Prospectus Supplement Filed Pursuant to Rule 424(b)(5)
(To Prospectus Dated March 30, 2021) File No. 333-254878

 

 

The9 Limited

 

3,765,100 American Depositary Shares,

representing 112,953,000 Class A ordinary shares, and

ADS Warrants to Purchase 2,823,825 American Depositary Shares,

representing 84,714,750 Class A ordinary shares

(and Class A Ordinary Shares in the form of ADSs issuable upon exercise of the ADS warrants)

 

We are offering 3,765,100 American Depositary Shares (the “ADSs”), representing 112,953,000 Class A ordinary shares, par value $0.01 per share, ADS warrants to purchase 2,823,825 ADSs, representing 84,714,750 Class A ordinary shares, and the Class A ordinary shares in the form of ADSs issuable upon exercise of the ADS warrants pursuant to this prospectus supplement and the accompanying prospectus. The offering price of each ADS and accompanying 0.75 of an ADS warrant is $33.20. The ADSs and the accompanying ADS warrants, can only be purchased together in this offering but will be issued separately and will be immediately separable upon issuance. Each ADS warrant will have an exercise price of $36.00 per ADS, will be exercisable upon issuance, and will expire three years from the date of issuance.

 

Our ADSs are listed on The Nasdaq Capital Market under the symbol “NCTY.” On March 30, 2021, the last reported sale price of our ADSs on The Nasdaq Capital Market was $40.93 per ADS.

 

Investing in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should review carefully the information described under the heading “Risk Factors” beginning on page S-6 of this prospectus supplement and on page 4 of the accompanying prospectus, and under similar headings in the documents that are incorporated by reference herein.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

    Per ADS and 0.75 of
An ADS Warrant
    Total  
Public offering price   $ 33.20     $ 125,001,320.00  
Underwriting discounts and commissions (1)   $ 1.992     $ 7,570,079.20  
Proceeds, before expenses, to us   $ 31.208     $ 117,501,240.80  

 

  (1) In addition to the underwriting discount, we have agreed to reimburse the underwriter for certain expenses in connection with this offering. See “Underwriting” for additional information regarding total underwriting compensation.

 

We have granted the underwriters a 45-day option to purchase up to an additional 564,765 ADSs and/or ADS Warrants to purchase up to an additional 423,574 ADSs, in each case to cover over-allotments, if any.  If the underwriter exercises this option in full, the total underwriting discounts and commissions will be $8,625,091.12, and our total proceeds, before expenses, will be $135,126,426.88.

 

The underwriter expects to deliver the securities to purchasers on or about April 5, 2021.

 

 

Sole Book-Running Manager

 

Maxim Group LLC

 

 

The date of this prospectus supplement is March 31, 2021.

 

 

 

 

TABLE OF CONTENTS

 

  Page
ABOUT THIS PROSPECTUS SUPPLEMENT S-1
COMMONLY USED DEFINED TERMS S-2
NOTE REGARDING FORWARD-LOOKING STATEMENTS S-2
THE OFFERING S-4
RISK FACTORS S-6
USE OF PROCEEDS S-7
CAPITALIZATION S-9
DILUTION S-11
DESCRIPTION OF SECURITIES WE ARE OFFERING S-13
UNDERWRITING S-13
LEGAL MATTERS S-17
EXPERTS S-18
INFORMATION INCORPORATED BY REFERENCE S-18
WHERE YOU CAN FIND MORE INFORMATION S-19
ENFORCEABILITY OF CIVIL LIABILITIES S-19
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES S-20

 

TABLE OF CONTENTS

 

  Page
ABOUT THIS PROSPECTUS ii
COMMONLY USED DEFINED TERMS ii
NOTE REGARDING FORWARD-LOOKING STATEMENTS iii
OUR BUSINESS 1
RISK FACTORS 1
USE OF PROCEEDS 2
DILUTION 2
DESCRIPTION OF SHARE CAPITAL 2
DESCRIPTION OF THE AMERICAN DEPOSITARY SHARES 12
DESCRIPTION OF DEBT SECURITIES 19
DESCRIPTION OF WARRANTS 23
DESCRIPTION OF UNITS 26
PLAN OF DISTRIBUTION OF THE OFFERING 27
SELLING SHAREHOLDERS 29
LEGAL MATTERS 29
EXPERTS 29
INFORMATION INCORPORATED BY REFERENCE 29
WHERE YOU CAN FIND MORE INFORMATION 30
ENFORCEABILITY OF CIVIL LIABILITIES 31
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 32

 

 

 

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

On March 30, 2021, we filed with the Securities and Exchange Commission an automatic shelf registration on Form F-3 (File No. 333-254878). Under this shelf registration statement, we may from time to time offer to sell up to $1,000,000,000 of Class A ordinary shares, par value US$0.01 per share; Class A ordinary shares in the form of American Depositary Shares, or ADSs; preferred shares, par value US$0.01 per share; preferred shares in the form of ADSs; debt securities; warrants; units; rights; or any combination thereof, in one or more transactions.

 

We provide information to you about this offering of our ADSs and warrants to purchase ADSs in two separate documents that are bound together: (1) this prospectus supplement, which describes the specific details regarding this offering of our ADSs and warrants to purchase ADSs; and (2) the accompanying base prospectus dated March 30, 2021, included in our automatic shelf registration statement on Form F-3 (File No. 333-254878). You should read this entire prospectus supplement as well as the accompanying prospectus and the documents incorporated by reference that are described under “Where You Can Find More Information” in this prospectus supplement and the accompanying prospectus. If information in this prospectus supplement is inconsistent with the accompanying prospectus, you should rely on 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, the statement in the document having the later date modifies or supersedes the earlier statement as our business, financial condition, results of operations and prospects may have changed since the earlier dates.

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or in any free writing prospectus that we have authorized for use in connection with this offering. We have not, and Maxim Group LLC, has not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it.

 

We are not making an offer to sell the securities covered by this prospectus supplement in any jurisdiction in which an offer or solicitation is not permitted or in which the person making the offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation.

 

The information appearing in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference in this prospectus supplement and in the accompanying prospectus, and in any free writing prospectus that we have authorized for use in connection with this offering is accurate only as of its respective date, regardless of the time of delivery of the respective document or of any sale of securities covered by this prospectus. You should not assume that the information contained in or incorporated by reference in this prospectus supplement, the accompanying prospectus or in any free writing prospectus that we have authorized for use in connection with this offering, is accurate as of any date other than the respective dates thereof.

 

Unless the context otherwise requires, all references in this prospectus to “The9”, “we,” “us,” “our,” “the Company” or similar words refer to The9 Limited, as the context may require, its subsidiaries, the affiliated PRC entity and its subsidiaries.

 

No action is being taken in any jurisdiction outside the United States to permit a public offering of the securities or possession or distribution of this prospectus supplement or the accompanying prospectus in that jurisdiction. Persons who come into possession of this prospectus supplement or the accompanying prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus supplement or the accompanying prospectus applicable to that jurisdiction.

 

S-1

 

 

COMMONLY USED DEFINED TERMS

 

Unless otherwise indicated or the context otherwise requires in this prospectus:

 

  · “ADSs” refers to our American Depositary Shares, each of which currently represents thirty Class A ordinary shares. ADSs, per ADS amount and other related amount in this prospectus have been retroactively adjusted to reflect the changes in ADS-to-Class A ordinary share ratio from each ADS representing three Class A ordinary shares to each ADS representing thirty Class A ordinary shares for all periods presented;
     
  · “affiliated entity” and “affiliated PRC entity” refer to our consolidated affiliated PRC entities, including, among others, Shanghai The9 Information Technology Co., Ltd., or Shanghai IT, in which we do not have direct equity interests but over which we effectively control through a series of contractual arrangements as described under “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Arrangements with Affiliated PRC Entities” of the Form 20-F filed on March 29, 2021, as amended on March 30, 2021;
     
  · “China” and “PRC” refer to the People’s Republic of China, and solely for the purpose of this prospectus, excluding Taiwan, Hong Kong and Macau;
     
  · “Class A ordinary shares” refers to our Class A ordinary shares of par value US$0.01 per share;
     
  · “Class B ordinary shares” refers to our Class B ordinary shares of par value US$0.01 per share;
     
  · “RMB” and “Renminbi” are to the legal currency of China;
     
  · “U.S. dollars,” “dollars,” “US$” and “$” are to the legal currency of the United States; and
     
  · “we,” “us,” “our company,” “our” and “The9” refer to The9 Limited and, as the context may require, its subsidiaries, the affiliated PRC entity and its subsidiaries.

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus 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 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.

 

S-2

 


 


PROSPECTUS SUPPLEMENT SUMMARY

 

The following summary highlights selected information contained or incorporated by reference in this prospectus supplement. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus and any supplement hereto carefully, including the risk factors section as well as the financial statements and the notes to the financial statements incorporated herein by reference.

