equity
interests in the operating entities.
We are subject to certain legal and operational risks associated
with having the majority of our operations in China, which could
significantly limit or completely hinder our ability to offer
securities to investors and cause the value of our securities to
significantly decline or be worthless. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—Any actions by the Chinese government, including any decision
to intervene or influence our operations or to exert control over
any offering of securities conducted overseas and/or foreign
investment in China-based issuers, may cause us to make material
changes to our operations, may limit or completely hinder our
ability to offer or continue to offer securities to investors, and
may cause the value of such securities to significantly decline or
be worthless” in our most recent annual report on Form 20-F (the
“2021 Annual Report”). Recently, the PRC government adopted a
series of regulatory actions and issued statements to regulate
business operations in China, including cracking down on illegal
activities in the securities market, enhancing supervision over
China-based companies listed overseas using variable interest
entity structure, adopting new measures to extend the scope of
cybersecurity reviews, and expanding the efforts in anti-monopoly
enforcement. As of the date of this prospectus supplement, we and
our subsidiaries have not been involved in any investigations on
cybersecurity review initiated by any PRC regulatory authority, nor
has any of them received any inquiry, notice or sanction. As of the
date of this prospectus supplement, we are not subject to
cybersecurity review by the Cyberspace Administration of China, or
the CAC, since we currently do not have over one million users’
personal information and do not anticipate that we will be
collecting over one million users’ personal information in the
foreseeable future, which we understand might otherwise subject us
to the Cybersecurity Review Measures. We are not subject to network
data security review by the CAC if the Draft Regulations on the
Network Data Security Administration (Draft for Comments) (the
“Security Administration Draft”) are enacted as proposed, because
we currently do not have over one million users’ personal
information, we do not collect data that affect or may affect
national security and we do not anticipate that we will be
collecting over one million users’ personal information or data
that affect or may affect national security in the foreseeable
future, which we understand might otherwise subject us to the
Security Administration Draft. See “Item 3. Key Information—D. Risk
Factors—Risks Relating to Doing Business in the PRC—Recent greater
oversight by the Cyberspace Administration of China, or the “CAC,”
over data security, particularly for companies seeking to list on a
foreign exchange, could adversely impact our business and our
offering” in the 2021 Annual Report. According to our PRC counsel,
Yingke Wuxi Law Firm, no relevant laws or regulations in the PRC
explicitly require us to seek approval from the China Securities
Regulatory Commission (the “CSRC”) for our overseas listing. As of
the date of this prospectus supplement, we and our subsidiaries
have not received any inquiry, notice, warning, or sanction
regarding our overseas listing from the CSRC or any other PRC
governmental authorities. However, since these statements and
regulatory actions are newly published, official guidance and
related implementation rules have not been issued. It is highly
uncertain what the potential impact such modified or new laws and
regulations will have on the daily business operations of our
subsidiaries, our ability to accept foreign investments, and our
listing on an U.S. exchange. The Standing Committee of the National
People’s Congress (the “SCNPC”) or PRC regulatory authorities may
in the future promulgate laws, regulations, or implementing rules
that require us or our subsidiaries to obtain regulatory approval
from Chinese authorities for listing in the U.S.
In addition, our Class A ordinary shares may be prohibited from
trading on a national exchange or over-the-counter under the
Holding Foreign Companies Accountable Act, if the Public Company
Accounting Oversight Board (United States) (the “PCAOB”) is unable
to inspect our auditor for three consecutive years beginning in
2021. Our auditor is headquartered in Singapore and subject to
PCAOB inspection on a regular basis. Our auditor is not subject to
the determinations announced by the PCAOB on December 16, 2021. If
trading in our Class A ordinary shares is prohibited under the
Holding Foreign Companies Accountable Act in the future because the
PCAOB determines that it cannot inspect or fully investigate our
auditor at such future time, Nasdaq may determine to delist our
Class A ordinary shares and trading in our Class A ordinary shares
could be prohibited. On June 22, 2021, the U.S. Senate passed the
Accelerating Holding Foreign Companies Accountable Act, which, if
passed by the U.S. House of Representatives and signed into law,
would reduce the period of time for foreign companies to comply
with PCAOB audits to two consecutive years instead of three, thus
reducing the time period for triggering the prohibition on trading.
On August 26, 2022, the CSRC, the Ministry of Finance of the PRC
(the “MOF”), and the PCAOB signed a Statement of Protocol (the
“Protocol”), governing inspections and investigations of accounting
firms based in mainland China and Hong Kong. Pursuant to the fact
sheet with respect to the Protocol disclosed by the SEC, the PCAOB
shall have independent discretion to select any issuer audits for
inspection or investigation and has the unfettered ability to
transfer information to the SEC. However, uncertainties still exist
as to whether and how this new Protocol will be implemented and
whether the PCAOB can make a determination that it is able to
inspect and investigate completely in mainland China and Hong Kong.
When the PCAOB reassesses its determinations by the end of 2022, it
could determine that it is still unable to inspect and investigate
completely accounting firms based in mainland China and Hong
Kong.
As of the date of this prospectus supplement, none of our
subsidiaries have made any dividends or distributions to our
Company and our Company has not made any dividends or distributions
to our shareholders. We intend to keep any future earnings to
finance the expansion of our business, and we do not anticipate
that any cash dividends will be paid in the foreseeable future. If
we determine to pay dividends on any of our ordinary shares in the
future, as a holding company, we will rely on payments from
subsidiaries of CN Energy Industrial Development Co., Ltd., our
indirect wholly owned subsidiary in China (“CN Energy
Development”), to CN Energy Development and from CN Energy
Development to Zhejiang CN Energy Technology Development Co., Ltd.,
our indirect wholly owned subsidiary in China (“Zhejiang CN
Energy”), and indirectly to Manzhouli CN Energy Industrial Co.,
Ltd., our indirect wholly owned subsidiary in China (“Manzhouli CN
Energy”), and the distribution of such payments to CLEAN ENERGY
HOLDINGS LIMITED, our wholly owned subsidiary in Hong Kong (“Energy
Holdings”), and then to our Company. Our finance department is
supervising cash management, following the instructions of our
management. Our finance department is responsible for establishing
our cash operation plan and coordinating cash management matters
among our subsidiaries and departments. Each subsidiary and
department initiate a cash request by putting forward a cash demand
plan, which explains the specific amount and timing of cash
requested, and submitting it to our finance department. The finance
department reviews the cash demand plan and prepares a summary for
the management of our Company. Management examines and approves the
allocation of cash based on the sources of cash and the priorities
of the needs. Other than the above, we currently do not have other
cash management policies or procedures that dictate how funds are
transferred.
This is a self-underwritten offering. See “Plan of Distribution”
beginning on page S-20 of this prospectus supplement for more
information regarding these arrangements.
Investing in our securities involves risks. See “Risk Factors”
beginning on page S-9 of this prospectus supplement and page 11 of
the accompanying prospectus and risk factors set forth in the 2021
Annual Report.
Neither the U.S. Securities and Exchange Commission nor any
state securities commission nor any other regulatory body has
approved or disapproved of these securities or determined if this
prospectus supplement is truthful or complete. Any representation
to the contrary is a criminal offense.
| |
|
Per
Class A ordinary
share |
|
|
Total |
|
| Public
offering price |
|
$ |
1.712 |
|
|
$ |
18,000,000 |
|
| Proceeds, before expenses, to
us |
|
$ |
1.712 |
|
|
$ |
18,000,000 |
|
We expect that delivery of the Class A ordinary shares being
offered pursuant to this prospectus supplement and the accompanying
prospectus will be made on or about October 12, 2022, subject to
customary closing conditions.
The date of this prospectus supplement is October 3,
2022.
Prospectus
ABOUT THIS PROSPECTUS
SUPPLEMENT
On April 29, 2022, we filed with the U.S. Securities and Exchange
Commission (the “SEC”) a registration statement on Form F-3 (File
No. 333-264579), utilizing a shelf registration process relating to
the securities described in this prospectus supplement, which
registration statement was declared effective by the SEC on June
13, 2022. Under this shelf registration process, we may, from time
to time, in one or more offerings, offer and sell up to
US$100,000,000 of any combination, together or separately, of our
ordinary shares, no par value, preferred shares, debt securities,
warrants, rights, and units, or any combination thereof as
described in the accompanying prospectus. We are selling Class A
ordinary shares in this offering.
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this offering and
also adds to and updates information contained in the accompanying
prospectus and the documents incorporated by reference into the
prospectus supplement. The second part, the accompanying
prospectus, gives more general information, some of which does not
apply to this offering. You should read this entire prospectus
supplement as well as the accompanying prospectus and the documents
incorporated by reference that are described under “Incorporation
of Documents by Reference” and “Where You Can Find Additional
Information” in this prospectus supplement and the accompanying
prospectus.
If the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on the
information contained in this prospectus supplement. However, if
any statement in one of these documents is inconsistent with a
statement in another document having a later date—for example, a
document incorporated by reference in this prospectus supplement
and the accompanying prospectus—the statement in the document
having the later date modifies or supersedes the earlier statement.
Except as specifically stated, we are not incorporating by
reference any information submitted under any Report of Foreign
Private Issuer on Form 6-K into this prospectus supplement or the
accompanying prospectus.
Any statement contained in a document incorporated by reference, or
deemed to be incorporated by reference, into this prospectus
supplement or the accompanying prospectus will be deemed to be
modified or superseded for purposes of this prospectus supplement
or the accompanying prospectus to the extent that a statement
contained herein, therein or in any other subsequently filed
document which also is incorporated by reference in this prospectus
supplement or the accompanying prospectus modifies or supersedes
that statement. Any such statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a
part of this prospectus supplement or the accompanying
prospectus.
We further note that the representations, warranties, and covenants
made by us in any agreement that is filed as an exhibit to any
document that is incorporated by reference in this prospectus
supplement and the accompanying prospectus were made solely for the
benefit of the parties to such agreement, including, in some cases,
for the purpose of allocating risk among the parties to such
agreements, and should not be deemed to be a representation,
warranty or covenant to you unless you are a party to such
agreement. Moreover, such representations, warranties, or covenants
were accurate only as of the date when made or expressly referenced
therein. Accordingly, such representations, warranties, and
covenants should not be relied on as accurately representing the
current state of our affairs unless you are a party to such
agreement.
COMMONLY USED DEFINED
TERMS
Unless otherwise indicated or the context requires otherwise,
references in this prospectus or in a prospectus supplement to:
| |
● |
“China” or the “PRC” are to the People’s Republic
of China, excluding Taiwan for the purposes of this prospectus
only; |
| |
● |
“CN
Energy Development” are to CN Energy Industrial Development Co.,
Ltd. (also referred to as 中北能源产业发展有限公司 in
Chinese), a company with limited liability organized under the laws
of the PRC, which is jointly owned by Zhejiang CN Energy and
Manzhouli CN Technology (as defined below); |
| |
● |
“Energy Holdings” are to CN Energy’s wholly owned
subsidiary, CLEAN ENERGY HOLDINGS LIMITED (also referred to as
清洁能源控股有限公司 in
Chinese), a Hong Kong corporation; |
| |
● |
“Exchange Act” are to the Securities Exchange Act
of 1934, as amended; |
| |
|
|
| |
● |
“fiscal year” are to the period from October 1 to
September 30 of the next calendar year; |
| |
● |
“Hangzhou Forasen” are to Hangzhou Forasen
Technology Co., Ltd. (also referred to as 杭州富来森科技有限公司 in
Chinese), a company with limited liability organized under the laws
of the PRC, which is wholly owned by CN Energy
Development; |
| |
● |
“Khingan Forasen” are to Greater Khingan Range
Forasen Energy Technology Co., Ltd. (also referred to as
大兴安岭富来森能源科技有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by CN Energy
Development; |
| |
● |
“Manzhouli CN Energy” are to Manzhouli CN Energy
Industrial Co., Ltd. (also referred to as 满洲里市中北能实业有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by Energy
Holdings; |
| |
● |
“Manzhouli CN Technology” are to Manzhouli CN
Energy Technology Co., Ltd. (also referred to as 满洲里市中北能科技有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is jointly owned by Zhejiang CN Energy (as
defined below) and Manzhouli CN Energy; |
| |
|
|
| |
● |
“operating entities” are to CN Energy Development
and its subsidiaries; |
| |
● |
“RMB”
or “Renminbi” are to the legal currency of China; |
| |
● |
“Securities Act” are to the Securities Act of
1933, as amended; |
| |
● |
“Tahe
Biopower Plant” are to Greater Khingan Range Forasen Energy
Technology Co., Ltd. Tahe Biopower Plant (also referred to as
大兴安岭富来森能源科技有限公司塔河生物发电厂
in Chinese), the branch office of Khingan Forasen; |
| |
● |
“U.S.
dollars” are to the legal currency of the United
States; |
| |
● |
“U.S.
GAAP” are to generally accepted accounting principles in the United
States; |
| |
|
|
| |
● |
“Zhejiang CN Energy” are to Zhejiang CN Energy
Technology Development Co., Ltd. (also referred to as 浙江中北能源科技开发有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by Energy Holdings;
and |
| |
|
|
| |
● |
“Zhongxing Energy” are to Manzhouli Zhongxing
Energy Technology Co., Ltd. (also referred to as 满洲里市众兴能源科技有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by CN Energy
Development. |
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus, and our
SEC filings that are incorporated by reference into this prospectus
supplement contain or incorporate by reference forward-looking
statements within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. Many of the forward-looking
statements contained in this prospectus supplement can be
identified by the use of forward-looking words such as
“anticipate,” “believe,” “could,” “expect,” “should,” “plan,”
“intend,” “estimate,” and “potential,” among others.
Forward-looking statements appear in a number of places in this
prospectus supplement, the accompanying prospectus, and our SEC
filings that are incorporated by reference into this prospectus
supplement. These forward-looking statements include, but are not
limited to, statements regarding our intent, belief, or current
expectations. Forward-looking statements are based on our
management’s beliefs and assumptions and on information currently
available to our management. Such statements are subject to risks
and uncertainties, and actual results may differ materially from
those expressed or implied in the forward-looking statements due to
of various factors, including, but not limited to, those identified
under the section entitled “Item 3. Key Information—3.D. Risk
Factors” in our annual report on Form 20-F for the fiscal year
ended September 30, 2021, the section entitled “Risk Factors”
beginning on page S-9 of this prospectus supplement, and the
section entitled “Risk Factors” beginning on page 11 of the
accompanying prospectus.
Forward-looking statements speak only as of the date they are made,
and we do not undertake any obligation to update them in light of
new information or future developments or to release publicly any
revisions to these statements in order to reflect later events or
circumstances or to reflect the occurrence of unanticipated events,
except as, and to the extent required by, applicable securities
laws.
PROSPECTUS SUPPLEMENT
SUMMARY
The following summary highlights, and should be read in
conjunction with, the more detailed information contained elsewhere
in this prospectus supplement, the accompanying prospectus, and the
documents incorporated therein by reference. You should read
carefully the entire documents, including our financial statements
and related notes, to understand our business, the ordinary shares,
and the other considerations that are important to your decision to
invest in our securities. You should pay special attention to the
“Risk Factors” sections beginning on page S-9 of this prospectus
supplement and on page 11 of the accompanying prospectus.
Our Corporate Structure
We are an offshore holding company incorporated in the British
Virgin Islands and not a Chinese operating company. As a holding
company with no material operations of our own, our operations are
conducted in China by our subsidiaries.
The following diagram illustrates our corporate structure as of the
date of this prospectus supplement.
* Indicates less than 1%
Notes: All percentages reflect the voting ownership interests
instead of the equity interests held by each of our shareholders
given that each holder of Class B ordinary shares will be entitled
to 50 votes per one Class B ordinary share and each holder of Class
A ordinary shares will be entitled to one vote per one Class A
ordinary share.
|
(1) |
Represents 3,020,969 Class B
ordinary shares held by Yefang Zhang, the 100% owner of Global
Clean Energy Limited, as of the date of this prospectus
supplement. |
We are subject to certain legal and operational risks associated
with having the majority of our operations in China, which could
significantly limit or completely hinder our ability to offer
securities to investors and cause the value of our securities to
significantly decline or be worthless. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—Any actions by the Chinese government, including any decision
to intervene or influence our operations or to exert control over
any offering of securities conducted overseas and/or foreign
investment in China-based issuers, may cause us to make material
changes to our operations, may limit or completely hinder our
ability to offer or continue to offer securities to investors, and
may cause the value of such securities to significantly decline or
be worthless” in the 2021 Annual Report. Recently, the PRC
government adopted a series of regulatory actions and statements to
regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities
market, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement. As
of the date of this prospectus supplement, we and our subsidiaries
have not been involved in any investigations on cybersecurity
review initiated by any PRC regulatory authority, nor has any of
them received any inquiry, notice, or sanction. As of the date of
this prospectus supplement, we are not subject to cybersecurity
review by the CAC since we currently do not have over one million
users’ personal information and do not anticipate that we will be
collecting over one million users’ personal information in the
foreseeable future, which we understand might otherwise subject us
to the Cybersecurity Review Measures. We are not subject to network
data security review by the CAC if the Security Administration
Draft are enacted as proposed, because we currently do not have
over one million users’ personal information, we do not collect
data that affect or may affect national security and we do not
anticipate that we will be collecting over one million users’
personal information or data that affect or may affect national
security in the foreseeable future, which we understand might
otherwise subject us to the Security Administration Draft. See
“Item 3. Key Information—D. Risk Factors—Risks Relating to Doing
Business in the PRC—Recent greater oversight by the Cyberspace
Administration of China, or the “CAC,” over data security,
particularly for companies seeking to list on a foreign exchange,
could adversely impact our business and our offering” in the 2021
Annual Report. As of the date of this prospectus supplement, no
relevant laws or regulations in the PRC explicitly require us to
seek approval from the CSRC for our overseas listing, and we and
our subsidiaries have not received any inquiry, notice, warning, or
sanction regarding our overseas listing from the CSRC or any other
PRC governmental authorities. However, since these statements and
regulatory actions are newly published, official guidance and
related implementation rules have not been issued. It is highly
uncertain what the potential impact such modified or new laws and
regulations will have on the daily business operations of our
subsidiaries, our ability to accept foreign investments, and our
listing on an U.S. exchange. The SCNPC or PRC regulatory
authorities may in the future promulgate laws, regulations, or
implementing rules that require us or our subsidiaries to obtain
regulatory approval from Chinese authorities for listing in the
U.S.
In addition, our Class A ordinary shares may be prohibited from
trading on a national exchange or over-the-counter under the
Holding Foreign Companies Accountable Act, if the PCAOB is unable
to inspect our auditor for three consecutive years beginning in
2021. Our auditor is headquartered in Singapore and subject to
PCAOB inspection on a regular basis. Our auditor is not subject to
the determinations announced by the PCAOB on December 16, 2021. If
trading in our Class A ordinary shares is prohibited under the
Holding Foreign Companies Accountable Act in the future because the
PCAOB determines that it cannot inspect or fully investigate our
auditor at such future time, Nasdaq may determine to delist our
Class A ordinary shares and trading in our Class A ordinary shares
could be prohibited. On June 22, 2021, the U.S. Senate passed the
Accelerating Holding Foreign Companies Accountable Act, which, if
passed by the U.S. House of Representatives and signed into law,
would reduce the period of time for foreign companies to comply
with PCAOB audits to two consecutive years instead of three, thus
reducing the time period for triggering the prohibition on trading.
On August 26, 2022, the CSRC, the MOF, and the PCAOB signed a
Protocol, governing inspections and investigations of accounting
firms based in mainland China and Hong Kong. Pursuant to the fact
sheet with respect to the Protocol disclosed by the SEC, the PCAOB
shall have independent discretion to select any issuer audits for
inspection or investigation and has the unfettered ability to
transfer information to the SEC. However, uncertainties still exist
as to whether and how this new Protocol will be implemented and
whether the PCAOB can make a determination that it is able to
inspect and investigate completely in mainland China and Hong Kong.
When the PCAOB reassesses its determinations by the end of 2022, it
could determine that it is still unable to inspect and investigate
completely accounting firms based in mainland China and Hong
Kong.
Our Company
Business Overview
The operating entities manufacture and supply wood-based activated
carbon that is primarily used in pharmaceutical manufacturing,
industrial manufacturing, water purification, environmental
protection, as well as food and beverage production (“Activated
Carbon Production”), and a producer of biomass electricity
generated in the process of producing activated carbon (“Biomass
Electricity Production”).
As a manufacturer of wood-based activated carbon, the operating
entities’ primary raw materials are forestry residues, little
fuelwood, and wood wastes, which the operating entities source from
their suppliers. The operating entities’ current facility is
located in Tahe County, Heilongjiang Province, in close proximity
to the Greater Khingan Range, where their suppliers are primarily
located. The operating entities also source raw materials from
Inner Mongolia Autonomous Region.
The operating entities produce wood-based activated carbon that is
conformed to their customers’ specifications. The operating
entities’ activated carbon customers are mainly activated carbon
wholesalers and companies engaged in the activated carbon deep
processing business. The operating entities’ activated carbon
customers are all based in the PRC and currently mainly located in
Anhui Province, Fujian Province, Zhejiang Province, and Shanghai.
The primary end users of the operating entities’ activated carbon
are mainly food and beverage producers, industrial manufacturers,
pharmaceutical manufacturers, and companies engaged in
environmental protection. In addition, the operating entities have
provided activated carbon related technical services to Hangzhou
Lianmu Technology Co., Ltd. (“Lianmu Technology”) from time to time
since January 1, 2017. Their technical services included activated
carbon mixing ratio adjustments, activated carbon component
indicator analyses, absorptive capacity tests, and other technical
support. The operating entities expect to provide similar technical
services to Lianmu Technology and other customers if requested.
The biomass electricity generated during the process of producing
activated carbon is supplied to State Grid Heilongjiang Electric
Power Company Limited, a subsidiary of State Grid Corporation of
China in Heilongjiang Province. The operating entities do not
supply biomass electricity to any other state-owned or other
entity.
The operating entities generate revenue primarily from selling
activated carbon.
For the six months ended March 31, 2022, the operating entities
sold 10,215 tons of activated carbon and 1,313,280 kWh of biomass
electricity. For the same period, the total revenue was $13,650,703
and the net income was $1,000,786. For the same period, the revenue
derived from Activated Carbon Production, Biomass Electricity
Production, and technical services provided to Lianmu Technology
accounted for 99.01%, 0.50%, and 0.49% of the total revenue,
respectively.
For the fiscal years ended September 30, 2021, 2020, and 2019, the
operating entities sold 15,018, 9,525, and 8,584 tons of activated
carbon and 2,817,600, 2,641,964, and 3,044,574 kWh of biomass
electricity, respectively. For the same years, the total revenue
was $19,846,921, $12,476,314, and $10,893,164, and the net income
was $1,296,360, $2,344,770, and $1,667,812, respectively. For the
same years, the revenue derived from Activated Carbon Production
accounted for 98.62%, 96.99%, and 96.31% of the total revenue,
respectively; the revenue derived from Biomass Electricity
Production accounted for 0.72%, 2.05%, and 1.80% of the total
revenue, respectively; and the revenue derived from technical
services provided to Lianmu Technology accounted for 0.66%, 0.96%,
and 1.89% of the total revenue, respectively.
On March 31, 2022, we established a wholly owned subsidiary, CN
Energy USA Inc., as a corporation pursuant to the laws of the State
of Delaware. CN Energy currently holds 100% of the equity interests
in CN Energy USA Inc.
On April 8, 2022, Hangzhou Forasen established a wholly owned
subsidiary, Zhoushan Xinyue Trading Co., Ltd., as a company with
limited liability organized under the laws of the PRC. Hangzhou
Forasen currently holds 100% of the equity interests in Zhoushan
Xinyue Trading Co., Ltd.
On April 13, 2022, CN Energy Development established a wholly owned
subsidiary, Ningbo Nadoutong Trading Co., Ltd., as a company with
limited liability organized under the laws of the PRC. CN Energy
Development currently holds 100% of the equity interests in Ningbo
Nadoutong Trading Co., Ltd.
Share re-designation
In July 2022, our shareholders adopted a resolution to authorize
the re-designation of our shares
|
(a) |
from (i) an unlimited number of
ordinary shares of no par value and an unlimited number of
convertible preferred shares of no par value to (ii) an unlimited
number of Class A ordinary shares of no par value and an unlimited
number of Class B ordinary shares of no par value; and |
|
(b) |
our issued shares were
re-designated and re-classified into Class A or Class B ordinary
shares of no par value on a one for one basis, each with the rights
and privileges as set forth in our Third Amended and Restated
Memorandum and Articles of Association. |
Each holder of Class A ordinary shares is entitled to one vote per
one Class A ordinary share and each holder of Class B ordinary
shares is entitled to 50 votes per one Class B ordinary share. The
Class A ordinary shares are not convertible into shares of any
other class. The Class B ordinary shares are convertible into Class
A ordinary shares at any time after issuance at the option of the
holder on a one-to-one basis.
The Offering
| Securities
offered by us pursuant to this prospectus
supplement |
|
10,514,018 Class A ordinary shares |
| |
|
|
| Offering price |
|
$1.712 per Class A ordinary share |
| |
|
|
| Total ordinary shares
outstanding before this offering |
|
20,062,658 Class A ordinary shares and 3,020,969
Class B ordinary shares |
| |
|
|
| Total ordinary shares
outstanding immediately after this offering |
|
30,576,676 Class A ordinary shares and 3,020,969
Class B ordinary shares |
| |
|
|
| Use of
proceeds |
|
We
intend to use the net proceeds from this offering for working
capital and general corporate purposes. See “Use of Proceeds” on
page S-16 of this prospectus supplement. |
| |
|
|
| Risk factors |
|
Investing in our securities involves a high
degree of risk. For a discussion of factors you should consider
carefully before deciding to invest in our securities, see the
information contained in or incorporated by reference under the
heading “Risk Factors” beginning on page S-9 of this prospectus
supplement, on page 11 of the accompanying prospectus, and in the
other documents incorporated by reference into this prospectus
supplement. |
| |
|
|
| Listing |
|
Our
Class A ordinary shares are listed on Nasdaq under the symbol
“CNEY.” |
RISK FACTORS
The following is a summary of certain risks that should be
carefully considered along with the other information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus, and the documents incorporated by
reference, as updated by our subsequent filings under the Exchange
Act. Particularly, you should carefully consider the risk factors
incorporated by reference to the 2021 Annual Report and in the
accompanying prospectus. If any of the following events actually
occurs, our business, operating results, prospects, or financial
condition could be materially and adversely affected. The risks
described below are not the only ones that we face. Additional
risks not presently known to us or that we currently deem
immaterial may also significantly impair our business operations
and could result in a complete loss of your investment.
Risks Related to this Offering and our Ordinary Shares
Our share price may be volatile and could decline
substantially.
The market price of our Class A ordinary shares may be volatile,
both because of actual and perceived changes in our financial
results and prospects, and because of general volatility in the
stock market. The factors that could cause fluctuations in our
share price may include, among other factors discussed in this
section, the following:
| |
● |
actual or anticipated variations in the financial
results and prospects of our Company or other companies in the
retail business; |
| |
● |
changes in financial estimates by research
analysts; |
| |
● |
mergers or other business combinations involving
us; |
| |
● |
additions and departures of key personnel and
senior management; |
| |
● |
changes in accounting principles; |
| |
● |
the
passage of legislation or other developments affecting us or our
industry; |
| |
● |
the
trading volume of our Class A ordinary shares in the public
market; |
| |
● |
the
release of lockup, escrow, or other transfer restrictions on our
outstanding equity securities or sales of additional equity
securities; |
| |
● |
potential litigation or regulatory
investigations; |
| |
● |
changes in economic conditions, including
fluctuations in global and Chinese economies; |
| |
● |
financial market conditions; |
| |
● |
the
COVID-19 pandemic; |
| |
|
|
| |
● |
natural disasters, terrorist acts, acts of war,
or periods of civil unrest; and |
| |
● |
the
realization of some or all of the risks described in this
section. |
In addition, the stock markets have experienced significant price
and trading volume fluctuations from time to time, and the market
prices of the equity securities of retailers have been extremely
volatile and are sometimes subject to sharp price and trading
volume changes. These broad market fluctuations may materially and
adversely affect the market price of our ordinary shares.
Since our management will have broad discretion in how we use
the proceeds from this offering, we may use the proceeds in ways
with which you disagree.
Our management will have significant flexibility in applying the
net proceeds of this offering. You will be relying on the judgment
of our management with regard to the use of those net proceeds, and
you will not have the opportunity, as part of your investment
decision, to influence how the proceeds are being used. It is
possible that the net proceeds will be invested in a way that does
not yield a favorable, or any, return for us. The failure of our
management to use such funds effectively could have a material
adverse effect on our business, financial condition, operating
results, and cash flow.
Future sales of our ordinary shares, whether by us or our
shareholders, could cause the price of our Class A ordinary shares
to decline.
If our existing shareholders sell, or indicate an intent to sell,
substantial amounts of our ordinary shares in the public market,
the trading price of our Class A ordinary shares could decline
significantly. Similarly, the perception in the public market that
our shareholders might sell our ordinary shares could also depress
the market price of our shares. A decline in the price of our Class
A ordinary shares might impede our ability to raise capital through
the issuance of additional Class A ordinary shares or other equity
securities. In addition, the issuance and sale by us of additional
ordinary shares, or securities convertible into or exercisable for
our ordinary shares, or the perception that we will issue such
securities, could reduce the trading price for our Class A ordinary
shares as well as make future sales of equity securities by us less
attractive or not feasible.
We do not know whether a market for the Class A ordinary
shares will be sustained or what the trading price of the Class A
ordinary shares will be and as a result it may be difficult for you
to sell your Class A ordinary shares.
Although our Class A ordinary shares trade on Nasdaq, an active
trading market for the Class A ordinary shares may not be
sustained. It may be difficult for you to sell your Class A
ordinary shares without depressing the market price for the Class A
ordinary shares. As a result of these and other factors, you may
not be able to sell your Class A ordinary shares. Further, an
inactive market may also impair our ability to raise capital by
selling Class A ordinary shares, or may impair our ability to enter
into strategic partnerships or acquire companies or products by
using our Class A ordinary shares as consideration.
Securities analysts may not cover our Class A ordinary shares
and this may have a negative impact on the market price of our
Class A ordinary shares.
The trading market for our Class A ordinary shares will depend, in
part, on the research and reports that securities or industry
analysts publish about us or our business. We do not have any
control over independent analysts (provided that we have engaged
various non-independent analysts). We do not currently have and may
never obtain research coverage by independent securities and
industry analysts. If no independent securities or industry
analysts commence coverage of us, the trading price for our Class A
ordinary shares would be negatively impacted. If we obtain
independent securities or industry analyst coverage and if one or
more of the analysts who covers us downgrades our Class A ordinary
shares, changes their opinion of our shares or publishes inaccurate
or unfavorable research about our business, the price of our Class
A ordinary shares would likely decline. If one or more of these
analysts ceases coverage of us or fails to publish reports on us
regularly, demand for our Class A ordinary shares could decrease
and we could lose visibility in the financial markets, which could
cause the price and trading volume of our Class A ordinary shares
to decline.
Our existing shareholders will experience immediate dilution
as a result of this offering and may experience future dilution as
a result of future equity offerings or other equity
issuances.
We believe that our existing shareholders will experience an
immediate dilution relative to net tangible book value per ordinary
share as a result of this offering. Our net tangible book value on
March 31, 2022 was US$64.9 million, or US$3.19 per ordinary share.
After giving effect to the sale of 10,514,018 Class A ordinary
shares at an offering price of US$1.712 per Class A ordinary share,
and after deducting the estimated offering expenses payable by us
in connection with this offering, our as adjusted net tangible book
value as of March 31, 2022 would have been US$82.8 million, or
US$2.68 per ordinary share. This represents an immediate decrease
in net tangible book value of US$0.51 per ordinary share to our
existing shareholders and an immediate increase in net tangible
book value of US$0.97 per ordinary share to the investors
participating in this offering.
We may in the future issue additional ordinary shares or other
securities convertible into or exchangeable for our ordinary
shares. We cannot assure you that we will be able to sell our Class
A ordinary shares or other securities in any other offering or
other transactions at a price per Class A ordinary share that is
equal to or greater than the price per Class A ordinary share paid
by the investors in this offering. The price per ordinary share at
which we sell additional ordinary shares or other securities
convertible into or exchangeable for our ordinary shares in future
transactions may be higher or lower than the price per Class A
ordinary share in this offering. If we do issue any such additional
ordinary shares, such issuance also will cause a reduction in the
proportionate ownership and voting power of all other
shareholders.
Because we do not expect to pay dividends in the foreseeable
future, you must rely on the price appreciation of our Class A
ordinary shares for return on your investment.
We currently intend to retain most, if not all, of our available
funds and any future earnings to fund the development and growth of
our business. As a result, we do not expect to pay any cash
dividends in the foreseeable future. Therefore, you should not rely
on an investment in our Class A ordinary shares as a source for any
future dividend income.
Our board of directors has complete discretion as to whether to
distribute dividends, subject to certain requirements of British
Virgin Islands law. In addition, our shareholders may by ordinary
resolution declare a dividend, but no dividend may exceed the
amount recommended by our board of directors. Under British Virgin
Islands law, a British Virgin Islands company may pay a dividend
out of either profit or share premium account, provided that in no
circumstances may a dividend be paid if this would result in the
company being unable to pay its debts as they fall due in the
ordinary course of business. Even if our board of directors decides
to declare and pay dividends, the timing, amount and form of future
dividends, if any, will depend on, among other things, our future
results of operations and cash flow, our capital requirements and
surplus, the amount of distributions, if any, received by us from
our subsidiaries, our financial condition, contractual
restrictions, and other factors deemed relevant by our board of
directors. Accordingly, the return on your investment in our Class
A ordinary shares will likely depend entirely upon any future price
appreciation of our Class A ordinary shares. There is no guarantee
that our Class A ordinary shares will appreciate in value or even
maintain the price at which you purchased the Class A ordinary
shares. You may not realize a return on your investment in our
Class A ordinary shares and you may even lose your entire
investment in our Class A ordinary shares.
Techniques employed by short sellers may drive down the
market price of our Class A ordinary shares.
Short selling is the practice of selling securities that the seller
does not own but rather has borrowed from a third party with the
intention of buying identical securities back at a later date to
return to the lender. The short seller hopes to profit from a
decline in the value of the securities between the sale of the
borrowed securities and the purchase of the replacement shares, as
the short seller expects to pay less in that purchase than it
received in the sale. As it is in the short seller’s interest for
the price of the security to decline, many short sellers publish,
or arrange for the publication of, negative opinions regarding the
relevant issuer and its business prospects in order to create
negative market momentum and generate profits for themselves after
selling a security short. These short attacks have, in the past,
led to selling of shares in the market.
Public companies listed in the United States that have a
substantial majority of their operations in China have been the
subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective
internal control over financial reporting resulting in financial
and accounting irregularities and mistakes, inadequate corporate
governance policies or a lack of adherence thereto and, in many
cases, allegations of fraud. As a result, many of these companies
are now conducting internal and external investigations into the
allegations and, in the interim, are subject to shareholder
lawsuits and/or SEC enforcement actions.
We may in the future be the subject of unfavorable allegations made
by short sellers. Any such allegations may be followed by periods
of instability in the market price of our Class A ordinary shares
and negative publicity. If and when we become the subject of any
unfavorable allegations, whether such allegations are proven to be
true or untrue, we could have to expend a significant amount of
resources to investigate such allegations and/or defend ourselves.
While we would strongly defend against any such short seller
attacks, we may be constrained in the manner in which we can
proceed against the relevant short seller by principles of freedom
of speech, applicable federal or state law, or issues of commercial
confidentiality. Such a situation could be costly and
time-consuming and could distract our management from growing our
business. Even if such allegations are ultimately proven to be
groundless, allegations against us could severely impact our
business operations and shareholder’s equity, and the value of any
investment in our could be greatly reduced or rendered
worthless.
As an exempted company incorporated in the British Virgin
Islands with limited liability, we are permitted to adopt certain
home country practices in relation to corporate governance matters
that differ significantly from the Nasdaq corporate governance
listing standards; these practices may afford less protection to
shareholders than they would enjoy if we complied fully with the
Nasdaq corporate governance listing standards.
As an exempted company incorporated in the British Virgin Islands
company with limited liability that is listed on the Nasdaq, we are
subject to the Nasdaq corporate governance listing standards.
However, Nasdaq rules permit a foreign private issuer like us to
follow the corporate governance practices of its home country.
Certain corporate governance practices in the British Virgin
Islands, which is our home country, may differ significantly from
the Nasdaq corporate governance listing standards. We have relied
on and plan to rely on home country practice with respect to our
corporate governance. Specifically, we are not required to seek
shareholder approval for (i) the issuance 20% or more of our
outstanding ordinary shares or voting power in a private offering,
(ii) the issuance of securities pursuant to a stock option or
purchase plan to be established or materially amended or other
equity compensation arrangement made or materially amended, (iii)
the issuance of securities when the issuance or potential issuance
will result in a change of control of our Company, and (iv) certain
acquisitions in connection with the acquisition of the stock or
assets of another company. As a result, our shareholders may be
afforded less protection than they otherwise would enjoy under the
Nasdaq corporate governance listing standards applicable to U.S.
domestic issuers.
Certain judgments obtained against us by our shareholders may
not be enforceable.
We are a British Virgin Islands company and substantially all of
our assets are located outside of the United States. All of our
current operations are conducted in the PRC. In addition, the
majority of our officers and directors are nationals and residents
of countries other than the United States and all of their assets
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 U.S.
federal securities laws or otherwise. Even if you are successful in
bringing an action of this kind, the laws of the British Virgin
Islands and of the PRC 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 within the meaning of the
rules under the Exchange Act, and as such we are exempt from
certain provisions applicable to United States domestic public
companies.
Because we are a foreign private issuer under the Exchange Act, we
are exempt from certain provisions of the securities rules and
regulations in the United States that are applicable to U.S.
domestic issuers, including:
| |
● |
the
rules under the Exchange Act requiring the filing of quarterly
reports on Form 10-Q or current reports on Form 8-K with the
SEC; |
| |
● |
the
sections of the Exchange Act regulating the solicitation of
proxies, consents, or authorizations in respect of a security
registered under the Exchange Act; |
| |
● |
the
sections of the Exchange Act requiring insiders to file public
reports of their stock ownership and trading activities and
liability for insiders who profit from trades made in a short
period of time; and |
| |
● |
the
selective disclosure rules by issuers of material nonpublic
information under Regulation FD. |
We are required to file an annual report on Form 20-F within four
months of the end of each fiscal year. Press releases relating to
financial results and material events will also be furnished to the
SEC on Form 6-K. However, the information we are required to file
with or furnish to the SEC will be less extensive and less timely
compared to that required to be filed with the SEC by U.S. domestic
issuers. As a result, you may not be afforded the same protections
or information, which would be made available to you, were you
investing in a U.S. domestic issuer.
CAPITALIZATION
The following table sets forth our capitalization as of March 31,
2022:
| |
● |
on an
actual basis, as derived from our unaudited consolidated financial
statements as of March 31, 2022, which are incorporated by
reference into this prospectus supplement; and |
| |
● |
on an as adjusted basis to give further effect to
the issuance and sale of 10,514,018 Class A ordinary shares at the
offering price of US$1.712 per Class A ordinary share, after
deducting the estimated offering expenses payable by
us. |
You should read this table together with our consolidated financial
statements and notes included in the information incorporated by
reference into this prospectus supplement and the accompanying
prospectus.
| |
|
March 31, 2022 |
|
| |
|
Actual |
|
|
As
adjusted
|
|
| |
|
$ |
|
|
$ |
|
| Shareholders’
Equity: |
|
|
|
|
|
|
|
|
| Class A ordinary shares, no par
value, no par value, an unlimited number of Class A ordinary shares
authorized, 17,298,307 issued and outstanding*; 27,812,325 Class A
ordinary shares issued and outstanding, as adjusted |
|
|
47,965,683 |
|
|
|
65,850,683 |
|
| Class
B ordinary shares, no par value, an unlimited number of Class B
ordinary shares authorized, 3,020,969 issued and outstanding*;
3,020,969 Class B ordinary shares issued and outstanding, as
adjusted |
|
|
5,015,142 |
|
|
|
5,015,142 |
|
| Additional paid-in
capital(1) |
|
|
8,865,199 |
|
|
|
8,865,199 |
|
| Statutory reserve |
|
|
457,909 |
|
|
|
457,909 |
|
| Retained earnings |
|
|
1,253,241 |
|
|
|
1,253,241 |
|
| Accumulated other comprehensive loss |
|
|
1,330,931 |
|
|
|
1,330,931 |
|
| Total
Shareholders’ Equity |
|
|
64,888,105 |
|
|
|
82,773,105 |
|
| Total Capitalization |
|
|
64,888,105 |
|
|
|
82,773,105 |
|
* Retrospectively restated for effect of share re-designation on
July 22, 2022
Notes:
| (1) |
Additional paid-in capital reflects the sale of
Class A ordinary shares in this offering at a public offering price
of $1.712 per share, and after deducting the estimated offering
expenses payable by us. The pro forma as adjusted information is
illustrative only. We estimate that such net proceeds will be
approximately $17,885,000 ($18,000,000 gross offering
proceeds, less offering expenses of approximately
$115,000). |
DILUTION
Our net tangible book value on March 31, 2022 was US$64.9 million,
or US$3.19 per ordinary share. “Net tangible book value” is total
assets minus the sum of liabilities and intangible assets. “Net
tangible book value per share” is net tangible book value divided
by the total number of shares outstanding.
After giving effect to the sale of 10,514,018 Class A ordinary
shares at an offering price of US$1.712 per Class A ordinary share,
and after deducting the estimated offering expenses payable by us
in connection with this offering, our as adjusted net tangible book
value as of March 31, 2022 would have been US$82.8 million, or
US$2.68 per ordinary share. This represents an immediate decrease
in net tangible book value of US$0.51 per ordinary share to our
existing shareholders and an immediate increase in net tangible
book value of US$0.97 per ordinary share to the investor
participating in this offering.
The following table illustrates the net tangible book value
dilution per ordinary share to shareholders after the issuance of
the Class A ordinary shares in this offering:
| Public offering price per ordinary
share |
|
US$ |
1.712 |
|
| Net
tangible book value per ordinary share as of March 31,
2022 |
|
US$ |
3.19 |
|
| Increase per ordinary share attributable to
investors under this prospectus supplement |
|
US$ |
1.712 |
|
| As
adjusted net tangible book value per ordinary share after this
offering |
|
US$ |
2.68 |
|
| Net
tangible book value dilution per ordinary share to new
investors |
|
US$ |
0.97 |
|
The foregoing table and discussion is based on 20,319,276 ordinary
shares outstanding as of March 31, 2022.
This discussion of dilution, and the table quantifying it, assumes
no exercise of any outstanding options over our ordinary
shares.
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be
approximately US$17.88 million, after deducting the estimated
offering expenses payable by us.
We intend to use the net proceeds from this offering for working
capital and other general corporate purposes.
The amounts and timing of our use of proceeds will vary depending
on a number of factors, including the amount of cash generated or
used by our operations, and the rate of growth, if any, of our
business. As a result, we will retain broad discretion in the
allocation of the net proceeds of this offering.
DESCRIPTION OF SECURITIES WE
ARE OFFERING
We are an exempted company incorporated under the laws of the
British Virgin Islands and our affairs are governed by our Third
Amended and Restated Memorandum and Articles of Association, and
BVI Business Companies Act (2020), and the common law of the
British Virgin Islands.
As of the date of this prospectus supplement, we are authorized to
issue an unlimited number of no-par value Class A ordinary shares
and Class B ordinary shares. As of the date of this prospectus, an
aggregate of 20,062,658 Class A ordinary shares and 3,020,969 Class
B ordinary shares are issued and outstanding.
Ordinary Shares
General. All of our issued and outstanding ordinary
shares are fully paid and non-assessable. Ordinary shares are
issued in registered form. Ordinary shares have the following
characteristics:
Voting. At each meeting of shareholders, each holder of
ordinary shares who is present in person or by proxy (or, in the
case of a shareholder being a corporation, by its duly authorized
representative) will have one vote for each Class A ordinary share
and 50 votes for each Class B ordinary share that such shareholder
holds. In addition, all shareholders of a particular class are
entitled to vote at a meeting of the holders of that class of
shares.
Conversion Rights. Class A ordinary shares are not
convertible. Class B ordinary shares are convertible, at the option
of the holder thereof, into Class A ordinary shares on a one-to-one
basis.
Ranking. Each holder of ordinary shares has an equal share
in the distribution of the surplus assets of the Company.
Dividends. Holders of ordinary shares are entitled to an
equal share in any dividend paid to the ordinary shares class.
Cumulative Voting Rights
There is nothing under British Virgin Islands law which
specifically prohibits or restrict the creation of cumulative
voting rights for the election of our directors. Our second amended
and restated memorandum and articles do not provide for cumulative
voting for elections of directors.
Variation of Rights of Shares
All or any of the rights attached to any class of shares may,
subject to the provisions of the BVI Act, be varied only with the
consent in writing of, or pursuant to a resolution passed at a
meeting by the holders of more than 50% of the issued shares of
that class.
Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our second amended and restated
memorandum and articles on the rights of non-resident or foreign
shareholders to hold or exercise voting rights on our shares. In
addition, there are no provisions in our second amended and
restated memorandum and articles governing the ownership threshold
above which shareholder ownership must be disclosed.