 

Our Company

 

Business Overview

 

We are an Internet company based in China and we aim to become a diversified Internet company targeting on fast-growing technology sectors. We are currently transforming our business focus to cryptocurrencies mining business. For more information, you can see "Item 4. Information of the Company" in our annual report on Form 20-F for the year ended December 31, 2020, as amended, which is incorporated in this prospectus supplement by reference.

 

Corporate Information

 

Our principal executive office is located at 17 Floor, No. 130 Wu Song Road, Hong Kou District, Shanghai 201203, People’s Republic of China, and our telephone number is +86 (21) 6108-6080. Our registered office in the Cayman Islands is located at the offices of CARD Corporate Services Ltd, c/o Collas Crill Corporate Services Limited, Floor 2, Willow House, Cricket Square, PO Box 709, Grand Cayman KY1-1107 Cayman Islands.

 

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.the9.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.

 

Risk Factors

 

Investing in our securities involves significant risks and uncertainties. You should carefully consider all of the information contained and incorporated by reference in this prospectus before making an investment in our securities including the risks discussed in the section titled “Risk Factors.”

 

S-3

 

 

THE OFFERING

 

Issuer:   The9 Limited
     
Securities offered by us pursuant to this prospectus supplement:   3,765,100 ADSs, representing 112,953,000 Class A ordinary shares, ADSs warrants to purchase up to 2,823,825 ADSs, representing 84,714,750 Class A ordinary shares, and the Class A ordinary shares in the form of ADSs issuable upon the exercise of the ADS warrants.
     
Over-allotment option   We have granted the underwriters a 45-day option to purchase up to an additional 564,765 ADSs and/or up to an additional ADS warrants to purchase 423,574 ADSs from us to cover over-allotments, if any.
     
Offering price per ADS and accompanying 0.75 of an ADS warrant:   $33.20
     
Number of ordinary shares outstanding prior to this offering:   340,356,731 Class A ordinary shares and 13,607,334 Class B ordinary shares
     
Number of ordinary shares to be outstanding immediately after this offering(1):   453,309,731 Class A ordinary shares (or 470,252,681 Class A ordinary shares, if the underwriter exercises its over-allotment option in full), and 13,607,334 Class B ordinary shares, assuming no exercise of any ADS warrants issued in this offering.
     
Description of ADS warrants   The ADS warrants will be exercisable beginning on the date of issuance and expire on the three-year anniversary of the date of issuance at an initial exercise price per share equal to $36.00, subject to appropriate adjustment in the event of share dividends, share splits, or similar events affecting our ADSs and ordinary shares. Notwithstanding the foregoing, we shall not effect any exercise of ADS warrants to the extent that, after giving effect to an exercise, the holder of ADS warrants (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of our ordinary shares in excess of 4.99% (or, at the election of the holders prior to the date of issuance, 9.99%) of the our ordinary shares then outstanding after giving effect to such exercise.
     
Use of proceeds:   We expect the aggregate gross proceeds from the offering will be approximately $125 million (or $143 million if the underwriters exercise their over-allotment option in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering for working capital and other general corporate purposes. See “Use of Proceeds” on page S-7 of this prospectus supplement.
     
Depositary   Our depositary is the Bank of New York Mellon which administers our ADSs. Its principal executive office are located at 240 Greenwich Street, New York, New York 10286.
     
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 shares of common stock, see the information contained in or incorporated by reference under the heading “Risk Factors” beginning on page S-6 of this prospectus supplement, on page 1 of the accompanying prospectus, and in the other documents incorporated by reference into this prospectus supplement.

 

S-4

 

 

Listing   Our ADSs are listed on The Nasdaq Capital Market under the symbol “NCTY”. We do not intend to apply to list the ADS warrants on The Nasdaq Capital Market or on any other trading market.

 

(1) The number of ordinary shares to be outstanding immediately after this offering is based on 340,356,731 Class A ordinary shares and 13,607,334 Class B ordinary shares issued outstanding as of March 30, 2021, and excludes, as of such date:

 

  · 32,190,000 restricted Class A ordinary shares issued bearing restrictions to be vested;
     
  · 207,891,840 Class A ordinary shares issuable upon exercise of warrants issued to cryptocurrencies mining investors in January 2021;
     
  · Class A ordinary shares issuable upon conversion of the convertible notes held by Streeterville Capital, LLC;
     
  · Class A ordinary shares issuable pursuant to a certain standby equity distribution agreement, or SEDA, dated February 5, 2021, by and between us and YA II PN, LTD., a Cayman Islands exempt limited partnership managed by Yorkville Advisor Global, LP ; and
     
  · 2,823,825 ADSs, representing 84,714,750 Class A ordinary shares, issuable upon exercise of the ADS warrants in this offering.

 

Except as otherwise noted, all information in this prospectus reflects and assumes no exercise of the underwriter’s over-allotment option.

 

S-5

 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully consider the risk factors set forth under “Risk Factors” described in our most recent annual report on Form 20-F, filed on March 29, 2021, as amended on March 30, 2021, as supplemented and updated by subsequent current reports on Form 6-K that we have filed with the SEC, together with all other information contained or incorporated by reference in this prospectus supplement, before making an investment decision. Each of the risk factors could materially and adversely affect our business, operating results, financial condition and prospects, as well as the value of an investment in our securities, and the occurrence of any of these risks might cause you to lose all or part of your investment.

 

Risks Relating to this Offering

 

We may allocate net proceeds from this offering in ways which differ from our estimates based on our current plans and assumptions discussed in the section entitled “Use of Proceeds” and with which you may not agree.

 

The allocation of net proceeds of the offering set forth in the “Use of Proceeds” section below represents our estimates based upon our current plans and assumptions regarding industry and general economic conditions, our future revenues and expenditures. The amounts and timing of our actual expenditures will depend on numerous factors, including market conditions, cash generated by our operations, business developments and related rate of growth. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes. Circumstances that may give rise to a change in the use of proceeds and the alternate purposes for which the proceeds may be used are discussed in the section entitled “Use of Proceeds” below. You may not have an opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use our proceeds. As a result, you and other shareholders may not agree with our decisions. See “Use of Proceeds” below for additional information.

 

Investors will suffer immediate and substantial dilution as a result of this offering.

 

Investors of our ADSs and/or ordinary shares offered by this prospectus supplement and the accompanying prospectus will suffer immediate and substantial dilution of their investment. Based on the public offering price of $33.20 per ADS and accompanying 0.75 of an ADS warrant, and our net tangible book value as of December 31, 2020, if you purchase our ADSs and warrants in this offering, you will suffer immediate and substantial dilution of $3.30 per ADS, with respect to the net tangible book value of our ADSs. See “Dilution” in this prospectus supplement for a more detailed discussion of the dilution that investors will incur in this offering.

 

Future sales by our shareholders may adversely affect our ADSs’ trading price and our ability to raise funds in new offerings.

 

Sales of our ADSs and/or Class A ordinary shares by our shareholders and warrant holders following this offering could lower the market price of our ADSs. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable or at all.

 

The market price for our ADSs may be volatile.

 

In early 2021, we have experienced extreme price volatility. During the year 2021 up to the date of this prospectus supplement, the closing trade price of our ADSs ranged from US$6.62 to US$82.89 per ADS. Such extreme price volatility was probably attributable to our decision to step into cryptocurrency mining business. Due to such extreme price volatility, the risks exposure to and the possibilities of short squeeze also increased.

 

The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

 

  · actual or anticipated fluctuations in our operating results;

 

  · the market price of cryptocurrency;

 

  · the development of our cryptocurrency mining business;

 

  · changes in financial estimates by securities analysts;

 

  · price fluctuations of publicly traded securities of other China-based companies engaging in Internet-related services or other similar businesses;

 

  · changes in the economic performance or market valuations of other Internet companies;

 

  · announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

  · fluctuations in the exchange rates between the U.S. dollar and the RMB;

 

  · addition or departure of key personnel; and

 

  · pending and potential litigation.

 

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our ADSs.

 

S-6

 

 

There is no public market for the ADS Warrants offered in this offering.

 

There is no established public trading market for the ADS Warrants being offered in this offering. We do not intend to apply to list the ADS Warrants on the Nasdaq Capital Market or any other trading market. Accordingly, the liquidity of the ADS Warrants will be limited.

 

The ADS Warrants are speculative in nature.

 

The ADS Warrants do not confer any rights of ADS or Class A Ordinary Share ownership on its holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire ADSs at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the Warrants may exercise their right to acquire ADSs at an exercise price of $36.00 per ADS, subject to certain adjustments, prior to the three-year anniversary of the date of issuance. Moreover, following this offering, the market value of the ADS Warrants, if any, is uncertain. There can be no assurance that the market price of the ADSs will equal or exceed the exercise price of the ADS Warrants at any given time, and consequently, whether it will be profitable for holders of the ADS Warrants to exercise the ADS Warrants.