Redemption of Shares
Subject to the provisions of the BVI Act, we may issue shares on
terms that are subject to redemption, at our option or at the
option of the holders, on such terms and in such manner as may be
determined by our second amended and restated memorandum and
articles of association and subject to any applicable requirements
imposed from time to time by, the BVI Act, the SEC, or by any
recognized stock exchange on which our securities are listed.
Changes in the Number of Shares We Are Authorized to Issue
and Those in Issue
Subject to the BVI Act and our second amended and restated
memorandum and articles, we may from time to time by resolution of
our board of directors or resolution of members (as may be
appropriate):
| |
● |
amend our memorandum to increase or
decrease the maximum number of ordinary shares we are authorized to
issue; |
| |
● |
divide our authorized and issued
ordinary shares into a larger number of ordinary
shares; |
| |
● |
combine our authorized and issued
ordinary shares into a smaller number of ordinary shares;
and |
| |
● |
create new classes of shares with
preference to be determined by resolution of the board of directors
to amend the memorandum and articles to create new classes of
shares with such preferences at the time of
authorization. |
Subject to the provisions of the BVI Act and our articles regarding
redemption, purchase, and issuance of the shares, the directors
have general and unconditional authority to issue and allot (with
or without confirming rights of renunciation), grant options over
or otherwise deal with any unissued shares to such persons, at such
times and on such terms and conditions as they may decide. Such
authority could be exercised by the directors to issue shares which
carry rights and privileges that are preferential to the rights
attaching to ordinary shares. The directors may refuse to accept
any application for shares, and may accept any application in whole
or in part, for any reason or for no reason.
Calls on Shares and Forfeiture of Shares
Our board of directors may, on the terms established at the time of
the issuance of such shares or as otherwise agreed, make calls upon
shareholders for any amounts unpaid on their shares in a notice
served to such shareholders at least 14 days prior to the specified
time of payment. The shares that have been called upon and remain
unpaid are subject to forfeiture.
Transfer Agent and Registrar
The transfer agent and registrar for our ordinary shares is VStock
Transfer, LLC, at 18 Lafayette Place, Woodmere, NY 11598.
Transfer of Shares
Subject to the restrictions in our second amended and restated
memorandum and articles and applicable securities laws, any of our
shareholders may transfer all or any of his or her ordinary shares
by written instrument of transfer signed by the transferor and
containing the name and address of the transferee or in any other
manner as may be permitted in accordance with applicable exchange
rules or requirements of the Nasdaq Capital Market or by any
recognized stock exchange on which our securities are listed. Our
board of directors may not resolve to refuse or delay the transfer
of any ordinary share unless the shareholder has failed to pay an
amount due in respect of it.
Meetings of Shareholders
Under our second amended and restated memorandum and articles, a
copy of the notice of any meeting of shareholders shall be given
not less than seven days before the date of the proposed meeting to
those persons whose names appear as shareholders in the register of
members on the date of the notice and are entitled to vote at the
meeting and our directors. Our board of directors may call a
meeting of shareholders upon the written request of shareholders
holding at least 30% of our issued voting shares. In addition, our
board of directors may call a meeting of shareholders on its own
motion. A meeting of shareholders may be called on short notice if
at least 90% of the shares entitled to vote on the matters to be
considered at the meeting have agreed to short notice of the
meeting, or if all members holding shares entitled to vote on all
or any matters to be considered at the meeting have waived notice
and presence at the meeting shall be deemed to constitute waiver
for this purpose.
At any meeting of shareholders, a quorum will be present if there
are shareholders present in person or by proxy representing more
than one-half of the issued shares entitled to vote on the
resolutions to be considered at the meeting. Such quorum may be
represented by only a single shareholder or proxy. If no quorum is
present within two hours of the start time of the meeting, the
meeting shall be dissolved if it was requested by shareholders. In
any other case, the meeting shall be adjourned to the next business
day, and if shareholders representing not less than one-third of
the votes of the ordinary shares or class or series of shares
entitled to vote on the matters to be considered at the meeting are
present within one hour of the start time of the adjourned meeting,
a quorum will be present. If not, the meeting will be dissolved. No
business may be transacted at any meeting of shareholders unless a
quorum is present at the commencement of business. If present, the
chairperson of our board of directors shall be the chairperson
presiding at any meeting of the shareholders. If the chairperson of
our board is not present, or there is no such chairperson, then the
members present shall choose a shareholder to act to chairperson
the meeting of the shareholders. If the shareholders are unable to
choose a chairperson for any reason, then the person representing
the greatest number of voting shares present in person or by proxy
shall preside as chairperson, failing which the oldest individual
member or member representative shall take the chair.
A corporation that is a shareholder shall be deemed for the purpose
of our second amended and restated memorandum and articles to be
present in person if represented by its duly authorized
representative who has been authorized to do so by resolutions of
its directors or other governing body. This duly authorized
representative shall be entitled to exercise the same powers on
behalf of the corporation which he represents as that corporation
could exercise if it were our individual shareholder.
Meetings of Directors
Our business and affairs are managed by our board of directors, who
will make decisions by voting on resolutions of directors. Our
directors are free to meet at such times and in such manner and
places within or outside the British Virgin Islands as the
directors determine to be necessary or desirable. A director must
be given not less than three business days’ notice of a meeting of
directors. A meeting of directors may be called on short notice if
all of the directors entitled to vote on the matters to be
considered at the meeting have waived notice and presence at the
meeting shall be deemed to constitute waiver for this purpose
(unless that director objects in writing before or at the meeting).
At any meeting of directors, a quorum will be present if more than
one-half of the total number of directors is present, unless there
are only two directors in which case the quorum is two. An action
that may be taken by the directors at a meeting may also be taken
by a resolution of directors consented to in writing by a majority
of the directors.
Directors’ Interest
A transaction entered into by the Company in respect of which a
director is interested is voidable by the Company unless the
director’s interest was disclosed in accordance with the memorandum
and the articles prior to the Company entering into the
transaction. A director who is interested in a transaction entered
into or to be entered into by the Company may vote on a matter
relating to the transaction.
Protection of Minority Shareholders and Shareholder
Action
The enforcement of our rights will ordinarily be a matter for our
directors. However, in certain limited circumstances, a shareholder
may have the right to seek certain remedies against us in the event
the directors are in breach of their duties under the BVI Act.
Pursuant to Section 184B of the BVI Act, if a company or a director
of a company engages in, proposes to engage in, or has engaged in,
conduct that contravenes the provisions of the BVI Act or the
memorandum or articles of association of the company, a BVI court
may, on application of a shareholder or a director of the company,
make an order directing the company or director to comply with, or
restraining the company or director from engaging in conduct that
contravenes, the BVI Act or the memorandum or articles.
Furthermore, pursuant to Section 184I of the BVI Act, a shareholder
of a company who considers that the affairs of the company have
been, are being, or are likely to be, conducted in a manner that
is, or any acts of the company have been, or are likely to be,
oppressive, unfairly discriminatory, or unfairly prejudicial to him
in that capacity, may apply to the BVI court for an order which
can, if the court considers that it is just and equitable to do so,
require the company or any other person to pay compensation to the
shareholders (among various other potential orders and remedies).
Under Section 184G of the BVI Act, a shareholder of a company may
bring an action against the company for breach of a duty owed by
the company to him as a shareholder.
Under Section 184C of the BVI Act, a shareholder also may, with the
permission of the BVI court, bring an action or intervene in a
matter in the name of the company, in certain circumstances. Such
actions are known as derivative actions. The BVI court may only
grant permission to bring a derivative action where the following
circumstances apply: (i) the company does not intend to bring,
diligently continue or defend or discontinue proceedings; or (ii)
it is in the interests of the company that the conduct of the
proceedings not be left to the directors or to the determination of
the shareholders as a whole.
When considering whether to grant leave, the BVI court is also
required to have regard to the following matters: whether the
shareholder is acting in good faith; whether a derivative action is
in the interests of the company, taking into account the directors’
views on commercial matters; whether the proceedings are likely to
succeed; the costs of the proceedings in relation to the relief
likely to be obtained; and whether an alternative remedy is
available.
Any shareholder of a company may apply to BVI court under the
Insolvency Act, 2003 of the BVI for the appointment of a liquidator
to liquidate the company and the court may appoint a liquidator for
the company if it is of the opinion that it is just and equitable
to do so.
Generally, any other claims against a BVI company by its
shareholders must be based on the general laws of contract or tort
applicable in the BVI or their individual rights as shareholders as
established by the BVI Act or the company’s memorandum and articles
of association. There are also common law rights for the protection
of shareholders that may be invoked, largely derived from English
common law. Under general English company law known as the rule in
Foss v. Harbottle, a court will generally refuse to interfere with
the management of a company at the insistence of a minority of its
shareholders who express dissatisfaction with the conduct of the
company’s affairs by the majority or the board of directors.
However, every shareholder is entitled to seek to have the affairs
of the company conducted properly according to law and the
constituent documents of the corporation. As such, if those who
control the company have persistently disregarded the requirements
of company law or the provisions of the company’s memorandum and
articles of association, then the courts may grant relief.
Generally, the areas in which the courts may intervene are the
following: a company is acting or proposing to act illegally or
beyond the scope of its authority; the act complained of, although
not beyond the scope of the authority, could only be effected if
duly authorized by more than the number of votes which have
actually been obtained; the individual rights of the plaintiff
shareholder have been infringed or are about to be infringed; or
those who control the company are perpetrating a “fraud on the
minority.”
Inspection of Books and Records
Under the BVI Act, members of the general public, on payment of a
nominal fee, can obtain copies of the public records of a company
available at the office of the Registrar of Corporate Affairs which
will include the company’s certificate of incorporation, its
memorandum and articles of association (with any amendments) and
records of license fees paid to date and will also disclose any
articles of dissolution, articles of merger and a register of
charges if the company has elected to file such a register.
Our members are also entitled, upon giving written notice to us, to
inspect (i) our memorandum and articles of association, (ii) the
register of members, (iii) the register of directors, and (iv)
minutes of meetings and resolutions of members and of those classes
of members of which that member is a member, and to make copies and
take extracts from the documents and records referred to in (i) to
(iv) above. However, our directors may, if they are satisfied that
it would be contrary to the company’s interests to allow a member
to inspect any document, or part of a document specified in (ii) to
(iv) above, refuse to permit the member to inspect the document or
limit the inspection of the document, including limiting the making
of copies or the taking of extracts or records. See “Where You Can
Find Additional Information.” Where a company fails or refuses to
permit a member to inspect a document or permits a member to
inspect a document subject to limitations, that member may apply to
the British Virgin Islands court for an order that he should be
permitted to inspect the document or to inspect the document
without limitation.
Liquidation
As permitted by the BVI Act and our second amended and restated
memorandum and articles, we may be voluntarily liquidated under
Part XII of the BVI Act by resolution of directors and resolution
of shareholders if our assets exceed our liabilities and we are
able to pay our debts as they fall due. We also may be wound up in
circumstances where we are insolvent in accordance with the terms
of the BVI Insolvency Act, 2003 (as amended).
If we are wound up and the assets available for distribution among
our shareholders are more than sufficient to repay all amounts paid
to us on account of the issue of shares immediately prior to the
winding up, the excess shall be distributable pari passu among
those shareholders in proportion to the amount paid up immediately
prior to the winding up on the shares held by them, respectively.
If we are wound up and the assets available for distribution among
the shareholders as such are insufficient to repay the whole of the
amounts paid to us on account of the issue of shares, those assets
shall be distributed so that, to the greatest extent possible, the
losses shall be borne by the shareholders in proportion to the
amounts paid up immediately prior to the winding up on the shares
held by them, respectively. If we are wound up, the liquidator
appointed by us may, in accordance with the BVI Act, divide among
our shareholders in specie or kind the whole or any part of our
assets (whether they shall consist of property of the same kind or
not) and may, for such purpose, set such value as the liquidator
deems fair upon any property to be divided and may determine how
such division shall be carried out as between the shareholders or
different classes of shareholders.
PLAN OF DISTRIBUTION
This is a self-underwritten offering. This prospectus supplement is
part of a registration statement that permits our officers and
directors to sell the shares directly to the public, with no
commission or other remuneration payable to any of them for any
Class A ordinary shares that are sold by them. We have not entered
into any underwriting agreement, arrangement, or understanding for
the sale of the Class A ordinary shares being offered. In the event
we retain a broker who may be deemed an underwriter, we will file a
prospectus supplement with the SEC. This offering is intended to be
made solely by the delivery of this prospectus supplement and the
accompanying subscription agreements to prospective investors. Our
officers and directors will sell the shares and intend to offer
them to friends, family members, business acquaintances, and
interested parties. In offering the securities on our behalf, our
directors and officers will rely on the safe harbor from broker
dealer registration set out in Rule 3a4-1 under the
Exchange Act.
Rule 3a4-1 sets forth those conditions under which a person
associated with an issuer may participate in the offering of the
issuer’s securities and not be deemed to be a broker-dealer. Those
conditions are as follows:
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a. |
Our officers and directors are not
subject to a statutory disqualification, as that term is defined in
Section 3(a)(39) of the Exchange Act, at the time of their
participation; |
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b. |
Our officers and directors will not
be compensated in connection with their participation by the
payment of commissions or other remuneration based either directly
or indirectly on transactions in securities; |
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c. |
Our officers and directors are not,
nor will they be at the time of their participation in the
offering, an associated person of a broker-dealer; and |
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d. |
Our officers and directors meet the
conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of
the Exchange Act, in that they (A) primarily perform, or
intend primarily to perform at the end of the offering, substantial
duties for or on behalf of our Company, other than in connection
with transactions in securities; and (B) are not a broker or
dealer, or been associated person of a broker or dealer, within the
preceding twelve months; and (C) have not participated in selling
and offering securities for any Issuer more than once every 12
months other than in reliance on Paragraphs (a)(4)(i) and
(a)(4)(iii). |
We have entered into Subscription Agreements with the investors
pursuant to which we will sell to the investors Class A ordinary
shares at the aggregate offering price of US$18,000,000 in this
takedown from our shelf registration statement. We negotiated the
price for the securities offered in this offering with the
investors. The factors considered in determining the price included
the recent market price of our Class A ordinary shares, the general
condition of the securities market at the time of this offering,
the history of, and the prospects, for the industry in which we
compete, our past and present operations, and our prospects for
future revenue.
We entered into the Subscription Agreements directly with the
investor on September 27, 2022, and we will only sell to investors
who have entered into the Subscription Agreements with us.
We expect that delivery of the Class A ordinary shares being
offered pursuant to this prospectus supplement and the accompanying
prospectus will be made on or about October 12, 2022, subject to
customary closing conditions.
LEGAL MATTERS
We are being represented by Hunter Taubman Fischer & Li LLC
with respect to certain legal matters as to United States federal
securities and New York State law. The validity of the securities
offered in this offering and certain other legal matters as to
British Virgin Islands law will be passed upon for us by Carey
Olsen Singapore LLP, our counsel as to British Virgin Islands law.
Legal matters as to PRC law will be passed upon for us by Yingke
Wuxi Law Firm.
EXPERTS
The consolidated financial statements as of September 30, 2021 and
2020, and for the fiscal years ended September 30, 2021, 2020, and
2019 incorporated in this prospectus supplement by reference to the
2021 Annual Report have been so incorporated in reliance on the
report of Friedman LLP, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing
and accounting. The office of Friedman LLP is located at One
Liberty Plaza, 165 Broadway Floor 21, New York, NY 10006.
INCORPORATION OF DOCUMENTS BY
REFERENCE
The SEC allows us to “incorporate by reference” into this
prospectus supplement certain information that we file with the
SEC. This means that we can disclose important information to you
by referring you to those documents. Any statement contained in a
document incorporated by reference in this prospectus supplement
shall be deemed to be modified or superseded for purposes of this
prospectus supplement to the extent that a statement contained
herein, or in any subsequently filed document, which also is
incorporated by reference herein, modifies or supersedes such
earlier statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus supplement.
We hereby incorporate by reference into this prospectus supplement
the following documents:
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(1) |
our
annual report on Form
20-F for the fiscal year ended
September 30, 2021, filed with the SEC on February 15, 2022; |
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(2) |
our
unaudited condensed consolidated financial statements for the six
months ended March 31, 2022 and 2021 on Form 6-K, filed with the
SEC on August 31, 2022; |
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(3) |
our
current reports on Form 6-K furnished on March 17, 2022, April 4, 2022, April 11, 2022, June 6, 2022, July 1, 2022, July 25, 2022, and September 26, 2022; |
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(4) |
the
description of our ordinary shares contained in our registration
statements on Form 8-A, filed with the SEC on February 1, 2021, and any
amendment or report filed for the purpose of updating such
description; |
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(5) |
any
future annual reports on Form 20-F filed with the SEC after the
date of this prospectus supplement and prior to the termination of
the offering of the securities offered by this prospectus
supplement; and |
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(6) |
any
future reports of foreign private issuer on Form 6-K that we
furnish to the SEC after the date of this prospectus supplement
that are identified in such reports as being incorporated by
reference into the registration statement of which this prospectus
supplement forms a part. |
Our annual report on Form 20-F for the fiscal year ended September
30, 2021, filed with the SEC on February 15, 2022, contains a
description of our business and audited consolidated financial
statements with a report by our independent auditors. These
statements were prepared in accordance with U.S. GAAP.
Unless expressly incorporated by reference, nothing in this
prospectus supplement shall be deemed to incorporate by reference
information furnished to, but not filed with, the SEC. Copies of
all documents incorporated by reference in this prospectus
supplement, other than exhibits to those documents unless such
exhibits are specially incorporated by reference in this prospectus
supplement, will be provided at no cost to each person, including
any beneficial owner, who receives a copy of this prospectus
supplement on the written or oral request of that person made
to:
CN ENERGY GROUP. INC.
Building 2-B, Room 206, No. 268 Shiniu Road
Liandu District, Lishui City, Zhejiang Province
The PRC
Tel: +86 571 87555823
You should rely only on the information that we incorporate by
reference or provide in this prospectus supplement. We have not
authorized anyone to provide you with different information. We are
not making any offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should not assume
that the information contained or incorporated in this prospectus
supplement by reference is accurate as of any date other than the
date of the document containing the information.
WHERE YOU CAN FIND ADDITIONAL
INFORMATION
As permitted by SEC rules, this prospectus supplement omits certain
information and exhibits that are included in the registration
statement of which this prospectus supplement forms a part. Since
this prospectus supplement may not contain all of the information
that you may find important, you should review the full text of
these documents. If we have filed a contract, agreement, or other
document as an exhibit to the registration statement of which this
prospectus supplement forms a part, you should read the exhibit for
a more complete understanding of the document or matter involved.
Each statement in this prospectus supplement, including statements
incorporated by reference as discussed above, regarding a contract,
agreement, or other document is qualified in its entirety by
reference to the actual document.
We are subject to periodic reporting and other informational
requirements of the Exchange Act as applicable to foreign private
issuers. Accordingly, we are required to file reports, including
annual reports on Form 20-F, and other information with the SEC.
All information filed with the SEC can be inspected over the
Internet at the SEC’s website at www.sec.gov and copied at the
public reference facilities maintained by the SEC at 100 F Street,
N.E., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the
SEC.
As a foreign private issuer, we are exempt under the Exchange Act
from, among other things, the rules prescribing the furnishing and
content of proxy statements, and our executive officers, directors
and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of
the Exchange Act. In addition, we will not be required under the
Exchange Act to file periodic or current reports and financial
statements with the SEC as frequently or as promptly as U.S.
companies whose securities are registered under the Exchange
Act.
PROSPECTUS
$100,000,000 of
Ordinary Shares
Preferred Shares
Debt Securities
Warrants
Rights
and
Units
CN ENERGY GROUP. INC.
This is an offering of the securities of CN Energy Group. Inc., a
British Virgin Islands holding company. Unless otherwise stated, as
used in this prospectus, references to “we,” “us,” “our,” “CN
Energy,” and the “Company” are to CN Energy Group. Inc., a company
organized under the laws of the British Virgin Islands.
We may, from time to time, in one or more offerings, offer and sell
up to $100,000,000 of our ordinary shares, preferred shares, debt
securities, warrants, rights, and units, or any combination
thereof, together or separately as described in this prospectus. In
this prospectus, references to the term “securities” refers,
collectively, to our ordinary shares, preferred shares, debt
securities, warrants, rights, and units. The prospectus supplement
for each offering of securities will describe in detail the plan of
distribution for that offering. For general information about the
distribution of the securities offered, please see “Plan of
Distribution” in this prospectus.
This prospectus provides a general description of the securities we
may offer. We will provide the specific terms of the securities
offered in one or more supplements to this prospectus. We may also
authorize one or more free writing prospectuses to be provided to
you in connection with these offerings. You should read this
prospectus, any prospectus supplement, and any free writing
prospectus before you invest in any of our securities. The
prospectus supplement and any related free writing prospectus may
add, update, or change information in this prospectus. You should
read carefully this prospectus, the applicable prospectus
supplement, and any related free writing prospectus, as well as the
documents incorporated or deemed to be incorporated by reference,
before you invest in any of our securities. This prospectus may not
be used to offer or sell any securities unless accompanied by the
applicable prospectus supplement.
Our ordinary shares are listed on the Nasdaq Capital Market,
or “Nasdaq,” under the symbol “CNEY.” On May 27, 2022, the last
reported sale price of our ordinary shares on Nasdaq was $2.38 per
share. The aggregate market value of our outstanding ordinary
shares held by non-affiliates, or public float, as of May 31, 2022,
was approximately $41.1 million, which was calculated based on
17,268,307 ordinary shares held by non-affiliates and the price of
$2.38 per share, which was the closing price of our ordinary shares
on Nasdaq on May 27, 2022. Pursuant to General Instruction
I.B.5 of Form F-3, in no event will we sell our securities in
a public primary offering with a value exceeding more than
one-third of our public float in any 12-month period so long as our
public float remains below $75 million. During the 12 calendar
months prior to and including the date of this prospectus, we have
not offered or sold any securities pursuant to General Instruction
I.B.5 of Form F-3.
Investing in our securities involves a high degree of risk.
Before making an investment decision, please read the information
under the heading “Risk Factors” beginning on page 11 of this
prospectus and risk factors set forth in our most recent annual
report on Form 20-F (the “2021 Annual Report”), in other
reports incorporated herein by reference, and in an applicable
prospectus supplement.
We may offer and sell the securities from time to time at fixed
prices, at market prices, or at negotiated prices, to or through
underwriters, to other purchasers, through agents, or through a
combination of these methods. If any underwriters are involved in
the sale of any securities with respect to which this prospectus is
being delivered, the names of such underwriters and any applicable
commissions or discounts will be set forth in a prospectus
supplement. The offering price of such securities and the net
proceeds we expect to receive from such sale will also be set forth
in a prospectus supplement. See “Plan of Distribution” elsewhere in
this prospectus for a more complete description of the ways in
which the securities may be sold.
We are an offshore holding company with no material operations of
our own and not a Chinese operating company. Our operations are
conducted in China by our subsidiaries. This is an offering of
securities of the offshore holding company in the British Virgin
Islands, instead of securities of our operating companies in China.
Therefore, you will not directly hold any equity interests in our
operating companies. For risks facing our Company and this offering
as a result of our organizational structure, see “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC” in the 2021 Annual Report.
We are subject to certain legal and operational risks associated
with having the majority of our operations in China, which could
significantly limit or completely hinder our ability to offer
securities to investors and cause the value of our securities to
significantly decline or be worthless. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—Any actions by the Chinese government, including any decision
to intervene or influence our operations or to exert control over
any offering of securities conducted overseas and/or foreign
investment in China-based issuers, may cause us to make material
changes to our operations, may limit or completely hinder our
ability to offer or continue to offer securities to investors, and
may cause the value of such securities to significantly decline or
be worthless” in the 2021 Annual Report. Recently, the PRC
government adopted a series of regulatory actions and statements to
regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities
market, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement. As
of the date of this prospectus, we and our subsidiaries have not
been involved in any investigations on cybersecurity review
initiated by any PRC regulatory authority, nor has any of them
received any inquiry, notice, or sanction. As confirmed by our PRC
counsel, Yingke Wuxi Law Firm, we are not subject to cybersecurity
review by the Cyberspace Administration of China, or the CAC, since
we currently do not have over one million users’ personal
information and do not anticipate that we will be collecting over
one million users’ personal information in the foreseeable future,
which we understand might otherwise subject us to the Cybersecurity
Review Measures. We are not subject to network data security review
by the CAC if the Draft Regulations on the Network Data Security
Administration (Draft for Comments) (the “Security Administration
Draft”) are enacted as proposed, because we currently do not have
over one million users’ personal information, we do not collect
data that affect or may affect national security and we do not
anticipate that we will be collecting over one million users’
personal information or data that affect or may affect national
security in the foreseeable future, which we understand might
otherwise subject us to the Security Administration Draft. See
“Item 3. Key Information—D. Risk Factors—Risks Relating to Doing
Business in the PRC—Recent greater oversight by the Cyberspace
Administration of China, or the “CAC,” over data security,
particularly for companies seeking to list on a foreign exchange,
could adversely impact our business and our offering” in the 2021
Annual Report. According to our PRC counsel, Yingke Wuxi Law Firm,
no relevant laws or regulations in the PRC explicitly require us to
seek approval from the China Securities Regulatory Commission for
our overseas listing. As of the date of this prospectus, we and our
subsidiaries have not received any inquiry, notice, warning, or
sanction regarding our overseas listing from the China Securities
Regulatory Commission (the “CSRC”) or any other PRC governmental
authorities. However, since these statements and regulatory actions
are newly published, official guidance and related implementation
rules have not been issued. It is highly uncertain what the
potential impact such modified or new laws and regulations will
have on the daily business operations of our subsidiaries, our
ability to accept foreign investments, and our listing on an U.S.
exchange. The Standing Committee of the National People’s Congress
(the “SCNPC”) or PRC regulatory authorities may in the future
promulgate laws, regulations, or implementing rules that
require us or our subsidiaries to obtain regulatory approval from
Chinese authorities for listing in the U.S.
In addition, our ordinary shares may be prohibited from trading on
a national exchange or over-the-counter under the Holding Foreign
Companies Accountable Act, if the Public Company Accounting
Oversight Board (United States) (the “PCAOB”) is unable to inspect
our auditor for three consecutive years beginning in 2021. Our
auditor is headquartered in Manhattan, New York, and has been
inspected by the PCAOB on a regular basis, with the last inspection
in June 2018, and our auditor is not subject to the
determinations announced by the PCAOB on December 16, 2021. If
trading in our ordinary shares is prohibited under the Holding
Foreign Companies Accountable Act in the future because the PCAOB
determines that it cannot inspect or fully investigate our auditor
at such future time, Nasdaq may determine to delist our ordinary
shares and trading in our ordinary shares could be prohibited. On
June 22, 2021, the U.S. Senate passed the Accelerating Holding
Foreign Companies Accountable Act, which, if passed by the U.S.
House of Representatives and signed into law, would reduce the
period of time for foreign companies to comply with PCAOB audits to
two consecutive years instead of three, thus reducing the time
period for triggering the prohibition on trading. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—Recent joint statement by the U.S. Securities and Exchange
Commission, or the “SEC,” and the Public Company Accounting
Oversight Board (United States) (the “PCAOB”), rule changes by
Nasdaq, and the Holding Foreign Companies Accountable Act all call
for additional and more stringent criteria to be applied to
emerging market companies upon assessing the qualification of their
auditors, especially the non-U.S. auditors who are not inspected by
the PCAOB. These developments could add uncertainties to our
offering” in the 2021 Annual Report.
As of the date of this prospectus, none of our subsidiaries have
made any dividends or distributions to our Company and our Company
has not made any dividends or distributions to our shareholders. We
intend to keep any future earnings to finance the expansion of our
business, and we do not anticipate that any cash dividends will be
paid in the foreseeable future. If we determine to pay dividends on
any of our ordinary shares in the future, as a holding company, we
will rely on payments from subsidiaries of CN Energy Industrial
Development Co., Ltd., our indirect wholly owned subsidiary in
China (“CN Energy Development”), to CN Energy Development and from
CN Energy Development to Zhejiang CN Energy Technology Development
Co., Ltd., our indirect wholly owned subsidiary in China
(“Zhejiang CN Energy”), and indirectly to Manzhouli CN Energy
Industrial Co., Ltd., our indirect wholly owned subsidiary in
China (“Manzhouli CN Energy”), and the distribution of such
payments to CLEAN ENERGY HOLDINGS LIMITED, our wholly owned
subsidiary in Hong Kong (“Energy Holdings”), and then to our
Company. Our finance department is supervising cash management,
following the instructions of our management. Our finance
department is responsible for establishing our cash operation plan
and coordinating cash management matters among our subsidiaries and
departments. Each subsidiary and department initiates a cash
request by putting forward a cash demand plan, which explains the
specific amount and timing of cash requested, and submitting it to
our finance department. The finance department reviews the cash
demand plan and prepares a summary for the management of our
Company. Management examines and approves the allocation of cash
based on the sources of cash and the priorities of the needs. Other
than the above, we currently do not have other cash management
policies or procedures that dictate how funds are transferred. As
of the date of this prospectus, CN Energy has transferred the net
proceeds from our initial public offering, through Energy Holdings
and Zhejiang CN Energy, to CN Energy Development and its
subsidiaries, including RMB15,000,000 (approximately $2,287,500) to
CN Energy Development, RMB103,921,379 (approximately $15,848,010)
to Hangzhou Forasen Technology Co., Ltd. and RMB12,891,800
(approximately $1,966,000) to Manzhouli Zhongxing Energy Technology
Co., Ltd. See “Prospectus Summary—Dividends or Distributions
Made to Our Company and U.S. Investors and Tax Consequences” and
our audited consolidated financial statements for the fiscal years
ended September 30, 2021, 2020, and 2019.
Neither the U.S. Securities and Exchange Commission nor any
state securities commission nor any other regulatory body has
approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus is
,
2022.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed
with the U.S. Securities and Exchange Commission (the “SEC”)
utilizing a “shelf” registration process. Under this shelf
registration process, we may, from time to time, sell the
securities described in this prospectus in one or more offerings,
up to a total offering amount of $100,000,000.
This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities under this
shelf registration, we will provide a prospectus supplement that
will contain specific information about the terms of that offering,
including a description of any risks related to the offering. If
there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you should
rely on the information in the prospectus supplement. This
prospectus and any accompanying prospectus supplement do not
contain all the information included in the registration statement.
We have omitted parts of the registration statement in accordance
with the rules and regulations of the SEC. Statements in this
prospectus and any accompanying prospectus supplement about the
provisions or contents of any agreement or other documents are not
necessarily complete. If the SEC rules and regulations require
that an agreement or other document be filed as an exhibit to the
registration statement, please see that agreement or document for a
complete description of the matters. You should read both this
prospectus and any prospectus supplement or other offering
materials together with additional information described under the
headings “Where You Can Find Additional Information” and
“Incorporation of Documents by Reference” before investing in any
of the securities offered.
The information in this prospectus is accurate as of the date on
the front cover. The information incorporated by reference into
this prospectus is accurate as of the date of the document from
which the information is incorporated. You should not assume that
the information contained in this prospectus is accurate as of any
other date.
You should rely only on the information provided or incorporated by
reference in this prospectus or in the prospectus supplement. We
have not authorized anyone to provide you with additional or
different information. This document may only be used where it is
legal to sell these securities.
As permitted by SEC rules and regulations, the registration
statement of which this prospectus forms a part includes additional
information not contained in this prospectus. You may read the
registration statement and the other reports we file with the SEC
at its website or at its offices described under “Where You Can
Find Additional Information.”
COMMONLY USED DEFINED
TERMS
Unless otherwise indicated or the context requires otherwise,
references in this prospectus or in a prospectus supplement to:
| |
• |
“China” or the “PRC” are to the People’s Republic
of China, excluding Taiwan for the purposes of this prospectus
only; |
| |
• |
“CN
Energy,” “we,” “us,” “our Company,” or the “Company” are to CN
ENERGY GROUP. INC. (also referred to as 中北能源集团有限公司 in
Chinese), a company limited by shares organized under the laws of
British Virgin Islands; |
| |
• |
“CN
Energy Development” are to CN Energy Industrial Development
Co., Ltd. (also referred to as 中北能源产业发展有限公司 in
Chinese), a company with limited liability organized under the laws
of the PRC, which is jointly owned by Zhejiang CN Energy and
Manzhouli CN Technology (as defined below); |
| |
• |
“Convertible Preferred Shares” are to the
convertible preferred shares of the Company, no par
value; |
| |
• |
“Energy Holdings” are to CN Energy’s wholly owned
subsidiary, CLEAN ENERGY HOLDINGS LIMITED (also referred to as
清洁能源控股有限公司 in
Chinese), a Hong Kong corporation; |
| |
• |
“Exchange Act” are to the Securities Exchange Act
of 1934, as amended; |
| |
• |
“fiscal year” are to the period from
October 1 to September 30 of the next calendar
year; |
| |
• |
“Hangzhou Forasen” are to Hangzhou Forasen
Technology Co., Ltd. (also referred to as 杭州富来森科技有限公司 in
Chinese), a company with limited liability organized under the laws
of the PRC, which is wholly owned by CN Energy
Development; |
| |
• |
“Khingan Forasen” are to Greater Khingan Range
Forasen Energy Technology Co., Ltd. (also referred to as
大兴安岭富来森能源科技有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by CN Energy
Development; |
| |
• |
“Manzhouli CN Energy” are to Manzhouli CN Energy
Industrial Co., Ltd. (also referred to as 满洲里市中北能实业有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by Energy
Holdings; |
| |
• |
“Manzhouli CN Technology” are to Manzhouli CN
Energy Technology Co., Ltd. (also referred to as 满洲里市中北能科技有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is jointly owned by Zhejiang CN Energy (as
defined below) and Manzhouli CN Energy; |
| |
• |
“operating entities” are to CN Energy Development
and its subsidiaries; |
| |
• |
“RMB”
or “Renminbi” are to the legal currency of China; |
| |
• |
“SEC”
are to the U.S. Securities Exchange Commission; |
| |
• |
“Securities Act” are to the Securities Act of
1933, as amended; |
| |
• |
“Tahe
Biopower Plant” are to Greater Khingan Range Forasen Energy
Technology Co., Ltd. Tahe Biopower Plant (also referred to as
大兴安岭富来森能源科技有限公司塔河生物发电厂
in Chinese), the branch office of Khingan Forasen; |
| |
• |
“U.S.
dollars” are to the legal currency of the United
States; |
| |
• |
“U.S.
GAAP” are to generally accepted accounting principles in the United
States; |
| |
• |
“Zhejiang CN Energy” are to Zhejiang CN Energy
Technology Development Co., Ltd. (also referred to as
浙江中北能源科技开发有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by Energy Holdings;
and |
| |
• |
“Zhongxing Energy” are to Manzhouli Zhongxing
Energy Technology Co., Ltd. (also referred to as 满洲里市众兴能源科技有限公司
in Chinese), a company with limited liability organized under the
laws of the PRC, which is wholly owned by CN Energy
Development. |
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus, an applicable prospectus supplement, and our SEC
filings that are incorporated by reference into this prospectus
contain or incorporate by reference forward-looking statements
within the meaning of Section 27A of the Securities Act of and
Section 21E of the Exchange Act. 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. The words “believe,” “anticipate,” “estimate,” “plan,”
“expect,” “intend,” “may,” “could,” “should,” “potential,”
“likely,” “projects,” “continue,” “will,” and “would” and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Forward-looking statements reflect our current
views with respect to future events, are based on assumptions, and
are subject to risks and uncertainties. We cannot guarantee that we
actually will achieve the plans, intentions, or expectations
expressed in our forward-looking statements and you should not
place undue reliance on these statements. There are a number of
important factors that could cause our actual results to differ
materially from those indicated or implied by forward-looking
statements. These important factors include those discussed under
the heading “Risk Factors” contained or incorporated by reference
in this prospectus and in the applicable prospectus supplement and
any free writing prospectus we may authorize for use in connection
with a specific offering. These factors and the other cautionary
statements made in this prospectus should be read as being
applicable to all related forward-looking statements whenever they
appear in this prospectus. Except as required by law, we undertake
no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
Prospectus Summary
Overview
We are an offshore holding company incorporated in the British
Virgin Islands. As a holding company with no material operations of
our own, our operations are conducted in China through our wholly
owned indirect PRC subsidiary, CN Energy Development, and its
subsidiaries. This is an offering of securities of the offshore
holding company in the British Virgin Islands, instead of
securities of the operating entities in China. Therefore, you will
not directly hold any equity interests in the operating
entities.
The following diagram illustrates our corporate structure as of the
date of this prospectus.
* Indicates less than 1%
Notes:
(1) Represents 3,020,969 ordinary shares held by Yefang Zhang, the
100% owner of Global Clean Energy Limited, as of the date of this
prospectus.
We are subject to certain legal and operational risks associated
with having the majority of our operations in China, which could
significantly limit or completely hinder our ability to offer
securities to investors and cause the value of our securities to
significantly decline or be worthless. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—Any actions by the Chinese government, including any decision
to intervene or influence our operations or to exert control over
any offering of securities conducted overseas and/or foreign
investment in China-based issuers, may cause us to make material
changes to our operations, may limit or completely hinder our
ability to offer or continue to offer securities to investors, and
may cause the value of such securities to significantly decline or
be worthless” in the 2021 Annual Report. Recently, the PRC
government adopted a series of regulatory actions and statements to
regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities
market, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement. As
of the date of this prospectus, we and our subsidiaries have not
been involved in any investigations on cybersecurity review
initiated by any PRC regulatory authority, nor has any of them
received any inquiry, notice, or sanction. As confirmed by our PRC
counsel, Yingke Wuxi Law Firm, we are not subject to cybersecurity
review by the CAC, since we currently do not have over one million
users’ personal information and do not anticipate that we will be
collecting over one million users’ personal information in the
foreseeable future, which we understand might otherwise subject us
to the Cybersecurity Review Measures. We are not subject to network
data security review by the CAC if the Security Administration
Draft is enacted as proposed, because we currently do not have over
one million users’ personal information, we do not collect data
that affect or may affect national security and we do not
anticipate that we will be collecting over one million users’
personal information or data that affect or may affect national
security in the foreseeable future, which we understand might
otherwise subject us to the Security Administration Draft. See
“Item 3. Key Information—D. Risk Factors—Risks Relating to Doing
Business in the PRC—Recent greater oversight by the Cyberspace
Administration of China, or the “CAC,” over data security,
particularly for companies seeking to list on a foreign exchange,
could adversely impact our business and our offering” in the 2021
Annual Report. According to our PRC counsel, Yingke Wuxi Law Firm,
no relevant laws or regulations in the PRC explicitly require us to
seek approval from the China Securities Regulatory Commission for
our overseas listing. As of the date of this prospectus, we and our
subsidiaries have not received any inquiry, notice, warning, or
sanction regarding our overseas listing from the CSRC or any other
PRC governmental authorities. However, since these statements and
regulatory actions are newly published, official guidance and
related implementation rules have not been issued. It is
highly uncertain what the potential impact such modified or new
laws and regulations will have on the daily business operations of
our subsidiaries, our ability to accept foreign investments, and
our listing on an U.S. exchange. The SCNPC or PRC regulatory
authorities may in the future promulgate laws, regulations, or
implementing rules that require us or our subsidiaries to
obtain regulatory approval from Chinese authorities for listing in
the U.S.
In addition, our ordinary shares may be prohibited from trading on
a national exchange or over-the-counter under the Holding Foreign
Companies Accountable Act, if the PCAOB is unable to inspect our
auditor for three consecutive years beginning in 2021. Our auditor
is headquartered in Manhattan, New York, and has been inspected by
the PCAOB on a regular basis, with the last inspection in
June 2018, and our auditor is not subject to the
determinations announced by the PCAOB on December 16, 2021. If
trading in our ordinary shares is prohibited under the Holding
Foreign Companies Accountable Act in the future because the PCAOB
determines that it cannot inspect or fully investigate our auditor
at such future time, Nasdaq may determine to delist our ordinary
shares and trading in our ordinary shares could be prohibited. On
June 22, 2021, the U.S. Senate passed the Accelerating Holding
Foreign Companies Accountable Act, which, if passed by the U.S.
House of Representatives and signed into law, would reduce the
period of time for foreign companies to comply with PCAOB audits to
two consecutive years instead of three, thus reducing the time
period for triggering the prohibition on trading. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—Recent joint statement by the U.S. Securities and Exchange
Commission, or the “SEC,” and the Public Company Accounting
Oversight Board (United States) (the “PCAOB”), rule changes by
Nasdaq, and the Holding Foreign Companies Accountable Act all call
for additional and more stringent criteria to be applied to
emerging market companies upon assessing the qualification of their
auditors, especially the non-U.S. auditors who are not inspected by
the PCAOB. These developments could add uncertainties to our
offering” in the 2021 Annual Report.
Our Company
The operating entities are a manufacturer and supplier of
wood-based activated carbon that is primarily used in
pharmaceutical manufacturing, industrial manufacturing, water
purification, environmental protection, as well as food and
beverage production (“Activated Carbon Production”), and a producer
of biomass electricity generated in the process of producing
activated carbon (“Biomass Electricity Production”).
As a manufacturer of wood-based activated carbon, the operating
entities’ primary raw materials are forestry residues, little
fuelwood, and wood wastes, which the operating entities source from
their suppliers. The operating entities’ current facility is
located in Tahe County, Heilongjiang Province, in close proximity
to the Greater Khingan Range, where their suppliers are primarily
located. The operating entities also source raw materials from
Inner Mongolia Autonomous Region.
The operating entities produce wood-based activated carbon that is
conformed to their customers’ specifications. The operating
entities’ activated carbon customers are mainly activated carbon
wholesalers and companies engaged in the activated carbon deep
processing business. The operating entities’ activated carbon
customers are all based in the PRC and currently mainly located in
Anhui Province, Fujian Province, Zhejiang Province, and Shanghai.
The primary end users of the operating entities’ activated carbon
are mainly food and beverage producers, industrial manufacturers,
pharmaceutical manufacturers, and companies engaged in
environmental protection. In addition, the operating entities have
provided activated carbon related technical services to Hangzhou
Lianmu Technology Co., Ltd. (“Lianmu Technology”) from time to
time since January 1, 2017. Their technical services included
activated carbon mixing ratio adjustments, activated carbon
component indicator analyses, absorptive capacity tests, and other
technical support. The operating entities expect to provide similar
technical services to Lianmu Technology and other customers if
requested.
The biomass electricity generated during the process of producing
activated carbon is supplied to State Grid Heilongjiang Electric
Power Company Limited, a subsidiary of State Grid Corporation of
China in Heilongjiang Province. The operating entities do not
supply biomass electricity to any other state-owned or other
entity.
The operating entities generate revenue primarily from selling
activated carbon. For the fiscal years ended September 30,
2021, 2020, and 2019, the operating entities sold 15,018, 9,525,
and 8,584 tons of activated carbon and 2,817,600, 2,641,964, and
3,044,574 kWh of biomass electricity, respectively. For the same
years, the total revenue was $19,846,921, $12,476,314, and
$10,893,164, and the net income was $1,296,360, $2,344,770, and
$1,667,812, respectively. For the same years, the revenue derived
from Activated Carbon Production accounted for 98.62%, 96.99%, and
96.31% of the total revenue, respectively; the revenue derived from
Biomass Electricity Production accounted for 0.72%, 2.05%, and
1.80% of the total revenue, respectively; and the revenue derived
from technical services provided to Lianmu Technology accounted for
0.66%, 0.96%, and 1.89% of the total revenue, respectively.
Recent Development
On March 31, 2022, we established a wholly owned subsidiary, CN
Energy USA Inc., as a corporation pursuant to the laws of the State
of Delaware. CN Energy currently holds 100% of the equity interests
in CN Energy USA Inc.
On April 8, 2022, Hangzhou Forasen established a wholly owned
subsidiary, Zhoushan Xinyue Trading Co., Ltd., as a company with
limited liability organized under the laws of the PRC. Hangzhou
Forasen currently holds 100% of the equity interests in Zhoushan
Xinyue Trading Co., Ltd.
On April 13, 2022, CN Energy Development established a wholly owned
subsidiary, Ningbo Nadoutong Trading Co., Ltd., as a company with
limited liability organized under the laws of the PRC. CN Energy
Development currently holds 100% of the equity interests in Ningbo
Nadoutong Trading Co., Ltd.
Impact of the COVID-19 Pandemic
Since early 2020, the COVID-19 pandemic has significantly impacted
the business operations of the operating entities. In response to
the COVID-19 pandemic, the Chinese government implemented the
shelter-in-place orders and travel restrictions. As a result, the
employees of Tahe Biopower Plant and Hangzhou Forasen could not
return to work on time after the Chinese New Year of 2020 and the
transportation of raw materials and activated carbon was delayed or
even stopped in January and February 2020, which
adversely impacted the operating entities’ production and sales, as
well as the construction of their new facility in Manzhouli City.
Since the end of March 2020, the operating entities’
production and sales have gradually recovered. In August 2020,
the operating entities resumed the construction of their new
facility in Manzhouli City. During fiscal year 2021, the operating
entities’ production, sales, and construction of the new facility
in Manzhouli City were disrupted several times by government
regulations in response to the COVID-19 pandemic. In 2022, the
repeated COVID-19 outbreaks in China have continued to impact the
operating entities’ production, sales, and construction activities.
Due to regulations of the Chinese government in response to the
COVID-19 pandemic, the operating entities had to halt the
transportation of raw materials several times, which led to higher
costs of raw materials and transportation. The construction of the
new facility in Manzhouli City was also disrupted several
times.