 

Techniques employed by short sellers may drive down the market price of our ADSs.

 

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 ordinary shares and ADSs 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 ADSs could be greatly reduced or rendered worthless. Such allegations could also result in shareholder litigation which could result in substantial costs and liabilities to us.

 

USE OF PROCEEDS

 

We estimate that the net proceeds from this offering will be approximately $125 million (or $143 million if the underwriter exercises its over-allotment option in full), after deducting underwriting discounts and commissions and the estimated offering expenses payable by us, and assuming no exercise of the common warrants offered hereby. In the event that the common warrants offered hereby are exercised in full, the Company would receive approximately an additional $102 million in proceeds (or approximately an additional $244 million in proceeds if the underwriter exercises its overallotment option in full).

 

S-7

 

 

We currently intend to use the net proceeds from the sale of the securities offered under this prospectus supplement to fund the development and commercialization of our projects and the growth of our business, primarily working capital, and for general corporate purposes. We have not determined the amount of net proceeds to be used specifically for the foregoing purposes as of the date of this prospectus supplement. As a result, our management will have broad discretion in the allocation of the net proceeds and investors will be relying on the judgment of our management regarding the application of the proceeds of any sale of the securities. Pending use of the net proceeds will be deposited in interest bearing bank accounts.

 

S-8

 

 

CAPITALIZATION

 

The following table sets forth our capitalization as of December 31, 2020:

 

  · on an actual basis;
     
  · on a pro forma basis giving effect to (i) our issuance of an aggregate number of 900,000 restricted Class A ordinary shares to our directors, (ii) our issuance and sale of an aggregate of 17,339,440 Class A ordinary shares to cryptocurrencies investors, (iii) our issuance of 30,671,190 Class A ordinary shares in exchange for Bitcoin mining machines, and (iv) vesting of restrictions relating to 2,006,572 Class A ordinary shares and 665,323 Class B ordinary shares issued to directors, officers, employees; and
     
  · on a pro forma as adjusted basis, giving further effect to (i) the issuance of 84,600,000 Class A ordinary shares issuable upon exercise of outstanding warrants and representative’s warrants, and (ii) the issuance of 112,953,000 Class A ordinary shares in the form of ADSs in this offering.

 

    As of December 31, 2020  
    Actual     Pro Forma    

Pro Forma As Adjusted(1)

 
    RMB     US$     RMB     US$     RMB     US$  
                                     
                                     
    (in thousands, except for share and per share data)  
Shareholders’ equity:                                                
Class A ordinary shares (US$0.01 par value; 4,300,000,000 shares authorized,  247,090,351 shares issued and outstanding as of December 31, 2020; 298,007,453 shares issued and outstanding on a pro forma basis; 495,560,453 shares issued and outstanding on a pro forma as adjusted basis)     17,197       2,636       20,498       3,141       33,454       5,127  
Class B ordinary shares (US$0.01 par value; 600,000,000 shares authorized, 12,942,011 shares issued and outstanding as of December 31, 2020; 13,607,334  shares issued and outstanding on a pro forma basis; 13,607,334 shares issued and outstanding on a pro forma as adjusted basis)     901       138       936       143       936       143  
Additional paid-in capital     2,695,763       413,144       2,880,122       441,398       3,706,216       568,002  
Statutory reserves     7,326       1,123       7,326       1,123       7,326       1,123  
Accumulated other comprehensive loss     (16,678 )     (2,556 )     (16,678 )     (2,556 )     (16,678 )     (2,556 )
Accumulated deficit     (2,992,228 )     (458,580 )     (2,992,228 )     (458,580 )     (2,992,228 )     (458,580 )
Noncontrolling interest     (379,724 )     (58,195 )     (379,724 )     (58,195 )     (379,724 )     (58,195 )
Total shareholders’ equity     (667,443 )     (102,290 )     (479,748 )     (73,526 )     359,302       55,064  

 

Note:  
   
(1) The pro forma as adjusted information discussed above is illustrative only.

 

S-9

 

 

The above discussion and table are based on 247,090,351 Class A ordinary shares and 12,942,011 Class B ordinary shares outstanding ordinary shares as of December 31, 2020 and exclude the following:

 

  · 84,600,000 Class A ordinary shares issuable upon exercise of outstanding warrants and representative’s warrants to be issued pursuant to the prospectus and registration statement on Form F-1 (File No. 333-240331)
     
  · 30,848,750 restricted Class A ordinary shares issued bearing restrictions to be vested;
     
  · 207,891,840 Class A ordinary shares issuable upon exercise of warrants issued to cryptocurrencies mining investors in January 2021;
     
  · Class A ordinary shares issuable upon conversion of the convertible notes held by Streeterville Capital, LLC;
     
  · Class A ordinary shares issuable pursuant to certain standby equity distribution agreement, or SEDA, dated February 5, 2021, by and between us and YA II PN, LTD., a Cayman Islands exempt limited partnership managed by Yorkville Advisor Global, LP; and
     
  · 2,823,825 ADSs, representing 84,714,750 Class A ordinary shares, issuable upon exercise of the ADS warrants in this offering.
     
  · 564,765 Option ADSs, representing 16,942,950 Class A ordinary shares and 423,574 Option Warrants, representing 12,707,220 Class A ordinary shares granted to underwriter in this offering.

 

S-10

 

 

DILUTION

 

If you invest in this offering, your ownership interest will be immediately diluted to the extent of the difference between the offering price per ADS and accompanying 0.75 of an ADS warrant, and the as adjusted net tangible book value per share of our ADS after this offering.

 

As of December 31, 2020, we had a net tangible book value of US$(48,796,318) or US$(5.70) per ADS.

 

After giving effect to the issuance and sale by us of 3,765,100 ADSs, representing 112,953,000 Class A ordinary shares, and ADS warrants to purchase 2,823,825 ADSs, representing 84,714,750 Class A ordinary shares in this offering and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2020 would have been approximately US$94,805,262, or approximately US$5.70 per ADS. This amount represents an immediate increase in net tangible book value of US$11.40 per ADS to our existing shareholders and an immediate dilution in as adjusted net tangible book value of approximately US$(27.50) per ADS to new investors purchasing shares in this offering.

 

Dilution per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the offering price per ADS paid by new investors. The following table illustrates this dilution on a per ADS basis:

 

The following table illustrates this dilution per share to investors participating in this offering:

 

  · on an actual basis;
     
  · on a pro forma basis giving effect to (i) our issuance of an aggregate number of 900,000 restricted Class A ordinary shares to our directors, (ii) our issuance and sale of an aggregate of 17,339,440 Class A ordinary shares to cryptocurrencies investors, (iii) our issuance of 30,671,190 Class A ordinary shares in exchange for Bitcoin mining machines, and (iv) vesting of restrictions relating to 2,006,572 Class A ordinary shares and 665,323 Class B ordinary shares issued to directors, officers, employees; and
     
  · on a pro forma as adjusted basis, giving further effect to (i) the issuance of 84,600,000 Class A ordinary shares issuable upon exercise of outstanding warrants and representative’s warrants, and (ii) the issuance of 112,953,000 Class A ordinary shares in the form of ADSs in this offering.

 

    Actual     Pro Forma     Pro Forma,
as adjusted
 
Assumed offering price per ADS   $ 33.20       33.20       33.20  
Net tangible book value per ADS as of December 31, 2020   $ (5.70 )     N/A       N/A  
Dilution in net tangible book value per ADS attributable to new investors   $ N/A       (3.30 )     (3.30 )
                         
Net tangible book value per ADS after giving effect to this offering   $ N/A       N/A       5.70  
                         
Increase per ADS to existing investors   $ N/A       3.30       11.40  

 

S-11

 

 

The above discussion and table are based on 247,090,351 Class A ordinary shares and 12,942,011 Class B ordinary shares outstanding ordinary shares as of December 31, 2020 and exclude the following:

 

  · 84,600,000 Class A ordinary shares issuable upon exercise of outstanding warrants and representative’s warrants to be issued pursuant to the prospectus and registration statement on Form F-1 (File No. 333-240331)
     
  · 30,848,750 restricted Class A ordinary shares issued bearing restrictions to be vested;
     
  · 207,891,840 Class A ordinary shares issuable upon exercise of warrants issued to cryptocurrencies mining investors in January 2021;
     
  · Class A ordinary shares issuable upon conversion of the convertible notes held by Streeterville Capital, LLC;
     
  · Class A ordinary shares issuable pursuant to certain standby equity distribution agreement, or SEDA, dated February 5, 2021, by and between us and YA II PN, LTD., a Cayman Islands exempt limited partnership managed by Yorkville Advisor Global, LP ; and
     
  · 2,823,825 ADSs, representing 84,714,750 Class A ordinary shares, issuable upon exercise of the ADS warrants in this offering.
     
  · 564,765 Option ADSs, representing 16,942,950 Class A ordinary shares and 423,574 Option Warrants, representing 12,707,220 Class A ordinary shares granted to underwriter in this offering.

 

S-12

 

 

DESCRIPTION OF OUR SECURITIES WE ARE OFFERING

 

We are offering 3,765,100 ADSs representing 112,953,000 Class A ordinary shares and ADS warrants to purchase 2,823,852 ADSs representing 84,714,750 Class A ordinary shares issuable upon exercise of the ADS warrants pursuant to this prospectus supplement and the accompanying prospectus.  We have granted the underwriters a 45-day option to purchase up to an additional 564,765 ADSs and/or ADS warrants to purchase up to an additional 423,574 ADSs, in each case to cover over-allotments, if any.

 

The material terms and provisions of our ordinary shares and ADSs are described under the caption “Description of Share Capital” and “Description of the American Depositary Shares” beginning on pages 2 and 19 of the accompanying prospectus, respectively.

 

The initial exercise price of the ADS warrants will be $36.00 per ADS, subject to adjustments for share splits, share dividends, and similar events.

 

A holder may not exercise any of the ADS warrants, and the Company may not issue ADSs upon exercise of any of the ADS warrants if, after giving effect to the exercise, a holder together with its “attribution parties,” would beneficially own in excess of 4.99%, of the outstanding ADSs or Class A ordinary shares. At each holder’s option, the cap may be increased or decrease to any other percentage not in excess of 9.99%, except that any increase will not be effective until the 61st day after notice to the Company. Such increase or decrease in each holder’s cap will apply only to that holder and its “attribution parties,” and not to any other holder than is not an “attribution party” of such holder.

 

During the term of the ADS warrants, if a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the purchase ADS warrants with the same effect as if such successor entity had been named in the ADS warrant itself. If holders of shares of our ADSs and/or ordinary shares are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder shall be given the same choice as to the consideration it receives upon any exercise of the ADS warrant following such fundamental transaction. In addition, in certain circumstances, upon a fundamental transaction, the holder will have the right to require us to repurchase its ADS warrant at its fair value using the Black Scholes Value (as defined in ADS warrants) option pricing formula; provided, however, that, if the fundamental transaction is not within our control, including not approved by our board of directors, then the holder shall only be entitled to receive the same type or form of consideration (and in the same proportion), at the Black Scholes value per ADS in the fundamental transaction for each ADS underlying a ADS warrant, that is being offered and paid to the holders of our ADS in connection with the fundamental transaction, whether that consideration be in the form of cash, share or any combination thereof, or whether the holders of ADS and/or our ordinary shares are given the choice to receive from among alternative forms of consideration in connection with the fundamental transaction. Notwithstanding the foregoing, the fundamental transaction shall not include any issuance of ADSs, Ordinary Shares and/or Ordinary Shares Equivalent upon exercise of certain warrants issued pursuant to certain share subscription and warrant purchase agreement dated January 25, 2021 among the Company, Jianping Kong, JPKONG LTD., Qifeng Sun Ltd., Luckylily Ltd. and Root Grace Ltd.

 

UNDERWRITING

 

We are offering the ADSs and warrants as described in this prospectus supplement and the accompanying prospectus through the underwriter listed below. Maxim Group LLC is acting as the sole book-running manager of this offering. The underwriter has agreed to buy, subject to the terms of the underwriting agreement, the number of securities listed below. The underwriter is committed to purchase and pay for all of the securities if any are purchased.

 

Underwriter   Number of ADSs     Number of ADS
Warrants
 
Maxim Group LLC     3,765,100       2,823,825  
Total     3,765,100       2,823,825  

 

S-13

 

 

The underwriter has advised us that it proposes to offer the ADSs and the accompanying ADSs warrants to the public at a price of $33.20 per ADS and accompanying 0.75 of an ADS warrant.

 

The ADSs and ADS warrants sold in this offering are expected to be ready for delivery on or about April 5, 2021, against payment in immediately available funds.

 

The table below summarizes the underwriting discounts that we will pay to the underwriter. In addition to the underwriting discount, we have agreed to pay up to $70,000 of the fees and expenses of the underwriter, which may include the fees and expenses of counsel to the underwriter. The fees and expenses of the underwriter that we have agreed to reimburse are not included in the underwriting discounts set forth in the table below. The underwriting discount and reimbursable expenses the underwriter will receive were determined through arms’ length negotiations between us and the underwriter.

 

    Per ADS and 0.75 of
An ADS Warrant
    Total  
Public offering price   $ 33.20     $ 125,001,320  
Underwriting discounts and commissions (1)   $ 1.992     $ 7,570,079.20  
Proceeds, before expenses, to us   $ 31.208     $ 117,501,240.80  

 

We estimate that the total expenses of this offering, excluding underwriting discounts, will be $280,000. This includes $70,000 of the fees and expenses of the underwriter. These expenses are payable by us.

 

We also have agreed to indemnify the underwriter against certain liabilities, including civil liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the underwriter may be required to make in respect of those liabilities.

 

Right of First Refusal

 

We have granted the underwriter the right of first refusal for a period of twelve (12) months after the closing of this offering to act as co-underwriter and book runner with a minimum portion of at least US$10.0 million of the economics for any and all future private and public offerings of equity or equity-linked, convertible or debt securities undertaken by us or any successor or subsidiary of us that occur after the closing of the offering.

 

Lock-Up

 

We, each of our directors and officers and certain of our shareholders have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any ADSs or any securities convertible into or exchangeable for ADSs without the prior written consent of the underwriter for a period of 60 days after the date of this prospectus supplement. These lock-up agreements provide limited exceptions and their restrictions may be waived at any time by the underwriter.

 

Price Stabilization, Short Positions and Penalty Bids

 

To facilitate this offering, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of our ADSs during and after the offering. Specifically, the underwriter may over-allot or otherwise create a short position in our ADSs for its own account by selling more ADSs than we have sold to the underwriter. The underwriter may close out any short position by either exercising its option to purchase additional shares or purchasing shares in the open market.

 

In addition, the underwriter may stabilize or maintain the price of our ADSs by bidding for or purchasing shares in the open market and may impose penalty bids. If penalty bids are imposed, selling concessions allowed to broker-dealers participating in this offering are reclaimed if shares previously distributed in this offering are repurchased, whether in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of our ADSs at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of our ADSs to the extent that it discourages resales of our ADSs. The magnitude or effect of any stabilization or other transactions is uncertain. These transactions may be effected on the Nasdaq Capital Market or otherwise and, if commenced, may be discontinued at any time.

 

S-14

 

 

In connection with this offering, the underwriter and selling group members may also engage in passive market making transactions in our ADSs on the Nasdaq Capital Market. Passive market making consists of displaying bids on the Nasdaq Capital Market limited by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the Securities and Exchange Commission limits the amount of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of our ADSs at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.

 

Neither we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our ADSs. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.

 

Affiliations

 

The underwriter and its affiliates is a full service financial institution engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriter may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. The underwriter may in the future receive customary fees and commissions for these transactions.

 

In the ordinary course of its various business activities, the underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for its own account and for the accounts of its customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

Electronic Offer, Sale and Distribution

 

In connection with this offering, the underwriter or certain of the securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, the underwriter may facilitate Internet distribution for this offering to certain of its Internet subscription customers. The underwriter may allocate a limited number of securities for sale to its online brokerage customers. An electronic prospectus is available on the Internet websites maintained by any such underwriter. Other than the prospectus in electronic format, the information on the websites of the underwriter is not part of this prospectus supplement or the accompanying prospectus.

 

Depositary

 

Our depositary is the Bank of New York Mellon which administers our ADSs. Its principal executive office are located at 240 Greenwich Street, New York, New York 10286.

 

Listing

 

Our ADSs representing our Class A ordinary shares are listed on the Nasdaq under the symbol “NCTY.”

 

S-15

 

 

Selling Restrictions

 

Canada.  The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

Pursuant to section 3A.3 of National Instrument 33 105 Underwriting Conflicts (NI 33 105), the underwriter is not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

 

European Economic Area.  In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

  · to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

  · to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

 

  · in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

 

For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

 

United Kingdom. The underwriter has represented and agreed that:

 

  · it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and

 

  · it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

 

S-16

 

 

Switzerland. The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the “SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

 

Neither this document nor any other offering or marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of securities.

 

Australia. No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering.

 

This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

 

Any offer in Australia of the securities may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.

 

The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.