The COVID-19 pandemic may continue to adversely impact the
operating entities’ business operations and operating results,
including decreasing their revenue, slowing the collection of
accounts receivables, generating additional allowance for doubtful
accounts, disrupting their supply chain, and increasing the costs
of raw materials. Because of the significant uncertainties
surrounding the COVID-19 pandemic, the operating entities cannot
reasonably estimate the extent of its impact on their business
operations and financial condition at this time.
Permission Required from PRC Authorities
The operating entities are not operating in an industry that
prohibits or limits foreign investment. As a result, as advised by
our PRC counsel, Yingke Wuxi Law Firm, other than those requisite
for a domestic company in China to engage in the businesses similar
to those of the operating entities, the operating entities are not
required to obtain any permission from Chinese authorities,
including the CSRC, the CAC, or any other governmental agency that
is required to approve the operating entities’ operations. However,
if the operating entities do not receive or maintain the approvals,
or we inadvertently conclude that such approvals are not required,
or applicable laws, regulations, or interpretations change such
that the operating entities are required to obtain approval in the
future, we may be subject to investigations by competent
regulators, fines or penalties, ordered to suspend the operating
entities’ relevant operations and rectify any non-compliance,
prohibited from engaging in relevant business or conducting any
offering, and these risks could result in a material adverse change
in the operating entities’ operations, significantly limit or
completely hinder our ability to offer or continue to offer
securities to investors, or cause such securities to significantly
decline in value or become worthless. As of the date of this
prospectus, we and the operating entities have received from PRC
authorities all requisite licenses, permissions, or approvals
needed to engage in the businesses currently conducted in China,
and no permission or approval has been denied.
We are currently not required to obtain permission from any of the
PRC authorities to operate and issue our securities to foreign
investors. In addition, we and our subsidiaries are not required to
obtain permission or approval relating to our securities from the
PRC authorities, including the CSRC or the CAC, for our
subsidiaries’ operations, nor have we or our subsidiaries received
any denial for our subsidiaries’ operations with respect to this
offering. Recently, however, the General Office of the Central
Committee of the Communist Party of China and the General Office of
the State Council jointly issued the “Opinions on Severely Cracking
Down on Illegal Securities Activities According to Law,” or the
“Opinions,” which were made available to the public on July 6,
2021. The Opinions emphasized the need to strengthen the
administration over illegal securities activities and the
supervision over overseas listings by Chinese companies. The
Opinions proposed to take effective measures, such as promoting the
construction of relevant regulatory systems, to deal with the risks
and incidents facing China-based overseas-listed companies and the
demand for cybersecurity and data privacy protection. The
aforementioned policies and any related implementation
rules to be enacted may subject us to additional compliance
requirements in the future. Given the current regulatory
environment in the PRC, we are still subject to the uncertainty of
different interpretation and enforcement of the rules and
regulations in the PRC adverse to us, which may take place quickly
with little advance notice. See “Item 3. Key Information—D. Risk
Factors—Risks Relating to Doing Business in the PRC—The opinions
recently issued by the General Office of the Central Committee of
the Communist Party of China and the General Office of the State
Council may subject us to additional compliance requirements in the
future.”
Dividends or Distributions Made to Our Company and U.S.
Investors and Tax Consequences
As of the date of this prospectus, CN Energy has transferred the
net proceeds from our initial public offering, through Energy
Holdings and Zhejiang CN Energy, to CN Energy Development and its
subsidiaries, including RMB15,000,000 (approximately $2,287,500) to
CN Energy Development, RMB103,921,379 (approximately $15,848,010)
to Hangzhou Forasen, and RMB12,891,800 (approximately $1,966,000)
to Zhongxing Energy.
As of the date of this prospectus, none of our subsidiaries have
made any dividends or distributions to CN Energy and CN Energy has
not made any dividends or distributions to U.S. investors. We
intend to keep any future earnings to finance the expansion of our
business, and we do not anticipate that any cash dividends will be
paid in the foreseeable future. Subject to the passive foreign
investment company rules, the gross amount of distributions we make
to investors with respect to our ordinary shares (including the
amount of any taxes withheld therefrom) will be taxable as a
dividend, to the extent that the distribution is paid out of our
current or accumulated earnings and profits, as determined under
U.S. federal income tax principles.
Pursuant to the BVI Business Companies Act, 2004 as amended from
time to time (the “BVI Act”), and our second amended and restated
memorandum and articles of association, our board of directors may
authorize and declare a dividend to shareholders at such time and
of such an amount as they think appropriate, if they are satisfied
on reasonable grounds that immediately following the dividend
payment, the value of our assets will exceed our liabilities and we
will be able to pay our debts as they become due. There is no
further British Virgin Islands statutory restriction on the amount
of funds which may be distributed by us by dividends.
If we determine to pay dividends on any of our ordinary shares in
the future, as a holding company, we will be dependent on receipt
of funds from our Hong Kong subsidiary, Energy Holdings.
Current PRC regulations permit our indirect PRC subsidiaries to pay
dividends to Energy Holdings only out of their accumulated profits,
if any, determined in accordance with Chinese accounting standards
and regulations. In addition, each of our subsidiaries in China is
required to set aside at least 10% of its after-tax profits each
year, if any, to fund a statutory reserve until such reserve
reaches 50% of its registered capital. Each of such entity in China
is also required to further set aside a portion of its after-tax
profits to fund the employee welfare fund, although the amount to
be set aside, if any, is determined at the discretion of its board
of directors. Although the statutory reserves can be used, among
other ways, to increase the registered capital and eliminate future
losses in excess of retained earnings of the respective companies,
the reserve funds are not distributable as cash dividends except in
the event of liquidation.
The PRC government imposes controls on the conversion of RMB into
foreign currencies and the remittance of currencies out of the PRC
(excluding the special administrative regions of Hong Kong and
Macau). Under the applicable PRC regulations, RMB is freely
convertible only to the extent of current account items, such as
trade-related receipts and payments, interest, and dividends.
Conversion of RMB into a foreign currency such as U.S. dollars for
capital account items, such as direct equity investments, loans,
and repatriation of investment, requires prior approval from the
State Administration of Foreign Exchange or its local branch. Such
approval, however, does not guarantee the availability of foreign
currency conversion. Furthermore, the value of the RMB against the
U.S. dollar and other currencies may fluctuate and is affected by,
among other things, changes in China’s political and economic
conditions. The RMB may not be stable against the U.S. dollar or
other foreign currency. To the extent that we seek to convert RMB
into U.S. dollars, depreciation of the RMB against the U.S. dollar
would have an adverse effect on the U.S. dollar amount we receive
from the conversion. Therefore, we may experience difficulties in
complying with the administrative requirements necessary to obtain
and remit foreign currency for the payment of dividends from our
profits, if any. Furthermore, if our subsidiaries and affiliates in
the PRC 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 we or our subsidiaries are unable to
receive all of the revenue from our operations, we may be unable to
pay dividends on our ordinary shares.
Cash dividends, if any, on our ordinary shares will be paid in U.S.
dollars. Energy Holdings may be considered a non-resident
enterprise for PRC tax purposes. Any dividends that our PRC
subsidiaries pay to Energy Holdings may be regarded as
China-sourced income and as a result may be subject to PRC
withholding tax at a rate of up to 10%.
In order for us to pay dividends to our shareholders, we will rely
on payments made from CN Energy Development’s subsidiaries to CN
Energy Development and from CN Energy Development to Zhejiang CN
Energy and indirectly to Manzhouli CN Energy, and the distribution
of such payments to Energy Holdings and then to our Company.
According to the PRC Enterprise Income Tax Law, such payments from
subsidiaries to parent companies in China are subject to the PRC
enterprise income tax at a rate of 25%. In addition, if CN Energy
Development or its subsidiaries incur debt on their own behalf, the
instruments governing the debt may restrict its ability to pay
dividends or make other distributions to us.
Pursuant to the Arrangement between Mainland China and the Hong
Kong Special Administrative Region for the Avoidance of Double
Taxation and Tax Evasion on Income, the 10% withholding tax rate
may be lowered to 5% if a Hong Kong resident enterprise owns no
less than 25% of a PRC project. The 5% withholding tax rate,
however, does not automatically apply and certain requirements must
be satisfied, including without limitation that (a) the Hong
Kong project must be the beneficial owner of the relevant
dividends; and (b) the Hong Kong project must directly hold no
less than 25% share ownership in the PRC project during the 12
consecutive months preceding its receipt of the dividends. In
current practice, a Hong Kong project must obtain a tax resident
certificate from the Hong Kong tax authority to apply for the 5%
lower PRC withholding tax rate. As the Hong Kong tax authority will
issue such a tax resident certificate on a case-by-case basis, we
cannot assure you that we will be able to obtain the tax resident
certificate from the relevant Hong Kong tax authority and enjoy the
preferential withholding tax rate of 5% under the Double Taxation
Arrangement with respect to any dividends paid by our PRC
subsidiaries to its immediate holding company, Energy Holdings. As
of the date of this prospectus, we have not applied for the tax
resident certificate from the relevant Hong Kong tax authority.
Energy Holdings intends to apply for the tax resident certificate
if and when Zhejiang CN Energy and Manzhouli CN Energy plan to
declare and pay dividends to Energy Holdings. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Doing Business in the
PRC—There are significant uncertainties under the EIT Law relating
to the withholding tax liabilities of our PRC subsidiaries, and
dividends payable by our PRC subsidiaries to our Hong Kong
subsidiary may not qualify to enjoy certain treaty benefits” in the
2021 Annual Report.
Summary of Risk Factors
Investing in our securities involves significant risks. You should
carefully consider all of the information in this prospectus before
investing in our securities. Below is a summary of the principal
risks we face. These risks are discussed more fully under “Item 3.
Key Information—D. Risk Factors” in the 2021 Annual Report and in
the “Risk Factors” section of this prospectus.
Risks Relating to Our Business and Industry (for a more
detailed discussion, see “Item 3. Key Information—D. Risk
Factors—Risks Relating to Our Business and Industry” in the 2021
Annual Report)
Risks and uncertainties related to our business include, but are
not limited to, the following:
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• |
our
financial results could be materially and adversely affected by an
interruption of supply of raw materials (see page 4 of the
2021 Annual Report); |
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a
majority of our activated carbon sales are currently derived from a
small number of customers. If any of these customers experiences a
material business disruption, we would likely incur substantial
losses of revenue (see page 4 of the 2021 Annual
Report); |
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we
have sourced our raw materials and activated carbon primarily from
a limited number of suppliers. If we lose one or more of the
suppliers, our operation may be disrupted, and our results of
operations may be adversely and materially impacted (see
page 5 of the 2021 Annual Report); |
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a
disruption or delay in production at our existing production
facilities could have a material adverse effect on our financial
results (see page 5 of the 2021 Annual Report); |
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our
financial condition, results of operations, and cash flows have
been adversely affected by the COVID-19 pandemic (see page 6
of the 2021 Annual Report); |
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uncertainties as to the future of existing and
planned environmental and health and safety laws and regulations,
as well as delays of or changes to these laws and regulations,
could have a material adverse effect on demand for our products
(see page 7 of the 2021 Annual Report); |
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• |
disclosure of our trade secrets and other
proprietary information, or a failure to adequately protect these
or our other intellectual property rights, could result in
increased competition and have a material adverse effect on our
business and financial results (see page 7 of the 2021 Annual
Report); and |
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• |
the
activated carbon industry is highly competitive, and if we are
unable to compete effectively with existing competitors, or with
new entrants, our business and financial results could be
materially and adversely affected (see page 9 of the 2021
Annual Report). |
Risks Relating to Doing Business in the PRC (for a more
detailed discussion, see “Item 3. Key Information—D. Risk
Factors—Risks Relating to Doing Business in the PRC” in the 2021
Annual Report)
We face risks and uncertainties relating to doing business in the
PRC in general, including, but not limited to, the following:
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a
severe or prolonged slowdown in the Chinese economy could
materially and adversely affect our business and our financial
condition (see page 11 of the 2021 Annual Report); |
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• |
changes in the policies, regulations, rules, and
the enforcement of laws of the PRC government may be quick with
little advance notice and could have a significant impact upon our
ability to operate profitably in the PRC (see page 11 of the
2021 Annual Report); |
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given
the Chinese government’s significant oversight and discretion over
the conduct of our business, the Chinese government may intervene
or influence our operations at any time, which could result in a
material change in our operations and/or the value of our ordinary
shares (see page 11 of the 2021 Annual Report); |
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any
actions by the Chinese government, including any decision to
intervene or influence our operations or to exert control over any
offering of securities conducted overseas and/or foreign investment
in China-based issuers, may cause us to make material changes to
our operations, may limit or completely hinder our ability to offer
or continue to offer securities to investors, and may cause the
value of such securities to significantly decline or be worthless
(see page 12 of the 2021 Annual Report); |
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• |
recent greater oversight by the Cyberspace
Administration of China, or the “CAC,” over data security,
particularly for companies seeking to list on a foreign exchange,
could adversely impact our business and our offering (see
page 12 of the 2021 Annual Report); |
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the
opinions recently issued by the General Office of the Central
Committee of the Communist Party of China and the General Office of
the State Council may subject us to additional compliance
requirements in the future (see page 13 of the 2021 Annual
Report); |
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the
tariffs by the U.S. government and the trade war between the U.S.
and China, and on a larger scale, internationally, may dampen
global growth. If the U.S. government, in the future, subjects the
products that we produce to tariffs, our business operations and
revenue may be negatively impacted (see page 13 of the 2021
Annual Report); |
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increases in labor costs in the PRC may adversely
affect our business and our profitability (see page 13 of the
2021 Annual Report); |
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we
are not in compliance with the PRC’s regulations relating to
employee benefit plans, and as a result, we may be subject to
penalties if we are not able to remediate the non-compliance (see
page 14 of the 2021 Annual Report); |
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• |
because we are a British Virgin Islands
corporation and all of our business is conducted in the PRC, you
may be unable to bring an action against us or our officers and
directors or to enforce any judgment you may obtain. It may also be
difficult for you or overseas regulators to conduct investigations
or collect evidence within China (see page 14 of the 2021
Annual Report); |
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recent joint statement by the U.S. Securities and
Exchange Commission, or the “SEC,” and the Public Company
Accounting Oversight Board (United States) (the “PCAOB”),
rule changes by Nasdaq, and the Holding Foreign Companies
Accountable Act all call for additional and more stringent criteria
to be applied to emerging market companies upon assessing the
qualification of their auditors, especially the non-U.S. auditors
who are not inspected by the PCAOB. These developments could add
uncertainties to our offering (see page 15 of the 2021 Annual
Report); |
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• |
PRC
regulations relating to offshore investment activities by PRC
residents may limit our PRC subsidiaries’ ability to increase their
registered capital or distribute profits to us, or otherwise expose
us or our PRC resident shareholders to liabilities or penalties
(see page 16 of the 2021 Annual Report); |
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• |
we
may rely on dividends and other distributions on equity paid by our
PRC subsidiaries to fund any cash and financing requirement we may
have, and any limitation on the ability of our subsidiaries to make
payments to us and any tax we are required to pay could have a
materially adverse effect on our ability to conduct our business
(see page 16 of the 2021 Annual Report); |
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• |
PRC
regulation of loans to and direct investment in PRC entities by
offshore holding companies and governmental control of currency
conversion may delay or prevent us from using proceeds from our
future financing activities to make 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 (see page 17 of the 2021 Annual
Report); |
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because our business is conducted in RMB and the
price of our ordinary shares is quoted in U.S. dollars, changes in
currency conversion rates may affect the value of your investments
(see page 18 of the 2021 Annual Report); |
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under
the EIT Law, we may be classified as a “resident enterprise” of
China, which could result in unfavorable tax consequences to us and
our non-PRC shareholders (see page 18 of the 2021 Annual
Report); |
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there
are significant uncertainties under the EIT Law relating to the
withholding tax liabilities of our PRC subsidiaries, and dividends
payable by our PRC subsidiaries to our Hong Kong subsidiary may not
qualify to enjoy certain treaty benefits (see page 18 of the
2021 Annual Report); |
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we
face uncertainty with respect to indirect transfers of equity
interests in PRC resident enterprises by their non-PRC holding
companies (see page 19 of the 2021 Annual Report); |
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• |
if we
become directly subject to the scrutiny, criticism, and negative
publicity involving U.S.-listed Chinese companies, we may have to
expend significant resources to investigate and resolve the matter
which could harm our business operations, stock price, and
reputation (see page 19 of the 2021 Annual
Report); |
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• |
the
disclosures in our reports and other filings with the SEC and our
other public pronouncements are not subject to the scrutiny of any
regulatory bodies in the PRC (see page 19 of the 2021 Annual
Report); and |
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• |
the
M&A Rules and certain other PRC regulations establish
complex procedures for certain acquisitions of Chinese companies by
foreign investors, which could make it more difficult for us to
pursue growth through acquisitions in China (see page 20 of
the 2021 Annual Report). |
Risks Relating to Our Ordinary Shares and the Trading Market
(for a more detailed discussion, see “Item 3. Key Information—D.
Risk Factors—Risks Relating to Our Ordinary Shares and the Trading
Market” in the 2021 Annual Report)
In addition to the risks described above, we are subject to general
risks and uncertainties relating to our ordinary shares and the
trading market, including, but not limited to, the following:
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substantial future sales of our ordinary shares
or the anticipation of future sales of our ordinary shares in the
public market could cause the price of our ordinary shares to
decline (see page 20 of the 2021 Annual Report); |
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we do
not intend to pay dividends for the foreseeable future (see
page 20 of the 2021 Annual Report); and |
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• |
because we are a foreign private issuer and have
taken advantage of exemptions from certain Nasdaq corporate
governance standards applicable to U.S. issuers, you will have less
protection than you would have if we were a domestic issuer (see
page 22 of the 2021 Annual Report). |
Corporate Information
Our principal executive offices are located at Building 2-B,
Room 206, No. 268 Shiniu Road, Liandu District, Lishui
City, Zhejiang Province, the PRC, and our phone number is
+86-571-87555823. Our registered office in the British Virgin
Islands is located at 2/F, Palm Grove House, P.O. Box 3340,
Road Town, Tortola, British Virgin Islands, and the phone number of
our registered office is +1 (284) 393-6004. We maintain a corporate
website at www.cneny.com. The information contained in, or
accessible from, our website or any other website does not
constitute a part of this prospectus. Our agent for service of
process in the United States is CN Energy USA Inc., located at 900
19th Street NW, Floor 5, Squad 23, Washington, DC 20006.
RISK FACTORS
Investing in our securities involves risks. Before making an
investment decision, you should carefully consider the risks
described under “Risk Factors” in the applicable prospectus
supplement and under the heading “Item 3. Key Information—D. Risk
Factors” in the 2021 Annual Report, which is incorporated in this
prospectus by reference, together with any other information
appearing or incorporated by reference in this prospectus and in
any accompanying prospectus supplement, in light of your particular
investment objectives and financial circumstances. In addition to
those risk factors, there may be additional risks and uncertainties
that our management is not aware of or deems immaterial. Our
business, financial condition, or results of operations could be
materially and adversely affected by any of these risks. The
trading price of our securities could decline due to any of these
risks, and you may lose all or part of your investment.
OFFER STATISTICS AND EXPECTED
TIMETABLE
We may, from time to time, offer and sell any combination of the
securities described in this prospectus up to a total dollar amount
of $100,000,000 in one or more offerings. The securities offered
under this prospectus may be offered separately, together, or in
separate series, and in amounts, at prices, and on terms to be
determined at the time of sale. We will keep the registration
statement of which this prospectus is a part effective until such
time as all of the securities covered by this prospectus have been
disposed of pursuant to such registration statement.
CAPITALIZATION AND
INDEBTEDNESS
Our capitalization will be set forth in the applicable prospectus
supplement or in a report on Form 6-K subsequently furnished
to the SEC and specifically incorporated by reference into this
prospectus.
DILUTION
If required, we will set forth in a prospectus supplement the
following information regarding any material dilution of the equity
interests of investors purchasing securities in an offering under
this prospectus:
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the net tangible book value per share of our
equity securities before and after the offering; |
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the amount of the increase in such net tangible
book value per share attributable to the cash payments made by
purchasers in the offering; and |
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the amount of the immediate dilution from the
public offering price which will be absorbed by such
purchasers. |
USE OF PROCEEDS
We intend to use the net proceeds from the sale of securities we
offer as indicated in the applicable prospectus supplement,
information incorporated by reference, or free writing
prospectus.
DESCRIPTION OF SHARE
CAPITAL
The following description of our share capital and provisions of
our second amended and restated memorandum and articles of
association are summaries and do not purport to be complete.
References are made to our second amended and restated memorandum
and articles of association, forms of which are filed as an exhibit
to the registration statement of which this prospectus is a part
(and which is referred to in this section as, respectively, the
“memorandum” and the “articles”).
Ordinary Shares
We are authorized to issue an unlimited number of no-par value
ordinary shares. As of the date of this prospectus, an aggregate of
23,083,627 ordinary shares are issued and outstanding. All of our
issued and outstanding ordinary shares are fully paid and
non-assessable. Ordinary shares are issued in registered form.
Ordinary shares have the following characteristics:
Voting. At each meeting of shareholders, each holder of
ordinary shares who is present in person or by proxy (or, in the
case of a shareholder being a corporation, by its duly authorized
representative) will have one vote for each share that such
shareholder holds.
Ranking. Subject to the liquidation preference for
Convertible Preferred Shares as set out in the memorandum and the
articles, each holder of ordinary shares has an equal share in the
distribution of the surplus assets of the Company.
Dividends. Holders of ordinary shares are entitled to an
equal share in any dividend paid to the ordinary shares class.
Convertible Preferred Shares
We are authorized to issue an unlimited number of no-par
Convertible Preferred Shares. As of the date of this prospectus, no
Convertible Preferred Shares are issued and outstanding.
Convertible Preferred Shares are issued in registered form.
Convertible Preferred Shares have the following
characteristics:
Conversion. Upon our register of members being updated at
the closing of our initial public offering, all issued and
outstanding Convertible Preferred Shares are converted
automatically at a 10% discount to the initial public offering
price.
Voting. Prior to conversion of Convertible Preferred Shares,
holders of Convertible Preferred Shares do not have the right to
vote as a shareholder, and upon conversion of Convertible Preferred
Shares, holders of then ordinary shares have the same voting rights
and vote together with the holders of ordinary shares, and not as a
separate class, except where otherwise required by law.
Ranking. Convertible Preferred Shares, before conversion,
are senior to ordinary shares with respect to distribution rights
upon liquidation, to receive a payment per Convertible Preferred
Share, equal to the price per share for the issue of Convertible
Preferred Share.
Dividends. Holders of Convertible Preferred Shares are
entitled to an equal share in any dividend paid to the Convertible
Preferred Share class.
Cumulative Voting Rights
There is nothing under British Virgin Islands law which
specifically prohibits or restrict the creation of cumulative
voting rights for the election of our directors. Our second amended
and restated memorandum and articles do not provide for cumulative
voting for elections of directors.