 

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

 

LEGAL MATTERS

 

Except as otherwise set forth in the applicable prospectus supplement, certain legal matters in connection with the securities offered pursuant to this prospectus including the validity of the ADS warrants offered in this offering will be passed upon for us by Hunter Taubman Fischer & Li LLC to the extent governed by the laws of the State of New York. The validity of the Class A ordinary shares represented by the ADSs offered in this offering will be passed upon for us by Maples and Calder (Hong Kong) LLP. Certain legal matters as to PRC law will be passed upon for us by Grandall Law Firm.

 

S-17

 

 

EXPERTS

 

The audited consolidated financial statements appearing in our annual report on Form 20-F for the fiscal years ended December 31, 2020 and 2019 incorporated by reference in this prospectus supplement and the prospectus have been so incorporated by reference in reliance on the report of Grant Thornton, an independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.

 

The registered business address of Grant Thornton is located at level 45, Raffles City, 268 Xizang Zhong Road, Huangpu District, Shanghai, People’s Republic of China.

 

INFORMATION INCORPORATED BY REFERENCE

 

The SEC allows us to “incorporate by reference” into this prospectus the 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 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.

 

We hereby incorporate by reference into this prospectus the following documents that we have filed with the SEC under the Exchange Act:

 

  (1) the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020, filed with the SEC on March 29, 2021as amended on March 30, 2021;

 

  (2) the description of ordinary shares and ADSs incorporated by reference in our registration statement on Form 8-A, as amended (File No. 001-34238) filed with the Commission on April 30, 2020, including any amendment and report subsequently filed for the purpose of updating that description;

 

  (3) the Company’s current reports on Form 6-K, filed with the SEC on March 29, 2021, March 30, 2021,March 31, 2021, and April 1, 2021; and

 

  (4) any future reports 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 in this prospectus.

 

All documents that we file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (and in the case of a Current Report on Form 6-K, so long as they state that they are incorporated by reference into this prospectus, and other than Current Reports on Form 6-K, or portions thereof, furnished under Form 6-K) (i) after the initial filing date of the registration statement of which this prospectus forms a part and prior to the effectiveness of such registration statement and (ii) after the date of this prospectus and prior to the termination of the offering shall be deemed to be incorporated by reference in this prospectus from the date of filing of the documents, unless we specifically provide otherwise. Information that we file with the SEC will automatically update and may replace information previously filed with the SEC. To the extent that any information contained in any Current Report on Form 6-K or any exhibit thereto, was or is furnished to, rather than filed with the SEC, such information or exhibit is specifically not incorporated by reference.

 

Upon request, we will provide, without charge, to each person who receives this prospectus, a copy of any or all of the documents incorporated by reference (other than exhibits to the documents that are not specifically incorporated by reference in the documents).

 

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.the9.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our principal executive office is located at 17 Floor, No. 130 Wu Song Road, Hong Kou District, Shanghai 201203, People’s Republic of China, and our telephone number is +86 (21) 6108-6080. Our registered office in the Cayman Islands is located at the offices of CARD Corporate Services Ltd, c/o Collas Crill Corporate Services Limited, Floor 2, Willow House, Cricket Square, PO Box 709, Grand Cayman KY1-1107 Cayman Islands.

 

S-18

 

 

WHERE YOU CAN FIND MORE 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 the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and, in accordance with these requirements, we file annual and current reports and other information with the SEC. You may inspect, read (without charge) and copy the reports and other information we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website at www.sec.gov that contains our filed reports and other information that we file electronically with the SEC.

 

We maintain a corporate website at http://www.the9.com/. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus.

 

ENFORCEABILITY OF CIVIL LIABILITIES

 

We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

 

  · political and economic stability;
     
  · an effective judicial system;
     
  · a favorable tax system;
     
  · the absence of exchange control or currency restrictions; and
     
  · the availability of professional and support services.

 

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to:

 

  · the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors as compared to the United States; and
     
  · Cayman Islands companies may not have standing to sue before the federal courts of the United States.

 

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

 

Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. Most of our directors and executive officers are nationals or residents of jurisdictions other than the United States and most of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these individuals, or 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 securities laws of the United States or any state in the United States.

 

S-19

 

 

We have appointed Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, Delaware 19711 as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

 

Maples and Calder (Hong Kong) LLP, our legal counsel as to Cayman Islands law, and Grandall Law Firm, our legal counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

 

  · 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
     
  · entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

 

We have been advised by our Cayman Islands legal counsel, Maples and Calder (Hong Kong) LLP, that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States and that the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments, the courts of the Cayman Islands will, at common law, recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without re-examination of the merits of the underlying disputes based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the liquidated sum for which judgment has been given provided certain conditions are met. For such a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty and not obtained in a manner and is not of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

 

Grandall Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against 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 or the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law 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 ADSs or Class A ordinary shares.

 

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

S-20

 

  

PROSPECTUS

 

The9 Limited

 

$1,000,000,000

Class A ordinary shares,

Class A ordinary shares in the Form of American Depositary Shares,

Preferred Shares,

Preferred Shares in the Form of American Depositary Shares,

Debt Securities,

Warrants,

Units, and

Rights

 

We may, from time to time in one or more offerings, offer and sell up to $1,000,000,000 of any combination, together or separately, of Class A ordinary shares, par value US$0.01 per share; Class A ordinary shares in the form of American Depositary Shares, or ADSs; preferred shares, par value US$0.01 per share; preferred shares in the form of ADSs; debt securities; warrants; units; rights; or any combination thereof as described in this prospectus. Any ADS will represent a specified number of ordinary shares or preference shares. The warrants may be convertible into or exercisable or exchangeable for ordinary shares or preferred shares or debt securities, the preferred shares may be convertible into or exchangeable for ordinary shares and the debt securities may be convertible into or exchangeable for ordinary shares or preference shares or other debt securities. 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 securities offered, please see “Plan of Distribution” in this prospectus.

 

In addition, from time to time, the selling shareholders (if any) named in a prospectus supplement may offer and sell our Class A ordinary shares or ADSs held by them. The selling shareholders (if any) may sell our Class A ordinary shares or ADSs through public or private transactions at prevailing market prices or at privately negotiated prices. We will not receive any proceeds from the sale of our Class A ordinary shares by selling shareholders.

 

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. The prospectus supplement and any related free writing prospectus may add, update or change information contained 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 ADSs are listed on the Nasdaq Capital Market, or NASDAQ, under the symbol “NCTY.” On March 30, 2021, the last reported sale price of our ADS on the NASDAQ, was $36.30 per ADS. The applicable prospectus supplement will contain information, where applicable, as to other listings, if any, on the NASDAQ or other securities exchange of the securities covered by the prospectus supplement.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” on page 1 of this prospectus and in the documents incorporated by reference in this prospectus, as updated in the applicable prospectus supplement, any related free writing prospectus and other future filings we make with the Securities and Exchange Commission that are incorporated by reference into this prospectus, for a discussion of the factors you should consider carefully before deciding to purchase our securities.

 

We may sell these securities directly to investors, through agents designated from time to time or to or through underwriters or dealers. For additional information on the methods of sale, you should refer to the section entitled “Plan of Distribution” in this prospectus. 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 price to the public of such securities and the net proceeds we expect to receive from such sale will also be set forth in a prospectus supplement.

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission 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 March 30, 2021.

 

TABLE OF CONTENTS

 

  Page
ABOUT THIS PROSPECTUS ii
   
COMMONLY USED DEFINED TERMS ii
   
NOTE REGARDING FORWARD-LOOKING STATEMENTS iii
   
OUR BUSINESS 1
   
RISK FACTORS 1
   
USE OF PROCEEDS 2
   
DILUTION 2
   
DESCRIPTION OF SHARE CAPITAL 2
   
DESCRIPTION OF THE AMERICAN DEPOSITARY SHARES 12
   
DESCRIPTION OF DEBT SECURITIES 19
   
DESCRIPTION OF WARRANTS 23
   
DESCRIPTION OF UNITS 26
   
PLAN OF DISTRIBUTION OF THE OFFERING 27
   
SELLING SHAREHOLDERS 29
   
LEGAL MATTERS 29
   
EXPERTS 29
   
INFORMATION INCORPORATED BY REFERENCE 29
   
WHERE YOU CAN FIND MORE INFORMATION 30
   
ENFORCEABILITY OF CIVIL LIABILITIES 31
   
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 32

 

i 

 

 

ABOUT THIS PROSPECTUS

 

We are a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act. This prospectus is part of an automatic shelf registration statement that we filed with the Securities and Exchange Commission, or the SEC. By using an automatic shelf registration statement, we or any selling shareholder may, at any time and from time to time, offer and sell the securities described in this prospectus in one or more offerings. We may also add, update or change information contained in this prospectus by means of a prospectus supplement or by incorporating by reference information that we file or furnish to the SEC. As allowed by the SEC rules, this prospectus and any accompanying prospectus supplement do not contain all of the information included in the registration statement. For further information, we refer you to the registration statement, including its exhibits. Statements contained in this prospectus or any prospectus supplement about the provisions or contents of any agreement or other document are not necessarily complete. If the SEC’s rules and regulations require that an agreement or document be filed as an exhibit to the registration statement, please see that agreement or document for a complete description of these matters.