Variation of Rights of Shares
All or any of the rights attached to any class of shares may,
subject to the provisions of the BVI Act, be varied only with the
consent in writing of, or pursuant to a resolution passed at a
meeting by the holders of more than 50% of the issued shares of
that class.
Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our second amended and restated
memorandum and articles on the rights of non-resident or foreign
shareholders to hold or exercise voting rights on our shares. In
addition, there are no provisions in our second amended and
restated memorandum and articles governing the ownership threshold
above which shareholder ownership must be disclosed.
Redemption of Shares
Subject to the provisions of the BVI Act, we may issue shares on
terms that are subject to redemption, at our option or at the
option of the holders, on such terms and in such manner as may be
determined by our second amended and restated memorandum and
articles of association and subject to any applicable requirements
imposed from time to time by, the BVI Act, the SEC, or by any
recognized stock exchange on which our securities are listed.
Changes in the Number of Shares We Are Authorized to Issue and
Those in Issue
Subject to the BVI Act and our second amended and restated
memorandum and articles, we may from time to time by resolution of
our board of directors or resolution of members (as may be
appropriate):
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amend
our memorandum to increase or decrease the maximum number of
ordinary shares we are authorized to issue; |
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divide our authorized and issued ordinary shares
into a larger number of ordinary shares; |
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combine our authorized and issued ordinary shares
into a smaller number of ordinary shares; and |
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create new classes of shares with preference to
be determined by resolution of the board of directors to amend the
memorandum and articles to create new classes of shares with such
preferences at the time of authorization. |
Subject to the provisions of the BVI Act and our articles regarding
redemption, purchase, and issuance of the shares, the directors
have general and unconditional authority to issue and allot (with
or without confirming rights of renunciation), grant options over
or otherwise deal with any unissued shares to such persons, at such
times and on such terms and conditions as they may decide. Such
authority could be exercised by the directors to issue shares which
carry rights and privileges that are preferential to the rights
attaching to ordinary shares. The directors may refuse to accept
any application for shares, and may accept any application in whole
or in part, for any reason or for no reason.
Calls on Shares and Forfeiture of Shares
Our board of directors may, on the terms established at the time of
the issuance of such shares or as otherwise agreed, make calls upon
shareholders for any amounts unpaid on their shares in a notice
served to such shareholders at least 14 days prior to the specified
time of payment. The shares that have been called upon and remain
unpaid are subject to forfeiture.
Listing
On February 5, 2021, our ordinary shares commenced trading on
the Nasdaq Capital Market under the symbol “CNEY.”
Transfer Agent and Registrar
The transfer agent and registrar for our ordinary shares is VStock
Transfer, LLC, at 18 Lafayette Place, Woodmere, NY 11598.
Transfer of Shares
Subject to the restrictions in our second amended and restated
memorandum and articles and applicable securities laws, any of our
shareholders may transfer all or any of his or her ordinary shares
by written instrument of transfer signed by the transferor and
containing the name and address of the transferee or in any other
manner as may be permitted in accordance with applicable exchange
rules or requirements of the Nasdaq Capital Market or by any
recognized stock exchange on which our securities are listed. Our
board of directors may not resolve to refuse or delay the transfer
of any ordinary share unless the shareholder has failed to pay an
amount due in respect of it.
Meetings of Shareholders
Under our second amended and restated memorandum and articles, a
copy of the notice of any meeting of shareholders shall be given
not less than seven days before the date of the proposed meeting to
those persons whose names appear as shareholders in the register of
members on the date of the notice and are entitled to vote at the
meeting and our directors. Our board of directors may call a
meeting of shareholders upon the written request of shareholders
holding at least 30% of our issued voting shares. In addition, our
board of directors may call a meeting of shareholders on its own
motion. A meeting of shareholders may be called on short notice if
at least 90% of the shares entitled to vote on the matters to be
considered at the meeting have agreed to short notice of the
meeting, or if all members holding shares entitled to vote on all
or any matters to be considered at the meeting have waived notice
and presence at the meeting shall be deemed to constitute waiver
for this purpose.
At any meeting of shareholders, a quorum will be present if there
are shareholders present in person or by proxy representing more
than one-half of the issued shares entitled to vote on the
resolutions to be considered at the meeting. Such quorum may be
represented by only a single shareholder or proxy. If no quorum is
present within two hours of the start time of the meeting, the
meeting shall be dissolved if it was requested by shareholders. In
any other case, the meeting shall be adjourned to the next business
day, and if shareholders representing not less than one-third of
the votes of the ordinary shares or class or series of shares
entitled to vote on the matters to be considered at the meeting are
present within one hour of the start time of the adjourned meeting,
a quorum will be present. If not, the meeting will be dissolved. No
business may be transacted at any meeting of shareholders unless a
quorum is present at the commencement of business. If present, the
chairperson of our board of directors shall be the chairperson
presiding at any meeting of the shareholders. If the chairperson of
our board is not present, or there is no such chairperson, then the
members present shall choose a shareholder to act to chairperson
the meeting of the shareholders. If the shareholders are unable to
choose a chairperson for any reason, then the person representing
the greatest number of voting shares present in person or by proxy
shall preside as chairperson, failing which the oldest individual
member or member representative shall take the chair.
A corporation that is a shareholder shall be deemed for the purpose
of our second amended and restated memorandum and articles to be
present in person if represented by its duly authorized
representative who has been authorized to do so by resolutions of
its directors or other governing body. This duly authorized
representative shall be entitled to exercise the same powers on
behalf of the corporation which he represents as that corporation
could exercise if it were our individual shareholder.
Meetings of Directors
Our business and affairs are managed by our board of directors, who
will make decisions by voting on resolutions of directors. Our
directors are free to meet at such times and in such manner and
places within or outside the British Virgin Islands as the
directors determine to be necessary or desirable. A director must
be given not less than three business days’ notice of a meeting of
directors. A meeting of directors may be called on short notice if
all of the directors entitled to vote on the matters to be
considered at the meeting have waived notice and presence at the
meeting shall be deemed to constitute waiver for this purpose
(unless that director objects in writing before or at the meeting).
At any meeting of directors, a quorum will be present if more than
one-half of the total number of directors is present, unless there
are only two directors in which case the quorum is two. An action
that may be taken by the directors at a meeting may also be taken
by a resolution of directors consented to in writing by a majority
of the directors.
Directors’ Interest
A transaction entered into by the Company in respect of which a
director is interested is voidable by the Company unless the
director’s interest was disclosed in accordance with the memorandum
and the articles prior to the Company entering into the
transaction. A director who is interested in a transaction entered
into or to be entered into by the Company may vote on a matter
relating to the transaction.
Protection of Minority Shareholders and Shareholder
Action
The enforcement of our rights will ordinarily be a matter for our
directors. However, in certain limited circumstances, a shareholder
may have the right to seek certain remedies against us in the event
the directors are in breach of their duties under the BVI Act.
Pursuant to Section 184B of the BVI Act, if a company or a
director of a company engages in, proposes to engage in, or has
engaged in, conduct that contravenes the provisions of the BVI Act
or the memorandum or articles of association of the company, a BVI
court may, on application of a shareholder or a director of the
company, make an order directing the company or director to comply
with, or restraining the company or director from engaging in
conduct that contravenes, the BVI Act or the memorandum or
articles. Furthermore, pursuant to Section 184I of the BVI
Act, a shareholder of a company who considers that the affairs of
the company have been, are being, or are likely to be, conducted in
a manner that is, or any acts of the company have been, or are
likely to be, oppressive, unfairly discriminatory, or unfairly
prejudicial to him in that capacity, may apply to the BVI court for
an order which can, if the court considers that it is just and
equitable to do so, require the company or any other person to pay
compensation to the shareholders (among various other potential
orders and remedies). Under Section 184G of the BVI Act, a
shareholder of a company may bring an action against the company
for breach of a duty owed by the company to him as a
shareholder.
Under Section 184C of the BVI Act, a shareholder also may,
with the permission of the BVI court, bring an action or intervene
in a matter in the name of the company, in certain circumstances.
Such actions are known as derivative actions. The BVI court may
only grant permission to bring a derivative action where the
following circumstances apply: (i) the company does not intend
to bring, diligently continue or defend or discontinue proceedings;
or (ii) it is in the interests of the company that the conduct
of the proceedings not be left to the directors or to the
determination of the shareholders as a whole.
When considering whether to grant leave, the BVI court is also
required to have regard to the following matters: whether the
shareholder is acting in good faith; whether a derivative action is
in the interests of the company, taking into account the directors’
views on commercial matters; whether the proceedings are likely to
succeed; the costs of the proceedings in relation to the relief
likely to be obtained; and whether an alternative remedy is
available.
Any shareholder of a company may apply to BVI court under the
Insolvency Act, 2003 of the BVI for the appointment of a liquidator
to liquidate the company and the court may appoint a liquidator for
the company if it is of the opinion that it is just and equitable
to do so.
Generally, any other claims against a BVI company by its
shareholders must be based on the general laws of contract or tort
applicable in the BVI or their individual rights as shareholders as
established by the BVI Act or the company’s memorandum and articles
of association. There are also common law rights for the protection
of shareholders that may be invoked, largely derived from English
common law. Under general English company law known as the
rule in Foss v. Harbottle, a court will generally refuse
to interfere with the management of a company at the insistence of
a minority of its shareholders who express dissatisfaction with the
conduct of the company’s affairs by the majority or the board of
directors. However, every shareholder is entitled to seek to have
the affairs of the company conducted properly according to law and
the constituent documents of the corporation. As such, if those who
control the company have persistently disregarded the requirements
of company law or the provisions of the company’s memorandum and
articles of association, then the courts may grant relief.
Generally, the areas in which the courts may intervene are the
following: a company is acting or proposing to act illegally or
beyond the scope of its authority; the act complained of, although
not beyond the scope of the authority, could only be effected if
duly authorized by more than the number of votes which have
actually been obtained; the individual rights of the plaintiff
shareholder have been infringed or are about to be infringed; or
those who control the company are perpetrating a “fraud on the
minority.”
Inspection of Books and Records
Under the BVI Act, members of the general public, on payment of a
nominal fee, can obtain copies of the public records of a company
available at the office of the Registrar of Corporate Affairs which
will include the company’s certificate of incorporation, its
memorandum and articles of association (with any amendments) and
records of license fees paid to date and will also disclose any
articles of dissolution, articles of merger and a register of
charges if the company has elected to file such a register.
Our members are also entitled, upon giving written notice to us, to
inspect (i) our memorandum and articles of association,
(ii) the register of members, (iii) the register of
directors, and (iv) minutes of meetings and resolutions of
members and of those classes of members of which that member is a
member, and to make copies and take extracts from the documents and
records referred to in (i) to (iv) above. However, our
directors may, if they are satisfied that it would be contrary to
the company’s interests to allow a member to inspect any document,
or part of a document specified in (ii) to (iv) above,
refuse to permit the member to inspect the document or limit the
inspection of the document, including limiting the making of copies
or the taking of extracts or records. See “Where You Can Find
Additional Information.” Where a company fails or refuses to permit
a member to inspect a document or permits a member to inspect a
document subject to limitations, that member may apply to the
British Virgin Islands court for an order that he should be
permitted to inspect the document or to inspect the document
without limitation.
Liquidation
As permitted by the BVI Act and our second amended and restated
memorandum and articles, we may be voluntarily liquidated under
Part XII of the BVI Act by resolution of directors and
resolution of shareholders if our assets exceed our liabilities and
we are able to pay our debts as they fall due. We also may be wound
up in circumstances where we are insolvent in accordance with the
terms of the BVI Insolvency Act, 2003 (as amended).
If we are wound up and the assets available for distribution among
our shareholders are more than sufficient to repay all amounts paid
to us on account of the issue of shares immediately prior to the
winding up, the excess shall be distributable pari passu among
those shareholders in proportion to the amount paid up immediately
prior to the winding up on the shares held by them, respectively.
If we are wound up and the assets available for distribution among
the shareholders as such are insufficient to repay the whole of the
amounts paid to us on account of the issue of shares, those assets
shall be distributed so that, to the greatest extent possible, the
losses shall be borne by the shareholders in proportion to the
amounts paid up immediately prior to the winding up on the shares
held by them, respectively. If we are wound up, the liquidator
appointed by us may, in accordance with the BVI Act, divide among
our shareholders in specie or kind the whole or any part of our
assets (whether they shall consist of property of the same kind or
not) and may, for such purpose, set such value as the liquidator
deems fair upon any property to be divided and may determine how
such division shall be carried out as between the shareholders or
different classes of shareholders.
Exclusive Jurisdiction of Certain Actions
Our second amended and restated articles provide that, to the
fullest extent permitted by applicable law, unless our board of
directors consents in writing to the selection of an alternative
forum, the courts of the British Virgin Islands shall have
exclusive jurisdiction to hear and determine:
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(i) any dispute, suit, action, proceedings,
controversy, or claim of any kind arising out of or in connection
with our memorandum and/or articles, including, without limitation,
claims for set-off and counterclaims and any dispute, suit, action,
proceedings, controversy, or claim of any kind arising out of or in
connection with: (x) the creation, validity, effect,
interpretation, performance, or non-performance of, or the legal
relationships established by, our memorandum and/or articles; or
(y) any non-contractual obligations arising out of or in
connection with our memorandum and/or articles; or |
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(ii) any dispute, suit, action (including,
without limitation, any derivative action or proceeding brought on
behalf or in our name or any application for permissions to bring a
derivative action), proceedings, controversy, or claim of any kind
relating or connected to us, our board of directors, officers,
management, or shareholders arising out of or in connection with
the BVI Act, the Insolvency Act, 2003 of the British Virgin Islands
as amended from time to time, any other statute, rule, or common
law of the British Virgin Islands affecting any relationship
between us, our shareholders, and/or our directors and officers (or
any of them) or any rights and duties established thereby
(including, without limitation, Division 3 of Part VI and
Part XI of the Act and section 162(1)(b) of the
Insolvency Act, 2003, and fiduciary or other duties owed by any
director, officer, or shareholder of the Company to the Company or
the Company’s shareholders). |
To the fullest extent permitted by applicable laws, unless our
board of directors consents in writing to the selection of an
alternative forum, the federal district courts of the United States
of America shall be the exclusive forum for the resolution of any
complaint asserting a cause of action arising under the Securities
Act or the Exchange Act.
Notwithstanding the foregoing, we note that holders of our ordinary
shares cannot waive compliance with the federal securities laws and
the rules and regulations thereunder. Section 27 of the
Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any duty or liability created by the Exchange
Act or the rules and regulations thereunder, and
Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all suits brought to
enforce any duty or liability created by the Securities Act or the
rules and regulations thereunder. As a result, the exclusive
jurisdiction provision will not preclude or contract the scope of
exclusive federal or concurrent jurisdiction for actions brought
under the Securities Act or the Exchange Act, or the respective
rules and regulations promulgated thereunder.
Although we believe this provision benefits us by providing
increasing consistency in the application of BVI law in the types
of lawsuits to which it applies, the provision may have the effect
of discouraging lawsuits against our directors and officers or
limit investors’ ability to bring claims in a judicial forum that
they find favorable. See “Risk Factors—Risks Relating to our
Ordinary Shares—The exclusive jurisdiction provision in our second
amended and restated articles of association may limit our
shareholders’ ability to obtain a favorable judicial forum for
disputes with us or our directors, officers, or employees” in the
2021 Annual Report.
Differences in Corporate Law
The BVI Act and the laws of the British Virgin Islands affecting
British Virgin Islands companies like us and our shareholders
differ from laws applicable to U.S. corporations and their
shareholders. Set forth below is a summary of the significant
differences between the provisions of the laws of the British
Virgin Islands applicable to us and the laws applicable to
companies incorporated under the Delaware General Corporation Law
in the United States and their shareholders.
Mergers and Similar Arrangements
Under the laws of the British Virgin Islands, two or more companies
may merge or consolidate in accordance with Section 170 of the
BVI Act. A merger means the merging of two or more constituent
companies into one of the constituent companies (the “surviving
company”) and a consolidation means the uniting of two or more
constituent companies into a new company (the “consolidated
company”). The procedure for a merger or consolidation between the
company and another company (which need not be a British Virgin
Islands company, and which may be the company’s parent or
subsidiary, but need not be) is set out in the BVI Act. In order to
merge or consolidate, the directors of each constituent company
must approve a written plan of merger or consolidation, which with
the exception of a merger between a parent company and its
subsidiary, must also be approved by a resolution of a majority of
the shareholders voting at a quorate meeting of shareholders or by
written resolution of the shareholders of the British Virgin
Islands company or British Virgin Islands companies which are to
merge. While a director may vote on the plan of merger or
consolidation, or any other matter, even if he has a financial
interest in the plan, the interested director must disclose the
interest to all other directors of the company promptly upon
becoming aware of the fact that he is interested in a transaction
entered into or to be entered into by the company. A transaction
entered into by our Company in respect of which a director is
interested (including a merger or consolidation) is voidable by us
unless the director’s interest was (a) disclosed to the board
prior to the transaction or (b) the transaction is
(i) between the director and the company and (ii) the
transaction is in the ordinary course of the company’s business and
on usual terms and conditions. Notwithstanding the above, a
transaction entered into by the company is not voidable if the
material facts of the interest are known to the shareholders and
they approve or ratify it or the company received fair value for
the transaction. In any event, all shareholders must be given a
copy of the plan of merger or consolidation irrespective of whether
they are entitled to vote at the meeting to approve the plan of
merger or consolidation. A foreign company which is able under the
laws of its foreign jurisdiction to participate in the merger or
consolidation is required by the BVI Act to comply with the laws of
that foreign jurisdiction in relation to the merger or
consolidation. The shareholders of the constituent companies are
not required to receive shares of the surviving or consolidated
company but may receive debt obligations or other securities of the
surviving or consolidated company, other assets, or a combination
thereof. Further, some or all of the shares of a class or series
may be converted into a kind of asset while the other shares of the
same class or series may receive a different kind of asset. As
such, not all the shares of a class or series must receive the same
kind of consideration. After the plan of merger or consolidation
has been approved by the directors and authorized, if required, by
a resolution of the shareholders, articles of merger or
consolidation are executed by each company and filed with the
Registrar of Corporate Affairs in the British Virgin Islands. The
merger is effective on the date that the articles of merger are
registered with the Registrar or on such subsequent date, not
exceeding thirty days, as is stated in the articles of merger or
consolidation.
As soon as a merger becomes effective: (a) the surviving
company or consolidated company (so far as is consistent with its
memorandum and articles of association, as amended or established
by the articles of merger or consolidation) has all rights,
privileges, immunities, powers, objects and purposes of each of the
constituent companies; (b) in the case of a merger, the
memorandum and articles of association of any surviving company are
automatically amended to the extent, if any, that changes to its
memorandum and articles of association are contained in the
articles of merger or, in the case of a consolidation, the
memorandum and articles of association filed with the articles of
consolidation are the memorandum and articles of the consolidated
company; (c) assets of every description, including
choses-in-action and the business of each of the constituent
companies, immediately vest in the surviving company or
consolidated company; (d) the surviving company or
consolidated company is liable for all claims, debts, liabilities
and obligations of each of the constituent companies; (e) no
conviction, judgment, ruling, order, claim, debt, liability or
obligation due or to become due, and no cause existing, against a
constituent company or against any member, director, officer or
agent thereof, is released or impaired by the merger or
consolidation; and (f) no proceedings, whether civil or
criminal, pending at the time of a merger by or against a
constituent company, or against any member, director, officer or
agent thereof, are abated or discontinued by the merger or
consolidation; but: (i) the proceedings may be enforced,
prosecuted, settled or compromised by or against the surviving
company or consolidated company or against the member, director,
officer or agent thereof; as the case may be; or (ii) the
surviving company or consolidated company may be substituted in the
proceedings for a constituent company. The Registrar of Corporate
Affairs shall strike off the register of companies each constituent
company that is not the surviving company in the case of a merger
and all constituent companies in the case of a consolidation. If
the directors determine it to be in the best interests of the
company, it is also possible for a merger to be approved as a Court
approved plan of arrangement or scheme of arrangement in accordance
with the BVI Act.
A shareholder may dissent from (a) a merger if the company is
a constituent company, unless the company is the surviving company
and the member continues to hold the same or similar shares;
(b) a consolidation if the company is a constituent company;
(c) any sale, transfer, lease, exchange or other disposition
of more than 50 per cent in value of the assets or business of the
company if not made in the usual or regular course of the business
carried on by the company but not including: (i) a disposition
pursuant to an order of the court having jurisdiction in the
matter, (ii) a disposition for money on terms requiring all or
substantially all net proceeds to be distributed to the members in
accordance with their respective interest within one year after the
date of disposition, or (iii) a transfer pursuant to the power
of the directors to transfer assets for the protection thereof;
(d) a compulsory redemption of 10 per cent, or fewer of the
issued shares of the company required by the holders of 90 percent,
or more of the shares of the company pursuant to the terms of the
BVI Act; and (e) a plan of arrangement, if permitted by the
British Virgin Islands Court (each, an Action). A shareholder
properly exercising his dissent rights is entitled to a cash
payment equal to the fair value of his shares.
A shareholder dissenting from an Action must object in writing to
the Action before the vote by the shareholders on the merger or
consolidation, unless notice of the meeting was not given to the
shareholder. If the merger or consolidation is approved by the
shareholders, the company must give notice of this fact to each
shareholder within 20 days who gave written objection. Such
objection shall include a statement that the members proposes to
demand payment for his or her shares if the Action is taken. These
shareholders then have 20 days to give to the company their written
election in the form specified by the BVI Act to dissent from the
Action, provided that in the case of a merger, the 20 days starts
when the plan of merger is delivered to the shareholder. Upon
giving notice of his election to dissent, a shareholder ceases to
have any shareholder rights except the right to be paid the fair
value of his shares. As such, the merger or consolidation may
proceed in the ordinary course notwithstanding his dissent. Within
seven days of the later of the delivery of the notice of election
to dissent and the effective date of the merger or consolidation,
the company shall make a written offer to each dissenting
shareholder to purchase his shares at a specified price per share
that the company determines to be the fair value of the shares. The
company and the shareholder then have 30 days to agree upon the
price. If the company and a shareholder fail to agree on the price
within the 30 days, then the company and the shareholder shall,
within 20 days immediately following the expiration of the 30-day
period, each designate an appraiser and these two appraisers shall
designate a third appraiser. These three appraisers shall fix the
fair value of the shares as of the close of business on the day
prior to the shareholders’ approval of the transaction without
taking into account any change in value as a result of the
transaction.
Shareholders’ Suits
There are both statutory and common law remedies available to our
shareholders as a matter of British Virgin Islands Law. These are
summarized below:
Prejudiced Members
A shareholder who considers that the affairs of the company have
been, are being, or are likely to be, conducted in a manner that
is, or any act or acts of the company have been, or are, likely to
be oppressive, unfairly discriminatory or unfairly prejudicial to
him in that capacity, can apply to the court under
Section 184I of the BVI Act, inter alia, for an order that his
shares be acquired, that he be provided compensation, that the
Court regulate the future conduct of the company, or that any
decision of the company which contravenes the BVI Act or our second
amended and restated memorandum and articles of association be set
aside.