 

You should carefully read this document and any applicable prospectus supplement. You should also read the documents we have referred you to under “Where You Can Find More Information” and “Information Incorporated By Reference” below for information on our company, the risks we face and our financial statements. The registration statement and exhibits can be read on the SEC’s website as described under “Where You Can Find More Information.”

 

Unless the context otherwise requires, all references in this prospectus to “The9”, “we,” “us,” “our,” “the Company” or similar words refer to The9 Limited, as the context may require, its subsidiaries, the affiliated PRC entity and its subsidiaries.

 

COMMONLY USED DEFINED TERMS

 

Unless otherwise indicated or the context otherwise requires in this prospectus:

 

  · “ADSs” refers to our American depositary shares, each of which currently represents thirty Class A ordinary shares. ADSs, per ADS amount and other related amount in this prospectus have been retroactively adjusted to reflect the changes in ADS-to-Class A ordinary share ratio from each ADS representing three Class A ordinary shares to each ADS representing thirty Class A ordinary shares for all periods presented;
     
  · “affiliated entity” and “affiliated PRC entity” refer to our consolidated affiliated PRC entities, including, among others, Shanghai The9 Information Technology Co., Ltd., or Shanghai IT, in which we do not have direct equity interests but over which we effectively control through a series of contractual arrangements as described under “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Arrangements with Affiliated PRC Entities” of the Form 20-F filed on March 29, 2021;
     
  · “China” and “PRC” refer to the People’s Republic of China, and solely for the purpose of this prospectus, excluding Taiwan, Hong Kong and Macau;
     
  · “Class A ordinary shares” refers to our Class A ordinary shares of par value US$0.01 per share;
     
  · “Class B ordinary shares” refers to our Class B ordinary shares of par value US$0.01 per share;
     
  · “RMB” and “Renminbi” are to the legal currency of China;
     
  · “U.S. dollars,” “dollars,” “US$” and “$” are to the legal currency of the United States; and
     
  · “we,” “us,” “our company,” “our” and “The9” refer to The9 Limited and, as the context may require, its subsidiaries, the affiliated PRC entity and its subsidiaries.

 

ii 

 

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus 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 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.

 

iii 

 

 

OUR BUSINESS

 

Business Overview

 

We are an Internet company based in China and we aim to become a diversified Internet company targeting on fast-growing technology sectors We are currently transforming our business focus to cryptocurrencies mining business. For more information, you can see "Item 4. Information of the Company" in our annual report on Form 20-F for the year ended December 31, 2020, as amended, which is incorporated in this prospectus by reference.

 

Corporate Information

 

Our principal executive office is located at 17 Floor, No. 130 Wu Song Road, Hong Kou District, Shanghai 201203, People’s Republic of China, and our telephone number is +86 (21) 6108-6080. Our registered office in the Cayman Islands is located at the offices of CARD Corporate Services Ltd, c/o Collas Crill Corporate Services Limited, Floor 2, Willow House, Cricket Square, PO Box 709, Grand Cayman KY1-1107 Cayman Islands.

 

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.the9.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully consider the risk factors set forth under “Risk Factors” described in our most recent annual report on Form 20-F, filed on March 29, 2021, as amended on March 30, 2021, as supplemented and updated by subsequent current reports on Form 6-K that we have filed with the SEC, together with all other information contained or incorporated by reference in this prospectus and any applicable prospectus supplement and in any related free writing prospectus in connection with a specific offering, before making an investment decision. Each of the risk factors could materially and adversely affect our business, operating results, financial condition and prospects, as well as the value of an investment in our securities, and the occurrence of any of these risks might cause you to lose all or part of your investment.

 

  1  

 

 

USE OF PROCEEDS

 

Except as described in any prospectus supplement and any free writing prospectus in connection with a specific offering, we currently intend to use the net proceeds from the sale of the securities offered under this prospectus to fund the development and commercialization of our projects and the growth of our business, primarily working capital, and for general corporate purposes. We have not determined the amount of net proceeds to be used specifically for the foregoing purposes. As a result, our management will have broad discretion in the allocation of the net proceeds and investors will be relying on the judgment of our management regarding the application of the proceeds of any sale of the securities. If a material part of the net proceeds is to be used to repay indebtedness, we will set forth the interest rate and maturity of such indebtedness in a prospectus supplement. Pending use of the net proceeds will be deposited in interest bearing bank accounts.

 

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:

 

  the net tangible book value per share of our equity securities before and after the offering;
     
  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

 

  the amount of the immediate dilution from the public offering price which will be absorbed by such purchasers.

 

DESCRIPTION OF SHARE CAPITAL

 

We are a Cayman Islands exempted company with limited liability and our corporate affairs are governed by our Second Amended and Restated Memorandum and Articles of Association, as amended from time to time and the Companies Act of the Cayman Islands, which we refer to as the Companies Act below, and the common law of the Cayman Islands.

  

Our authorized share capital is US$50,000,000 divided into 5,000,000,000 shares comprising (i) 4,300,000,000 Class A ordinary shares of par value US$0.01 each, (ii) 600,000,000 Class B ordinary shares of par value US$0.01 each, and (iii) 100,000,000 shares of par value US$0.01 each of such class or classes (however designated) as our board of directors may determine in accordance with our currently effective Second Amended and Restated Memorandum and Articles of Association. As of the date of this prospectus, we have 340,356,731 Class A ordinary shares issued and outstanding, and 13,607,334 Class B ordinary shares issued and outstanding.

 

Our Second Amended and Restated Memorandum and Articles of Association

 

The following are summaries of material provisions of our currently effective Second Amended and Restated Memorandum and Articles of Association, as well as the Companies Act insofar as they relate to the material terms of our ordinary shares.

 

Ordinary Shares

 

Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our ordinary shares are issued in registered form and are issued when entered in our register of members (shareholders). Every person whose name is entered in our register of members as a registered shareholder is entitled to receive a share certificate within two months of the allotment of such shares. We are not permitted to issue bearer shares.

 

Conversion

 

Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of Class B ordinary shares by a holder thereof to any person who is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares.

 

  2  

 

 

Dividends

 

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. In addition, our shareholders may declare dividends by ordinary resolution, but no dividend shall exceed the amount recommended by our directors. Under the laws of the Cayman Islands, our 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 our company being unable to pay its debts as they fall due in the ordinary course of business.

 

Voting Rights

 

Holders of our Class A ordinary shares and our Class B ordinary shares shall, at all times, vote together as one class on all matters submitted to a vote by our shareholders at any general meeting of our company. Each Class A ordinary share shall be entitled to one vote, and each Class B ordinary share shall be entitled to fifty votes, on all matters subject to a vote at general meetings of our company. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by one or more shareholders together holding not less than ten percent of the paid up voting share capital, present in person or by proxy.

 

A quorum required for a meeting of shareholders consists of holders of not less than one-third of all issued and outstanding shares entitled to vote. Our company may hold an annual general meeting but shall not (unless required by the Companies Act) be obliged to hold an annual general meeting. Annual general meetings and extraordinary general meetings may be convened by our board of directors on its own initiative. In addition, our board of directors is required to convene extraordinary general meetings upon any requisition by shareholders holding in aggregate not less than 33% of our voting share capital. Advance notice of at least seven business days is required for the convening of our annual general meeting and extraordinary general meetings.

 

An ordinary resolution to be passed by our shareholders requires the affirmative vote of a simple majority of the votes attaching to our ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to our ordinary shares cast in a general meeting. A special resolution is required for important matters such as a change of name, a reduction of our share capital, effecting a statutory merger, or amending our memorandum and articles of association. Holders of our ordinary shares may effect certain changes by ordinary resolution, including an increase of our authorized share capital, the consolidation and division of all or any of our share capital into shares of a larger amount than our existing share capital, and the cancellation of any authorized but unissued shares.

 

Transfer of Shares

 

Subject to the restrictions of our Second Amended and Restated Memorandum and Articles of Association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board. The transferor shall be deemed to remain the holder of the shares until the name of the transferee is entered in the register of members in respect thereof.

 

Liquidation

 

On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to the par value of the shares held by them.

 

Calls on Shares and Forfeiture of Shares

 

Our board of directors may from time to time make calls upon shareholders for any moneys 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 on the specified time are subject to forfeiture.

 

  3  

 

 

Redemption, Repurchase and Surrender of Shares

 

We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of such shares, on such terms and in such manner as may be determined, before the issuance of such shares, by our board of directors. Our company may also repurchase any of our shares (including any redeemable shares) provided that the manner of such purchase has been approved by ordinary resolution of our shareholders or the manner of such purchase is in accordance with our Second Amended and Restated Memorandum and Articles of Association. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.

 

Variation of Rights of Shares

 

If at any time our share capital is divided into different classes of shares, the rights attaching to any class of shares may, subject to our Second Amended and Restated Memorandum and Articles of Association, be varied or abrogated either with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a resolution passed by at least a majority of the holders of the shares of that class present in person or by proxy at a separate general meeting of the holders of the shares of that class.

 

Issuance of Additional Shares

 

Our Second Amended and Restated Memorandum and Articles of Association authorize our board of directors to issue additional shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.

 

Our Second Amended and Restated Memorandum and Articles of Association also authorize our board of directors to establish from time to time one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including but not limited to:

 

  · the designation of the series;

 

  · the number of shares of the series and the subscription price thereof if different from the par value thereof;

 

  · the dividend rights, dividend rates, conversion rights, voting rights; and

 

  · the rights and terms of redemption and liquidation preferences

 

Our board of directors may issue preferred shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the voting power of holders of ordinary shares.

 

Inspection of Books and Records

 

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.

 

  4  

 

 

 

Anti-Takeover Provisions

 

Some provisions of our Second Amended and Restated Memorandum and Articles of Association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:

 

  · authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders; and

 

  · create a classified board of directors pursuant to which our directors are elected for staggered terms, which means that shareholders can only elect, or remove, a limited number of directors in any given year; and

 

  · limit the ability of shareholders to requisition and convene general meetings of shareholders.

 

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Second Amended and Restated Memorandum and Articles of Association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

 

Changes in Capital

 

We may from time to time by ordinary resolution of our shareholders increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe.

 

We may by ordinary resolution of our shareholders:

 

  · consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;

 

  · sub-divide our existing shares, or any of them into shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any unpaid on each reduced share shall be the same as it was in case of our share from which the reduced share is derived; and

 

  · cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.

 

We may by special resolution of our shareholders reduce our share capital and any capital redemption reserve in any manner authorized by law.

 

Differences in Corporate Law

 

The Companies Act is derived, to a large extent, from the older Companies Acts of England, but does not follow recent English law statutory enactments, and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of certain significant differences between the provisions of the Companies Act applicable to us and the comparable provisions of the laws applicable to companies incorporated in the State of Delaware and their shareholders.

 

Mergers and Similar Arrangements

 

The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) ”merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a ”consolidation” means the combination of two or more constituent companies into a combined company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a declaration as to the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Save in certain limited circumstances, a shareholder of a Cayman Islands constituent company who dissents from the merger or consolidation is entitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upon dissenting to the merger or consolidation, provided the dissenting shareholder complies strictly with the procedures set out in the Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

 

  5  

 

 

In addition to the statutory provisions relating to mergers and considerations, the Companies Act also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by a majority in number of each class of shareholders or creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the Grand Court of the Cayman Islands can be expected to approve the arrangement if it determines that:

 

  · the statutory provisions as to the required majority vote have been met;

 

  · the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;

 

  · the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and

 

  · the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.

 

The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.

 

If an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made and accepted, in accordance with the foregoing statutory provisions, a dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

 

Shareholders’ Suits

 

In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rule, a derivative action may ordinarily not be brought by a minority shareholder. However, based on English authority, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands courts can be expected (and have had occasion) to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action against, or derivative actions in the name of, our company to challenge:

 

  · an act which is ultra vires or illegal and is therefore incapable of ratification by the shareholders,

 

  · an act which constitutes a fraud against the minority where the wrongdoers are themselves in control of the company, and

 

  · an act which requires a resolution with a qualified (or special) majority (i.e. more than a simple majority) which has not been obtained.

 

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Indemnification of Directors and Officers and Limitation of Liability

 

Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Second Amended and Restated Memorandum and Articles of Association provides that we shall indemnify each of our directors and officers against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such director or officer in connection with the execution or discharge of his duties, powers, authorities or discretions as a director or officer, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by him in defending any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.

 

In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our Second Amended and Restated Memorandum and Articles of Association.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

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 acts 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, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

 

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore he owes the following duties to the company—a duty to act in good faith in the best interests of the company, a duty not to make a personal profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

 

Shareholder Action by Written Consent

 

Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. The Companies Act and our Second Amended and Restated Memorandum and Articles of Association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.

 

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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.

 

The Companies Act provides shareholders with only limited rights to requisition a general meeting and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our Second Amended and Restated Memorandum and Articles of Association allow our shareholders holding not less than 33% of the share capital of our company carrying the right of voting at general meetings of our company to requisition a shareholder’s meeting, in which case our directors are obligated to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. Other than this right to requisition a shareholders’ meeting, our Second Amended and Restated Articles of Association do not provide our shareholders other right to put proposal before annual general meetings or extraordinary general meetings not called by such shareholders. As a Cayman Islands exempted company, we are not obliged by law to call shareholders’ annual general meetings.

 

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. While there is nothing under the laws of the Cayman Islands which specifically prohibits or restricts the creation of cumulative voting rights for the election of directors of our company, it is not a concept that is accepted as a common practice in the Cayman Islands, and our company has made no provisions in our Second Amended and Restated Memorandum and Articles of Association to allow cumulative voting for such elections. 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, subject to certain restrictions as contained therein, directors may be removed with or without cause, by an ordinary resolution of our shareholders. A director shall hold office until the expiration of his or her term or his or her successor shall have been elected and qualified, or until his or her office is otherwise vacated. In addition, a director’s office shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) is found to be or becomes of unsound mind or dies; (iii) resigns his office by notice in writing to the company; (iv) without special leave of absence from our board of directors, is absent from meetings of our board for six consecutive months and the board resolves that his office be vacated; or (v)  is removed from office pursuant to any other provisions of our Second Amended and Restated Memorandum and Articles of Association.

 

Transactions with Interested Shareholders

 

The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

 

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Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, the directors of the Company are required to comply with the fiduciary duties which they owe to the Company under Cayman Islands law, including the duty to ensure that, in their opinion, any such transactions entered into are bona fide in the best interests of the Company, and are entered into for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.

 

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 Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.

 

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 Articles of Association, if at any time our share capital is divided into different classes of shares, the rights attaching to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to our Second Amended and Restated Memorandum and Articles of Association, be varied or abrogated with the consent in writing of the holders of a majority of the issued shares of that class or with the sanction of a resolution passed by at least a majority of the holders of the shares of that class present in person or by proxy at a separate general meeting of the holders of the shares of that class.

 

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. Under Cayman Islands law and our Second Amended and Restated Memorandum and Articles of Associations, our Second Amended and Restated Memorandum and Articles of Association may only be amended with a special resolution of our shareholders.

 

Rights of Non-resident or Foreign Shareholders

 

There are no limitations imposed by our Second Amended and Restated Memorandum and Articles of Association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Second Amended and Restated Memorandum and Articles of Association which require our company to disclose shareholder ownership above any particular ownership threshold.

 

History of Securities Issuances

 

The following is a summary of our securities issuances in the past three years.

 

Ordinary Shares

 

In September 2018, we issued 21,000,000 ordinary shares to Leading Choice Holding Limited, a Hong Kong company, for approximately then 20.0% equity interest in Leading Choice Holding Limited, as consideration. Such 21,000,000 ordinary shares were re-designated as 21,000,000 Class A ordinary shares in May 2019.

 

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In September 2018, we issued 21,000,000 ordinary shares to Plutux Limited, a Gibraltar company, for approximately then 8.0% equity interest in Plutux Limited, as consideration. Such 21,000,000 ordinary shares were re-designated as 21,000,000 Class A ordinary shares in May 2019.

 

In May 2019, as a result of the adoption of dual-class share structure, we re-designated and re-classified the then 13,607,334 authorized and issued ordinary shares held by Incsight Limited and Mr. Jun Zhu as 13,607,334 Class B ordinary shares, and re-designated and re-classified the then remaining 119,748,024 authorized and issued ordinary shares as 119,748,024 Class A ordinary shares.

 

In June 2019, we issued 3,444,882 Class A ordinary shares to Comtec Windpark Renewable (Holdings) Co., Ltd., in exchange for then 9.9% equity interest in Zhenjiang Kexin Power System Design and Research Company.

 

In February 2020, we issued (i) a one-year convertible note in a principal amount of US$500,000, (ii) 70,000 ADSs, and (iii) 3,300,000 Class A ordinary shares, for an aggregate consideration of US$500,000 to Iliad.

 

In June 2020, we issued 32,400,000 Class A ordinary shares to Splendid Days Limited to settle the repayment for the Convertible Notes of US$7.6 million.

 

On October 2, 2020, at the closing of our registered offering, we issued and sold 70,500,000 Class A ordinary shares, represented by ADSs, at a public offering price of US$0.36 per ADS, each ADS then representing three Class A ordinary shares.