Derivative Actions
Section 184C of the BVI Act provides that a shareholder of a
company may, with the leave of the Court, bring an action in the
name of the company in certain circumstances to redress any wrong
done to it. Such actions are known as derivative actions. The
British Virgin Islands Court may only grant permission to bring a
derivative action where the following circumstances apply:
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the
company does not intend to bring, diligently continue or defend or
discontinue proceedings; and |
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it is
in the interests of the company that the conduct of the proceedings
not be left to the directors or to the determination of the
shareholders as a whole. |
When considering whether to grant leave, the British Virgin Islands
Court is also required to have regard to the following matters:
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whether the shareholder is acting in good
faith; |
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whether a derivative action is in the company’s
best interests, taking into account the directors’ views on
commercial matters; |
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whether the action is likely to
proceed; |
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the
cost of the proceedings; and |
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whether an alternative remedy is
available. |
Just and Equitable Winding Up
In addition to the statutory remedies outlined above, shareholders
can also petition the British Virgin Islands Court for the winding
up of a company under the BVI Insolvency Act, 2003 (as amended) for
the appointment of a liquidator to liquidate the company and the
court may appoint a liquidator for the company if it is of the
opinion that it is just and equitable for the court to so order.
Save in exceptional circumstances, this remedy is generally only
available where the company has been operated as a
quasi-partnership and trust and confidence between the partners has
broken down.
Indemnification of Directors and Executive Officers and
Limitation of Liability
Our second amended and restated memorandum and articles of
association provide that, subject to certain limitations, we
indemnify against all expenses, including legal fees, and against
all judgments, fines and amounts paid in settlement and reasonably
incurred in connection with legal, administrative or investigative
proceedings for any person who:
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is or
was a party or is threatened to be made a party to any threatened,
pending or completed proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that the
person is or was our director; or |
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is or
was, at our request, serving as a director or officer of, or in any
other capacity is or was acting for, another body corporate or a
partnership, joint venture, trust or other enterprise. |
These indemnities only apply if the person acted honestly and in
good faith with a view to our best interests and, in the case of
criminal proceedings, the person had no reasonable cause to believe
that his conduct was unlawful. The decision of the directors as to
whether the person acted honestly and in good faith and with a view
to the best interests of the company and as to whether the person
had no reasonable cause to believe that his conduct was unlawful
and is, in the absence of fraud, sufficient for the purposes of the
memorandum and articles of association, unless a question of law is
involved. The termination of any proceedings by any judgment,
order, settlement, conviction or the entering of a nolle prosequi
does not, by itself, create a presumption that the person did not
act honestly and in good faith and with a view to the best
interests of the company or that the person had reasonable cause to
believe that his conduct was unlawful.
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
advised that in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
Anti-Takeover Provisions in Our Second Amended and Restated
Memorandum and Articles
Some provisions of our second amended and restated articles of
association may discourage, delay or prevent a change in control of
our Company or management that shareholders may consider favorable.
Under the BVI Act there are no provisions, which specifically
prevent the issuance of preferred shares or any such other “poison
pill” measures. Our second amended and restated memorandum and
articles of association also do not contain any express
prohibitions on the issuance of any preferred shares. Therefore,
the directors without the approval of the holders of ordinary
shares may issue preferred shares that have characteristics that
may be deemed to be anti-takeover. Additionally, such a designation
of shares may be used in connection with plans that are poison pill
plans. However, under British Virgin Islands law, our directors in
the exercise of their powers granted to them under our second
amended and restated memorandum and articles of association and
performance of their duties, are required to act honestly and in
good faith in what the director believes to be in the best
interests of our Company.
Directors’ Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation
has a fiduciary duty to the corporation and its shareholders. This
duty has two components: the duty of care and the duty of loyalty.
The duty of care requires that a director act in good faith, with
the care that an ordinarily prudent person would exercise under
similar circumstances.
Under this duty, a director must inform himself of, and disclose to
shareholders, all material information reasonably available
regarding a significant transaction.
The duty of loyalty requires that a director act in a manner he
reasonably believes to be in the best interests of the corporation.
He must not use his corporate position for personal gain or
advantage. This duty prohibits self-dealing by a director and
mandates that the best interest of the corporation and its
shareholders take precedence over any interest possessed by a
director, officer or controlling shareholder and not shared by the
shareholders generally. In general, actions of a director are
presumed to have been made on an informed basis, in good faith and
in the honest belief that the action taken was in the best
interests of the corporation. However, this presumption may be
rebutted by evidence of a breach of one of the fiduciary duties.
Should such evidence be presented concerning a transaction by a
director, a director must prove the procedural fairness of the
transaction and that the transaction was of fair value to the
corporation.
Under British Virgin Islands law, our directors owe fiduciary
duties both at common law and under statute including, among
others, a statutory duty to act honestly, in good faith, for a
proper purpose and with a view to what the directors believe to be
in the best interests of the company. Our directors are also
required, when exercising powers or performing duties as a
director, to exercise the care, diligence and skill that a
reasonable director would exercise in comparable circumstances,
taking into account without limitation, the nature of the company,
the nature of the decision and the position of the director and the
nature of the responsibilities undertaken. In the exercise of their
powers, our directors must ensure neither they nor the company acts
in a manner which contravenes the BVI Act or our second amended and
restated memorandum and articles of association. A shareholder has
the right to seek damages for breaches of duties owed to us by our
directors.
Pursuant to the BVI Act and our second amended and restated
memorandum and articles, a director of a company who has an
interest in a transaction and who has declared such interest to the
other directors, may:
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(a) vote on a matter relating to the
transaction; |
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(b) attend a meeting of directors at which a
matter relating to the transaction arises and be included among the
directors present at the meeting for the purposes of a quorum;
and |
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(c) sign a document on behalf of the
Company, or do any other thing in his capacity as a director, that
relates to the transaction. |
In certain limited circumstances, a shareholder has the right to
seek various remedies against the company in the event the
directors are in breach of their duties under the BVI Act. Pursuant
to Section 184B of the BVI Act, if a company or director of a
company engages in, or proposes to engage in or has engaged in,
conduct that contravenes the provisions of the BVI Act or the
memorandum or articles of association of the company, the British
Virgin Islands Court may, on application of a shareholder or
director of the company, make an order directing the company or
director to comply with, or restraining the company or director
from engaging in conduct that contravenes the BVI Act or the
memorandum or articles. Furthermore, pursuant to section
184I(1) of the BVI Act a shareholder of a company who
considers that the affairs of the company have been, are being or
likely to be, conducted in a manner that is, or any acts of the
company have been, or are likely to be oppressive, unfairly
discriminatory, or unfairly prejudicial to him in that capacity,
may apply to the British Virgin Islands Court for an order which,
inter alia, can require the company or any other person to pay
compensation to the shareholders.
Shareholder Action by Written Consent
Under the Delaware General Corporation Law, a corporation may
eliminate the right of shareholders to act by written consent by
amendment to its certificate of incorporation. British Virgin
Islands law provides that, subject to the memorandum and articles
of association of a company, an action that may be taken by members
of the company at a meeting may also be taken by a resolution of
members consented to in writing.
Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the
right to put any proposal before the annual meeting of
shareholders, provided it complies with the notice provisions in
the governing documents. A special meeting may be called by the
board of directors or any other person authorized to do so in the
governing documents, but shareholders may be precluded from calling
special meetings. British Virgin Islands law and our second amended
and restated memorandum and articles of association allow our
shareholders holding 30% or more of the votes of the issued and
outstanding voting shares to requisition a shareholders’ meeting.
There is no requirement under British Virgin Islands law to hold
shareholders’ annual general meetings, but our second amended and
restated memorandum and articles of association do permit the
directors to call such a meeting. The location of any shareholders’
meeting can be determined by the board of directors and can be held
anywhere in the world.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for
elections of directors is not permitted unless the corporation’s
certificate of incorporation specifically provides for it.
Cumulative voting potentially facilitates the representation of
minority shareholders on a board of directors since it permits the
minority shareholder to cast all the votes to which the shareholder
is entitled on a single director, which increases the shareholder’s
voting power with respect to electing such director. As permitted
under the British Virgin Islands law, our second amended and
restated memorandum and articles do not provide for cumulative
voting. As a result, our shareholders are not afforded any less
protections or rights on this issue than shareholders of a Delaware
corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a
corporation with a classified board may be removed only for cause
with the approval of a majority of the outstanding shares entitled
to vote, unless the certificate of incorporation provides
otherwise. Under our second amended and restated memorandum and
articles of association, directors can be removed from office, with
or without cause, by a resolution of shareholders. Directors can
also be removed by a resolution of directors passed at a meeting of
directors called for the purpose of removing the director or for
purposes including the removal of the director.
Transactions With Interested Shareholders
The Delaware General Corporation Law contains a business
combination statute applicable to Delaware public corporations
whereby, unless the corporation has specifically elected not to be
governed by such statute by amendment to its certificate of
incorporation, it is prohibited from engaging in certain business
combinations with an “interested shareholder” for three years
following the date that such person becomes an interested
shareholder. An interested shareholder generally is a person or
group who or which owns or owned 15% or more of the target’s
outstanding voting shares within the past three years. This has the
effect of limiting the ability of a potential acquirer to make a
two-tiered bid for the target in which all shareholders would not
be treated equally. The statute does not apply if, among other
things, prior to the date on which such shareholder becomes an
interested shareholder, the board of directors approves either the
business combination or the transaction which resulted in the
person becoming an interested shareholder. This encourages any
potential acquirer of a Delaware public corporation to negotiate
the terms of any acquisition transaction with the target’s board of
directors. British Virgin Islands law has no comparable statute and
our second amended and restated memorandum and articles of
association fails to expressly provide for the same protection
afforded by the Delaware business combination statute.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of
directors approves the proposal to dissolve, dissolution must be
approved by shareholders holding 100% of the total voting power of
the corporation. Only if the dissolution is initiated by the board
of directors may it be approved by a simple majority of the
corporation’s outstanding shares. Delaware law allows a Delaware
corporation to include in its certificate of incorporation a
supermajority voting requirement in connection with dissolutions
initiated by the board. Under the BVI Act and our second amended
and restated memorandum and articles of association, we may appoint
a voluntary liquidator by a resolution of the shareholders or
directors, provided that the directors have made a declaration of
solvency that the company is able to discharge its debts as they
fall due and that the value of the company’s assets exceed its
liabilities.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary
the rights of a class of shares with the approval of a majority of
the outstanding shares of such class, unless the certificate of
incorporation provides otherwise. Under our second amended and
restated memorandum and articles of association, if at any time our
shares are divided into different classes of shares, the rights
attached to any class may only be varied, whether or not our
Company is in liquidation, with the consent in writing of or by a
resolution passed at a meeting by a majority of the votes cast by
those entitled to vote at a meeting of the holders of the issued
shares in that class. For these purposes the creation, designation
or issue of preferred shares with rights and privileges ranking in
priority to an existing class of shares is deemed not to be a
variation of the rights of such existing class and may in
accordance with our second amended and restated memorandum and
articles of association be effected by resolution of directors
without shareholder approval.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation’s
governing documents may be amended with the approval of a majority
of the outstanding shares entitled to vote, unless the certificate
of incorporation provides otherwise. As permitted by British Virgin
Islands law, our second amended memorandum and articles of
association may be amended by a special majority (meaning a two
thirds majority) resolution of shareholders and, subject to certain
exceptions, by a special majority (meaning a two thirds majority)
resolution of directors. An amendment is effective from the date it
is registered at the Registry of Corporate Affairs in the British
Virgin Islands.
Anti-Money Laundering Laws
In order to comply with legislation or regulations aimed at the
prevention of money laundering we are required to adopt and
maintain anti-money laundering procedures, and may require
subscribers to provide evidence to verify their identity. Where
permitted, and subject to certain conditions, we also may delegate
the maintenance of our anti-money laundering procedures (including
the acquisition of due diligence information) to a suitable
person.
We reserve the right to request such information as is necessary to
verify the identity of a subscriber. In the event of delay or
failure on the part of the subscriber in producing any information
required for verification purposes, we may refuse to accept the
application, in which case any funds received will be returned
without interest to the account from which they were originally
debited.
If any person resident in the British Virgin Islands knows or
suspects that another person is engaged in money laundering or
terrorist financing and the information for that knowledge or
suspicion came to their attention in the course of their business
the person will be required to report his belief or suspicion to
the Financial Investigation Agency of the British Virgin Islands,
pursuant to the Proceeds of Criminal Conduct Act 1997 (as amended).
Such a report shall not be treated as a breach of confidence or of
any restriction upon the disclosure of information imposed by any
enactment or otherwise.
History of Share Capital
We were incorporated in the British Virgin Islands on
November 23, 2018. We issued the following ordinary shares to
our founding shareholders:
|
Purchaser |
|
Date of Issuance |
|
Number of Ordinary Shares |
|
| Global
Clean Energy Limited |
|
November 23, 2018 |
|
|
50,000 |
|
| Elk International
Capital Limited |
|
August 22, 2019 |
|
|
20,972 |
|
| Sentong Industry
Limited |
|
August 22, 2019 |
|
|
15,359 |
|
| Xieying Energy
Limited |
|
August 22, 2019 |
|
|
15,359 |
|
| Yunda Industrial
Limited |
|
August 22, 2019 |
|
|
11,058 |
|
| Xinhe Industrial
Limited |
|
August 22, 2019 |
|
|
7,987 |
|
| Xintai Industrial
Limited |
|
August 22, 2019 |
|
|
6,604 |
|
| Spruce International
Limited |
|
August 22, 2019 |
|
|
6,144 |
|
| Xingyou Industrial
Limited |
|
August 22, 2019 |
|
|
6,144 |
|
On April 15, 2020, our shareholders and board of directors
approved (i) a forward split of our issued and outstanding
ordinary shares at an approximate or rounded ratio of 71.62-for-1
share, and (ii) the creation of a new class of convertible
preferred shares of no par value. On April 16, 2020, we filed
our second amended and restated memorandum and articles of
association with the BVI Registrar to effect such corporate
actions, which filing became effective on April 20, 2020.
Unless otherwise indicated, all references to ordinary shares,
options to purchase ordinary shares, share data, per share data,
and related information have been retroactively adjusted, where
applicable, in this prospectus to reflect the forward split of our
ordinary shares as if it had occurred at the beginning of the
earlier period presented.
On April 20, 2020, we issued 195,000 Convertible Preferred
Shares to Wei Lian for a consideration of $702,000 and 305,000
Convertible Preferred Shares to Zhenyan Yu for a consideration of
$1,098,000 pursuant to certain Share Purchase Agreement dated
April 3, 2020. On February 9, 2021, the Convertible
Preferred Shares held by Wei Lian automatically converted into
195,000 ordinary shares and the Convertible Preferred Shares held
by Zhenyan Yu automatically converted into 305,000 ordinary shares
upon the closing of our initial public offering.
On June 11, 2021, pursuant to certain Subscription Agreements,
we issued the following ordinary shares to six investors:
|
Purchaser |
|
Date of Subscription Agreement |
|
Number of Ordinary Shares |
|
| Yonghong
Wu |
|
June 8, 2021 |
|
|
990,000 |
|
| Yan Wang |
|
June 9, 2021 |
|
|
950,000 |
|
| Jian Wang |
|
June 9, 2021 |
|
|
750,000 |
|
| Xiaochun Zhang |
|
June 9, 2021 |
|
|
700,000 |
|
| Ming Gao |
|
June 10, 2021 |
|
|
310,000 |
|
| Minggang Wang |
|
June 10, 2021 |
|
|
300,000 |
|
On August 20, 2021, we issued an aggregate of 69,276 ordinary
shares to Network 1 Financial Securities, Inc. and four
individuals related to it pursuant to certain underwriter warrants
dated February 9, 2021.
On April 7, 2022, we issued 2,764,351 ordinary shares to
Lishui Yilian Enterprise Management Consulting Co., Ltd., a
limited liability company formed under the laws of the PRC,
pursuant to a certain subscription agreement dated April 1,
2022.
DESCRIPTION OF DEBT
SECURITIES
General
As used in this prospectus, the term “debt securities” means the
debentures, notes, bonds, and other evidences of indebtedness that
we may issue from time to time. The debt securities will either be
senior debt securities or subordinated debt securities. Debt
securities will be issued under an indenture between us and a
trustee to be named therein. We have filed the forms of indentures
as exhibits to the registration statement of which this prospectus
is a part. We may issue debt securities which may or may not be
converted into our ordinary shares or preferred shares. It is
likely that convertible debt securities will not be issued under an
indenture. We may issue the debt securities independently or
together with any underlying securities, and debt securities may be
attached or separate from the underlying securities.
The following description is a summary of selected provisions
relating to the debt securities that we may issue. The summary is
not complete. When debt securities are offered in the future, a
prospectus supplement, information incorporated by reference, or a
free writing prospectus, as applicable, will explain the particular
terms of those securities and the extent to which these general
provisions may apply. The specific terms of the debt securities as
described in a prospectus supplement, information incorporated by
reference, or free writing prospectus will supplement and, if
applicable, may modify or replace the general terms described in
this section.
This summary and any description of debt securities in the
applicable prospectus supplement, information incorporated by
reference, or free writing prospectus is subject to and is
qualified in its entirety by reference to all the provisions of any
specific debt securities document or agreement. We will file each
of these documents, as applicable, with the SEC and incorporate
them by reference as an exhibit to the registration statement of
which this prospectus is a part on or before the time we issue a
series of debt securities. See “Where You Can Find Additional
Information” and “Incorporation of Documents by Reference” below
for information on how to obtain a copy of a debt securities
document when it is filed.
When we refer to a series of debt securities, we mean all debt
securities issued as part of the same series under the applicable
indenture.
Terms
The applicable prospectus supplement, information incorporated by
reference, or free writing prospectus, may describe the terms of
any debt securities that we may offer, including, but not limited
to, the following:
| |
● |
the
title of the debt securities; |
| |
|
|
| |
● |
the
total amount of the debt securities; |
| |
|
|
| |
● |
the
amount or amounts of the debt securities will be issued and
interest rate; |
| |
|
|
| |
● |
the
conversion price at which the debt securities may be
converted; |
| |
|
|
| |
● |
the
date on which the right to convert the debt securities will
commence and the date on which the right will expire; |
| |
|
|
| |
● |
if
applicable, the minimum or maximum amount of debt securities that
may be converted at any one time; |
| |
|
|
| |
● |
if
applicable, a discussion of material federal income tax
consideration; |
| |
● |
if
applicable, the terms of the payoff of the debt
securities; |
| |
|
|
| |
● |
the
identity of the indenture agent, if any; |
| |
|
|
| |
● |
the
procedures and conditions relating to the conversion of the debt
securities; and |
| |
|
|
| |
● |
any
other terms of the debt securities, including terms, procedure and
limitation relating to the exchange or conversion of the debt
securities. |
Form, Exchange, and Transfer
We may issue the debt securities in registered form or bearer form.
Debt securities issued in registered form, i.e., book-entry form,
will be represented by a global security registered in the name of
a depository, which will be the holder of all the debt securities
represented by the global security. Those investors who own
beneficial interests in global debt securities will do so through
participants in the depository’s system, and the rights of these
indirect owners will be governed solely by the applicable
procedures of the depository and its participants. In addition, we
may issue debt securities in non-global form, i.e., bearer form. If
any debt securities are issued in non-global form, debt securities
certificates may be exchanged for new debt securities certificates
of different denominations, and holders may exchange, transfer, or
convert their debt securities at the debt securities agent’s office
or any other office indicated in the applicable prospectus
supplement, information incorporated by reference or free writing
prospectus.
Prior to the conversion of their debt securities, holders of debt
securities convertible for ordinary shares or preferred shares will
not have any rights of holders of ordinary shares or preferred
shares, and will not be entitled to dividend payments, if any, or
voting rights of the ordinary shares or preferred shares.
Conversion of Debt Securities
A debt security may entitle the holder to purchase, in exchange for
the extinguishment of debt, an amount of securities at a conversion
price that will be stated in the debt security. Debt securities may
be converted at any time up to the close of business on the
expiration date set forth in the terms of such debt security. After
the close of business on the expiration date, debt securities not
exercised will be paid in accordance with their terms.
Debt securities may be converted as set forth in the applicable
offering material. Upon receipt of a notice of conversion properly
completed and duly executed at the corporate trust office of the
indenture agent, if any, or to us, we will forward, as soon as
practicable, the securities purchasable upon such exercise. If less
than all of the debt security represented by such security is
converted, a new debt security will be issued for the remaining
debt security.
DESCRIPTION OF
WARRANTS
General
We may issue warrants to purchase our securities. We may issue the
warrants independently or together with any underlying securities,
and the warrants may be attached or separate from the underlying
securities. We may also issue a series of warrants under a separate
warrant agreement to be entered into between us and a warrant
agent. The warrant agent will act solely as our agent in connection
with the warrants of such series and will not assume any obligation
or relationship of agency for or with holders or beneficial owners
of warrants.
The following description is a summary of selected provisions
relating to the warrants that we may issue. The summary is not
complete. When warrants are offered in the future, a prospectus
supplement, information incorporated by reference, or a free
writing prospectus, as applicable, will explain the particular
terms of those securities and the extent to which these general
provisions may apply. The specific terms of the warrants as
described in a prospectus supplement, information incorporated by
reference, or free writing prospectus will supplement and, if
applicable, may modify or replace the general terms described in
this section.
This summary and any description of warrants in the applicable
prospectus supplement, information incorporated by reference, or
free writing prospectus is subject to and is qualified in its
entirety by reference to all the provisions of any specific warrant
document or agreement, if applicable. We will file each of these
documents, as applicable, with the SEC and incorporate them by
reference as an exhibit to the registration statement of which this
prospectus is a part on or before the time we issue a series of
warrants. See “Where You Can Find Additional Information” and
“Incorporation of Documents by Reference” below for information on
how to obtain a copy of a warrant document when it is filed.
When we refer to a series of warrants, we mean all warrants issued
as part of the same series under the applicable warrant
agreement.
Terms
The applicable prospectus supplement, information incorporated by
reference, or free writing prospectus, may describe the terms of
any warrants that we may offer, including, but not limited to, the
following:
| |
● |
the
title of the warrants; |
| |
|
|
| |
● |
the
total number of warrants; |
| |
|
|
| |
● |
the
price or prices at which the warrants will be issued; |
| |
|
|
| |
● |
the
price or prices at which the warrants may be exercised; |
| |
|
|
| |
● |
the
currency or currencies that investors may use to pay for the
warrants; |
| |
|
|
| |
● |
the
date on which the right to exercise the warrants will commence and
the date on which the right will expire; |
| |
|
|
| |
● |
whether the warrants will be issued in registered
form or bearer form; |
| |
|
|
| |
● |
information with respect to book-entry
procedures, if any; |
| |
|
|
| |
● |
if
applicable, the minimum or maximum amount of warrants that may be
exercised at any one time; |
| |
|
|
| |
● |
if
applicable, the designation and terms of the underlying securities
with which the warrants are issued and the number of warrants
issued with each underlying security; |
| |
|
|
| |
● |
if
applicable, the date on and after which the warrants and the
related underlying securities will be separately
transferable; |
| |
|
|
| |
● |
if
applicable, a discussion of material federal income tax
considerations; |
| |
● |
if
applicable, the terms of redemption of the warrants; |
| |
|
|
| |
● |
the
identity of the warrant agent, if any; |
| |
|
|
| |
● |
the
procedures and conditions relating to the exercise of the warrants;
and |
| |
|
|
| |
● |
any
other terms of the warrants, including terms, procedures, and
limitations relating to the exchange and exercise of the
warrants. |
Warrant Agreement
We may issue the warrants in one or more series under one or more
warrant agreements, each to be entered into between us and a bank,
trust company, or other financial institution as warrant agent. We
may add, replace, or terminate warrant agents from time to time. We
may also choose to act as our own warrant agent or may choose one
of our subsidiaries to do so.
The warrant agent under a warrant agreement will act solely as our
agent in connection with the warrants issued under that agreement.
Any holder of warrants may, without the consent of any other
person, enforce by appropriate legal action, on its own behalf, its
right to exercise those warrants in accordance with their
terms.
Form, Exchange, and Transfer
We may issue the warrants in registered form or bearer form.
Warrants issued in registered form, i.e., book-entry form, will be
represented by a global security registered in the name of a
depository, which will be the holder of all the warrants
represented by the global security. Those investors who own
beneficial interests in a global warrant will do so through
participants in the depository’s system, and the rights of these
indirect owners will be governed solely by the applicable
procedures of the depository and its participants. In addition, we
may issue warrants in non-global form, i.e., bearer form. If any
warrants are issued in non-global form, warrant certificates may be
exchanged for new warrant certificates of different denominations,
and holders may exchange, transfer, or exercise their warrants at
the warrant agent’s office or any other office indicated in the
applicable prospectus supplement, information incorporated by
reference, or free writing prospectus.
Prior to the exercise of their warrants, holders of warrants
exercisable for ordinary shares or preferred shares will not have
any rights of holders of ordinary shares or preferred shares and
will not be entitled to dividend payments, if any, or voting rights
of the ordinary shares or preferred shares.
Exercise of Warrants
A warrant will entitle the holder to purchase for cash an amount of
securities at an exercise price that will be stated in, or that
will be determinable as described in, the applicable prospectus
supplement, information incorporated by reference, or free writing
prospectus. Warrants may be exercised at any time up to the close
of business on the expiration date set forth in the applicable
offering material. After the close of business on the expiration
date, unexercised warrants will become void. Warrants may be
redeemed as set forth in the applicable offering material.
Warrants may be exercised as set forth in the applicable offering
material. Upon receipt of payment and the warrant certificate
properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the
applicable offering material, we will forward, as soon as
practicable, the securities purchasable upon such exercise. If less
than all of the warrants represented by such warrant certificate
are exercised, a new warrant certificate will be issued for the
remaining warrants.
DESCRIPTION OF RIGHTS
We may issue rights to purchase our securities. The rights may or
may not be transferable by the persons purchasing or receiving the
rights. In connection with any rights offering, we may enter into a
standby underwriting or other arrangement with one or more
underwriters or other persons pursuant to which such underwriters
or other persons would purchase any offered securities remaining
unsubscribed for after such rights offering. Each series of rights
will be issued under a separate rights agent agreement to be
entered into between us and one or more banks, trust companies, or
other financial institutions, as rights agent, that we will name in
the applicable prospectus supplement. The rights agent will act
solely as our agent in connection with the rights and will not
assume any obligation or relationship of agency or trust for or
with any holders of rights certificates or beneficial owners of
rights.
The prospectus supplement relating to any rights that we offer will
include specific terms relating to the offering, including, among
other matters:
| |
● |
the
date of determining the security holders entitled to the rights
distribution; |
| |
|
|
| |
● |
the
aggregate number of rights issued and the aggregate amount of
securities purchasable upon exercise of the rights; |
| |
|
|
| |
● |
the
exercise price; |
| |
● |
the
conditions to completion of the rights offering; |
| |
|
|
| |
● |
the
date on which the right to exercise the rights will commence and
the date on which the rights will expire; and |
| |
|
|
| |
● |
any
applicable federal income tax considerations. |
Each right would entitle the holder of the rights to purchase for
cash the principal amount of securities at the exercise price set
forth in the applicable prospectus supplement. Rights may be
exercised at any time up to the close of business on the expiration
date for the rights provided in the applicable prospectus
supplement. After the close of business on the expiration date, all
unexercised rights will become void.
If less than all of the rights issued in any rights offering are
exercised, we may offer any unsubscribed securities directly to
persons other than our security holders, to or through agents,
underwriters, or dealers, or through a combination of such methods,
including pursuant to standby arrangements, as described in the
applicable prospectus supplement.
DESCRIPTION OF UNITS
We may issue units composed of any combination of our securities.
We will issue each unit so that the holder of the unit is also the
holder of each security included in the unit. As a result, the
holder of a unit will have the rights and obligations of a holder
of each included security. The unit agreement under which a unit is
issued may provide that the securities included in the unit may not
be held or transferred separately, at any time or at any time
before a specified date.
The following description is a summary of selected provisions
relating to units that we may offer. The summary is not complete.
When units are offered in the future, a prospectus supplement,
information incorporated by reference, or a free writing
prospectus, as applicable, will explain the particular terms of
those securities and the extent to which these general provisions
may apply. The specific terms of the units as described in a
prospectus supplement, information incorporated by reference, or
free writing prospectus will supplement and, if applicable, may
modify or replace the general terms described in this section.
This summary and any description of units in the applicable
prospectus supplement, information incorporated by reference, or
free writing prospectus is subject to and is qualified in its
entirety by reference to the unit agreement, collateral
arrangements, and depositary arrangements, if applicable. We will
file each of these documents, as applicable, with the SEC and
incorporate them by reference as an exhibit to the registration
statement of which this prospectus is a part on or before the time
we issue a series of units. See “Where You Can Find Additional
Information” and “Incorporation of Documents by Reference” below
for information on how to obtain a copy of a document when it is
filed.
The applicable prospectus supplement, information incorporated by
reference, or free writing prospectus may describe:
| |
● |
The
designation and terms of the units and of the securities comprising
the units, including whether and under what circumstances those
securities may be held or transferred separately; |
| |
|
|
| |
● |
Any
provisions for the issuance, payment, settlement, transfer, or
exchange of the units or of the securities composing the
units; |
| |
|
|
| |
● |
Whether the units will be issued in fully
registered or global form; and |
| |
|
|
| |
● |
Any
other terms of the units. |
The applicable provisions described in this section, as well as
those described under “Description of Share Capital,” “Description
of Debt Securities,” “Description of Warrants,” and “Description of
Rights” above, will apply to each unit and to each security
included in each unit, respectively.
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus from time to
time in one or more transactions, including, without
limitation:
| |
● |
through agents; |
| |
|
|
| |
● |
to or
through underwriters; |
| |
● |
through broker-dealers (acting as agent or
principal); |
| |
|
|
| |
● |
directly by us to purchasers (including our
affiliates and shareholders), through a specific bidding or auction
process, a rights offering, or other method; |
| |
|
|
| |
● |
through a combination of any such methods of
sale; or |
| |
|
|
| |
● |
through any other methods described in a
prospectus supplement. |
The distribution of securities may be effected, from time to time,
in one or more transactions, including:
| |
● |
block
transactions (which may involve crosses) and transactions on Nasdaq
or any other organized market where the securities may be
traded; |
| |
|
|
| |
● |
purchases by a broker-dealer as principal and
resale by the broker-dealer for its own account pursuant to a
prospectus supplement; |
| |
|
|
| |
● |
ordinary brokerage transactions and transactions
in which a broker-dealer solicits purchasers; |
| |
|
|
| |
● |
sales
“at the market” to or through a market maker or into an existing
trading market, on an exchange or otherwise; and |
| |
|
|
| |
● |
sales
in other ways not involving market makers or established trading
markets, including direct sales to purchasers. |
The securities may be sold at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at
prices relating to the prevailing market prices or at negotiated
prices. The consideration may be cash, extinguishment of debt, or
another form negotiated by the parties. Agents, underwriters, or
broker-dealers may be paid compensation for offering and selling
the securities. That compensation may be in the form of discounts,
concessions, or commissions to be received from us or from the
purchasers of the securities. Dealers and agents participating in
the distribution of the securities may be deemed to be
underwriters, and compensation received by them on resale of the
securities may be deemed to be underwriting discounts and
commissions under the Securities Act. If such dealers or agents
were deemed to be underwriters, they may be subject to statutory
liabilities under the Securities Act.
We may also make direct sales through subscription rights
distributed to our existing shareholders on a pro rata basis, which
may or may not be transferable. In any distribution of subscription
rights to our shareholders, if all of the underlying securities are
not subscribed for, we may then sell the unsubscribed securities
directly to third parties or may engage the services of one or more
underwriters, dealers, or agents, including standby underwriters,
to sell the unsubscribed securities to third parties.
Some or all of the securities that we offer through this prospectus
may be new issues of securities with no established trading market.
Any underwriters to whom we sell our securities for public offering
and sale may make a market in those securities, but they will not
be obligated to do so and they may discontinue any market making at
any time without notice. Accordingly, we cannot assure you of the
liquidity of, or continued trading markets for, any securities that
we offer.
Agents may, from time to time, solicit offers to purchase the
securities. If required, we will name in the applicable prospectus
supplement, document incorporated by reference, or free writing
prospectus, as applicable, any agent involved in the offer or sale
of the securities and set forth any compensation payable to the
agent. Unless otherwise indicated, any agent will be acting on a
best efforts basis for the period of its appointment. Any agent
selling the securities covered by this prospectus may be deemed to
be an underwriter of the securities.
If underwriters are used in an offering, securities will be
acquired by the underwriters for their own account and may be
resold, from time to time, in one or more transactions, including
negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale, or under delayed
delivery contracts or other contractual commitments. Securities may
be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. If an underwriter or
underwriters are used in the sale of securities, an underwriting
agreement will be executed with the underwriter or underwriters at
the time an agreement for the sale is reached. The applicable
prospectus supplement will set forth the managing underwriter or
underwriters, as well as any other underwriter or underwriters,
with respect to a particular underwritten offering of securities,
and will set forth the terms of the transactions, including
compensation of the underwriters and dealers and the public
offering price, if applicable. This prospectus, the applicable
prospectus supplement, and any applicable free writing prospectus
will be used by the underwriters to resell the securities.
If a dealer is used in the sale of the securities, we, or an
underwriter, will sell the securities to the dealer, as principal.
The dealer may then resell the securities to the public at varying
prices to be determined by the dealer at the time of resale. To the
extent required, we will set forth in the prospectus supplement,
document incorporated by reference, or free writing prospectus, as
applicable, the name of the dealer and the terms of the
transactions.
We may directly solicit offers to purchase the securities and may
make sales of securities directly to institutional investors or
others. These persons may be deemed to be underwriters with respect
to any resale of the securities. To the extent required, the
prospectus supplement, document incorporated by reference, or free
writing prospectus, as applicable, will describe the terms of any
such sales, including the terms of any bidding or auction process,
if used.
Agents, underwriters, and dealers may be entitled under agreements
which may be entered into with us to indemnification by us against
specified liabilities, including liabilities incurred under the
Securities Act, or to contribution by us to payments they may be
required to make in respect of such liabilities. If required, the
prospectus supplement, document incorporated by reference, or free
writing prospectus, as applicable, will describe the terms and
conditions of such indemnification or contribution. Some of the
agents, underwriters, or dealers, or their affiliates may be
customers of, engage in transactions with or perform services for
us or our subsidiaries or affiliates in the ordinary course of
business.
Under the securities laws of some states, the securities offered by
this prospectus may be sold in those states only through registered
or licensed brokers or dealers.
Any person participating in the distribution of securities
registered under the registration statement that includes this
prospectus will be subject to applicable provisions of the Exchange
Act, and the applicable SEC rules and regulations, including,
among others, Regulation M, which may limit the timing of purchases
and sales of any of our securities by any such person. Furthermore,
Regulation M may restrict the ability of any person engaged in the
distribution of our securities to engage in market-making
activities with respect to our securities.
These restrictions may affect the marketability of our securities
and the ability of any person or entity to engage in market-making
activities with respect to our securities.
Certain persons participating in an offering may engage in
over-allotment, stabilizing transactions, short-covering
transactions, and penalty bids in accordance with Regulation M
under the Exchange Act that stabilize, maintain, or otherwise
affect the price of the offered securities. If any such activities
will occur, they will be described in the applicable prospectus
supplement.
To the extent required, this prospectus may be amended or
supplemented from time to time to describe a specific plan of
distribution.
TAXATION
Material income tax consequences relating to the purchase,
ownership, and disposition of the securities offered by this
prospectus are set forth in “Item 10. Additional Information—E.
Taxation” in the 2021 Annual Report, which is incorporated herein
by reference, as updated by our subsequent filings under the
Exchange Act that are incorporated by reference and, if applicable,
in any accompanying prospectus supplement or relevant free writing
prospectus.
EXPENSES
The following table sets forth the aggregate expenses in connection
with this offering, all of which will be paid by us. All amounts
shown are estimates, except for the SEC registration fee.
|
SEC registration fee |
|
$ |
9,270 |
|
| FINRA fees |
|
$ |
15,500 |
|
| Legal fees and expenses |
|
$ |
* |
|
| Accounting fees and expenses |
|
$ |
* |
|
| Printing and postage expenses |
|
$ |
* |
|
|
Miscellaneous expenses |
|
$ |
* |
|
| Total |
|
$ |
* |
|
| * |
To be
provided by a prospectus supplement or as an exhibit to a report of
foreign private issuer on Form 6-K that is incorporated by
reference into this registration statement. Estimated solely for
this item. Actual expenses may vary. |
MATERIAL CONTRACTS
Our material contracts are described in the documents incorporated
by reference into this prospectus. See “Incorporation of Documents
by Reference” below.
MATERIAL CHANGES
Except as otherwise described in the 2021 Annual Report, in our
reports of foreign issuer on Form 6-K filed or submitted under
the Exchange Act and incorporated by reference herein, and as
disclosed in this prospectus or the applicable prospectus
supplement, no reportable material changes have occurred since
September 30, 2021.
LEGAL MATTERS
We are being represented by Hunter Taubman Fischer & Li
LLC with respect to certain legal matters as to United States
federal securities and New York State law. The validity of the
securities offered in this offering and certain other legal matters
as to British Virgin Islands law will be passed upon for us by
Carey Olsen Singapore LLP, our counsel as to British Virgin Islands
law. Legal matters as to PRC law will be passed upon for us by
Yingke Wuxi Law Firm. If legal matters in connection with offerings
made pursuant to this prospectus are passed upon by counsel to
underwriters, dealers, or agents, such counsel will be named in the
applicable prospectus supplement relating to any such offering.
EXPERTS
The consolidated financial statements as of September 30, 2021
and 2020, and for the fiscal years ended September 30, 2021,
2020, and 2019 included in this prospectus have been so included in
reliance on the report of Friedman LLP, an independent registered
public accounting firm, given on the authority of said firm as
experts in auditing and accounting. The office of Friedman LLP is
located at One Liberty Plaza, 165 Broadway Floor 21, New York, NY
10006.
INCORPORATION OF DOCUMENTS BY
REFERENCE
The SEC allows us to “incorporate by reference” into this
prospectus certain information we file with the SEC. This means
that we can disclose important information to you by referring you
to those documents. Any statement contained in a document
incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the
extent that a statement contained herein, or in any subsequently
filed document, which is incorporated by reference herein, modifies
or supersedes such earlier statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
We hereby incorporate by reference into this prospectus the
following documents:
| |
4. |
any
future annual reports on Form 20-F filed with the SEC after
the date of this prospectus and prior to the termination of the
offering of the securities offered by this prospectus;
and |
| |
5. |
any
future reports of foreign private issuer on Form 6-K that we
furnish to the SEC after the date of this prospectus that are
identified in such reports as being incorporated by reference into
the registration statement of which this prospectus forms a
part. |
Our annual report on Form 20-F for the fiscal year ended
September 30, 2021 filed with the SEC on February 15, 2022 contains a
description of our business and audited consolidated financial
statements with a report by our independent auditors. These
financial statements were prepared in accordance with U.S.
GAAP.
Unless expressly incorporated by reference, nothing in this
prospectus shall be deemed to incorporate by reference information
furnished to, but not filed with, the SEC. Copies of all documents
incorporated by reference in this prospectus, other than exhibits
to those document unless such exhibits are specially incorporated
by reference in this prospectus, will be provided at no cost to
each person, including any beneficial owner, who receives a copy of
this prospectus on the written or oral request of that person made
to:
CN ENERGY GROUP. INC.
Building 2-B, Room 206, No. 268 Shiniu Road
Liandu District, Lishui City, Zhejiang Province
The PRC
+86 571 87555823
You should rely only on the information that we incorporate by
reference or provide in this prospectus. We have not authorized
anyone to provide you with different information. We are not making
any offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should not assume that the
information contained or incorporated in this prospectus by
reference is accurate as of any date other than the date of the
document containing the information.
WHERE YOU CAN FIND ADDITIONAL
INFORMATION
As permitted by SEC rules, this prospectus omits certain
information and exhibits that are included in the registration
statement of which this prospectus forms a part. Since this
prospectus may not contain all of the information that you may find
important, you should review the full text of these documents. If
we have filed a contract, agreement, or other document as an
exhibit to the registration statement of which this prospectus
forms a part, you should read the exhibit for a more complete
understanding of the document or matter involved. Each statement in
this prospectus, including statements incorporated by reference as
discussed above, regarding a contract, agreement, or other document
is qualified in its entirety by reference to the actual
document.
We are subject to periodic reporting and other informational
requirements of the Exchange Act as applicable to foreign private
issuers. Accordingly, we are required to file reports, including
annual reports on Form 20-F, and other information with the
SEC. All information electronically filed with the SEC can be
inspected over the Internet at the SEC’s website at
www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act
from, among other things, the rules prescribing the furnishing
and content of proxy statements, and our executive officers,
directors, and principal shareholders are exempt from the reporting
and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. In addition, we will not be
required under the Exchange Act to file periodic or current reports
and financial statements with the SEC as frequently or as promptly
as U.S. companies whose securities are registered under the
Exchange Act.
ENFORCEABILITY OF CIVIL
LIABILITIES
We were incorporated under the laws of the British Virgin Islands
because there are certain benefits associated with being a British
Virgin Islands company, such as political and economic stability,
an effective judicial system, a favorable tax system, the absence
of foreign exchange control or currency restrictions, and the
availability of professional and support services. The British
Virgin Islands, however, has a less developed body of securities
laws than the United States and provides significantly less
protection for investors than the United States.
Substantially all of our assets are located in the PRC. In
addition, almost all of our directors and officers are nationals or
residents of the PRC and all or a substantial portion of their
assets are located outside the United States. As a result, it may
be difficult for investors to effect service of process within the
United States upon us or these persons, or to enforce against us or
them judgments obtained in United States courts, including
judgments predicated upon the civil liability provisions of the
securities laws of the United States or any state in the United
States.
We have appointed CN Energy USA Inc. as our agent to receive
service of process with respect to any action brought against us in
the United States District Court for the Southern District of New
York under the federal securities laws of the United States or of
any state in the United States or any action brought against us in
the Supreme Court of the State of New York in the County of New
York under the securities laws of the State of New York.
Our counsel with respect to the laws of the British Virgin Islands,
Carey Olsen Singapore LLP, and our counsel with respect to PRC law,
Yingke Wuxi Law Firm, have advised us that there is uncertainty as
to whether the courts of the British Virgin Islands or the PRC
would (i) recognize or enforce judgments of United States
courts obtained against us or our directors or officers predicated
upon the civil liability provisions of the securities laws of the
United States or any state in the United States or
(ii) entertain original actions brought in the British Virgin
Islands or the PRC against us or our directors or officers
predicated upon the securities laws of the United States or any
state in the United States.
Our BVI counsel, Carey Olsen Singapore LLP, has further advised us
that there is currently no statutory enforcement or treaty between
the United States and the British Virgin Islands providing for
enforcement of judgments. A judgment obtained in the United States,
however, may be recognized and enforced in the courts of the
British Virgin Islands at common law, without any re-examination on
the merits of the underlying dispute, by an action commenced on the
foreign judgment debt in the Commercial Division of the Eastern
Caribbean Supreme Court in the British Virgin Islands, provided
such judgment: (i) is given by a foreign court of competent
jurisdiction; (ii) is final; (iii) is not in respect of
taxes, a fine or a penalty; and (iv) was not obtained in a
manner and is not of a kind the enforcement of which is contrary to
natural justice or public policy of the British Virgin Islands. Our
BVI counsel, Carey Olsen Singapore LLP, has informed us that there
is uncertainty with regard to British Virgin Islands law relating
to whether a judgment obtained from the U.S. courts under civil
liability provisions of the securities laws will be determined by
the courts of the British Virgin Islands as penal or punitive in
nature.
Our PRC counsel, Yingke Wuxi Law Firm, has advised us that the
recognition and enforcement of foreign judgments are provided for
under the PRC Civil Procedure Law. PRC courts may recognize and
enforce foreign judgments in accordance with the requirements of
the PRC Civil Procedure Law based either on treaties between China
and the country where the judgment is made or on reciprocity
between jurisdictions. However, there are no treaties or other
forms of reciprocity between China and the United States for the
mutual recognition and enforcement of court judgments. Further, pursuant to the PRC Civil
Procedures Law, courts in the PRC will not enforce a foreign
judgment against us or our directors and officers if they decide
that the judgment violates the basic principles of PRC law or
national sovereignty, security, or public interest. As a result, it
is uncertain whether and on what basis a PRC court would enforce a
judgment rendered by a court in the United States.
Our PRC counsel, Yingke Wuxi Law Firm, has further advised us that, under the
PRC Civil Procedures Law, foreign shareholders may originate
actions based on PRC laws against us in the PRC, if they can
establish sufficient nexus to the PRC for a PRC court to have
jurisdiction, and meet other procedural requirements, including,
among others, the plaintiff must have a direct interest in the
case, and there must be a concrete claim, a factual basis, and a
cause for the suit. However, it would be difficult for foreign
shareholders to establish sufficient nexus to the PRC by virtue
only of holding our ordinary shares.
10,514,018 Class A Ordinary Shares
CN ENERGY GROUP. INC.
Prospectus Supplement
October 3, 2022
CN Energy (NASDAQ:CNEY)
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