 

In November 2020, we issued 3,040,050 Class A ordinary shares to Thurgau Limited to settle outstanding portion of their service fee in connection with sale transaction entered into with Kapler Pte. Ltd. to sell three subsidiaries which collectively hold land use rights and office buildings located at Zhangjiang, Shanghai.

 

On February 2, 2021, we issued 8,108,100 Class A ordinary shares in aggregate to JPKONG Ltd., Qifeng Ltd., Luckylily Ltd. and Root Grace Ltd. at US$0.1233 per Class A ordinary share.

 

On February 2, 2021, we issued and sold (i) a one-year convertible note in a principal amount of US$5,000,000, (ii) 50,000 ADSs, and (iii) 10,000,000 Class A ordinary shares, for an aggregate consideration of US$5,000,000 to Streeterville Capital LLC.

 

On February 7, 2021, we issued an aggregate of 26,838,360 Class A ordinary shares in exchange for cryptocurrency mining machines to several machine owners.

 

On February 14, 2021, we issued an aggregate of 33,090,000 Class A ordinary shares, including 32,190,000 restricted Class A ordinary shares and 900,000 Class A ordinary shares issued upon the vesting of the underlying restricted share units, to certain directors, executive officers, employees and consultants of our company in consideration of their past and future services.

 

On February 16, 2021, we issued an aggregate of 9,231,240 Class A ordinary shares to four investors in exchange for cash consideration of US$11.5 million.

 

On March 8, 2021, we issued an aggregate of 3,832,830 Class A ordinary shares in exchange for cryptocurrency mining machines to several machine owners.

 

Convertible Note

 

In February 2020, we issued (i) a one-year convertible note in a principal amount of US$500,000, (ii) 70,000 ADSs, and (iii) 3,300,000 Class A ordinary shares, for an aggregate consideration of US$500,000 to Iliad. The convertible note bears interest at a rate of 6.0% per year, compounded daily. Iliad has the right at any time after six months have elapsed since the purchase date until the outstanding balance has been paid in full, at its election, to convert all or any portion of the outstanding balance into ADSs of our company at an initial conversion price of US$10.5 per ADS, each ADS representing thirty Class A ordinary shares, subject to adjustment. Beginning on the date that is six months from the note purchase date, Iliad has the right, exercisable at any time in its sole and absolute discretion, to redeem any portion of the convertible note up to US$150,000 per calendar month. Payment of the redemption amount could be in cash or our ADSs. In the event the principal amount and interest accrued for the convertible note issued to Iliad are fully repaid, we have the right to repurchase the remaining Class A ordinary shares held by Iliad that are unsold at US$0.0001 per share.

 

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In February 2021, we issued and sold (i) a one-year convertible note in a principal amount of US$5,000,000, (ii) 50,000 ADSs, and (iii) 10,000,000 Class A ordinary shares, for an aggregate consideration of US$5,000,000 to Streeterville Capital LLC, or Streeterville. The convertible note bears interest at a rate of 6.0% per year, computed on the basis of a 360-day year. Streeterville has the right, at any time after six months have elapsed since the purchase date until the outstanding balance has been paid in full, at its election, to convert all or any portion of the outstanding balance into ADSs of our company at an initial conversion price of US$14 per ADS, each ADS representing thirty Class A ordinary shares, subject to adjustment. Beginning on the date that is six months from the note purchase date, Streeterville has the right, exercisable at any time in its sole and absolute discretion, to redeem any portion of the convertible note up to US$840,000 per calendar month. Payment of the redemption amount could be in cash or our ADSs, provided that any redemptions made in cash which exceed half of the original principal amount will be subject to a ten percent (10%) premium. We have the right to prepay all or any portion of the outstanding balance, at any time, subject to fifteen percent (15%) premium on the prepaid amount. In the event the principal amount and interest accrued for the convertible note issued to Streeterville are fully repaid, we have the right to repurchase the remaining Class A ordinary shares held by Streeterville that are unsold at US$0.0001 per share.

 

On March 17, 2021, we issued and sold a one-year convertible note in a principal amount of US$20,000,000 to Streeterville for an aggregate consideration of US$20,000,000. In addition, we are obligated to issue certain number of ADSs to Streeterville as transaction cost. The convertible note bears interest at a rate of 6.0% per year, computed on the basis of a 360-day year. Streeterville has the right, at any time after six months have elapsed since the purchase date until the outstanding balance has been paid in full, at its election, to convert all or any portion of the outstanding balance into ADSs of our company at an initial conversion price per ADS calculated as ninety percent (90%) of the lower of (a) the average of the closing trade prices during the five (5) trading days immediately preceding the date of the conversion, and (b) the closing trade price on the trading day immediately preceding the date of the conversion. Beginning on the date that is six months from the note purchase date, Streeterville has the right, exercisable at any time in its sole and absolute discretion, to redeem any portion of the convertible note up to US$3,360,000 per calendar month. Payment of the redemption amount could be in cash or our ADSs, provided that any redemptions made in cash which exceed half of the original principal amount will be subject to a ten percent (10%) premium. We have the right to prepay all or any portion of the outstanding balance, at any time, subject to fifteen percent (15%) premium on the prepaid amount.

 

Warrants

 

On October 2, 2020, at the closing of our registered offering, we issued and sold 23,500,000 warrants at a public offering price of US$0.01 per warrant, each warrant then representing the right of the holders thereof to purchase one ADS at an exercise price of US$0.37 per ADS, each ADS then representing three Class A ordinary shares. On October 29, 2020, we issued and sold 3,525,000 warrants at a public offering price of US$0.01 per warrant, each warrant then representing the right of the holders thereof to purchase 0.1 ADS at an exercise price of US$3.7 per ADS, each ADS representing thirty Class A ordinary shares, pursuant to the exercise by the underwriter of our registered offering of its option to purchase additional warrants.

 

On October 2, 2020, in connection with and at the closing of our registered offering, we issued warrants to purchase 1,175,000 ADSs, each ADS then representing three Class A ordinary shares, to Maxim Partners LLC.

 

On February 2, 2021, we issued 207,891,840 warrants in aggregate, each warrant representing the right to purchase one Class A ordinary share, to JPKONG Ltd., Qifeng Ltd., Luckylily Ltd. and Root Grace Ltd. The warrants are divided into four equal tranches: Tranche I Warrants, Tranche II Warrants, Tranche III Warrants and Tranche IV Warrants.

 

Share Incentive Awards Grants and Issuance

 

We have granted options to purchase our Class A ordinary shares and restricted shares to certain of our directors, executive officers, employees and consultants. See "Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers" in our annual report on Form 20-F for the year ended December 31, 2020, as amended, which is incorporated in this prospectus by reference.

 

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DESCRIPTION OF THE AMERICAN DEPOSITARY SHARES

 

American Depositary Shares

 

The Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent thirty Class A ordinary shares deposited with The Hongkong and Shanghai Banking Corporation Limited, as custodian for the depositary in Hong Kong. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The deposited shares together with any other securities, cash or other property held by the depositary are referred to as the deposited securities. The depositary’s office at which the ADSs will be administered and its principal executive office are located at 240 Greenwich Street, New York, New York 10286.

 

You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

 

Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.

 

As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. The laws of Cayman Islands govern shareholder rights. The depositary will be the holder of the Class A ordinary shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly holding or beneficially owning ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York govern the deposit agreement and the ADSs.

 

The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR. See “Where You Can Find Additional Information” for directions on how to obtain copies of those documents.

 

Dividends and Other Distributions

 

How will you receive dividends and other distributions on the shares?

 

The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent.

 

Cash. The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.

 

Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See “Taxation.” The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the distribution.

 

Shares. The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.

 

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Rights to purchase additional shares. If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

 

Other DistributionsThe depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

 

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you.

 

Deposit, Withdrawal and Cancellation

 

How are ADSs issued?

 

The depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

 

How can ADS holders withdraw the deposited securities?

 

You may surrender your ADSs to the depositary for the purpose of withdrawal. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. However, the depositary is not required to accept surrender of ADSs to the extent it would require delivery of a fraction of a deposited share or other security. The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.

 

How do ADS holders interchange between certificated ADSs and uncertificated ADSs?

 

You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

 

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Voting Rights

 

How do you vote?

 

ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of the Cayman Islands and the provisions of our Second Amended and Restated Memorandum and Articles of Association, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.

 

Except by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. In any event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed or as described in the following sentences. If we timely asked the depositary to solicit your instructions but the depositary does not receive voting instructions from you by the specified date and we confirm to the depositary that

 

  · we wish to receive a discretionary proxy;

 

  · as of the instruction cutoff date we reasonably do not know of any substantial shareholder opposition to the particular question; and

 

  · the particular question would not materially adverse to the interests of our shareholders,

 

then the depositary will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the number of deposited securities represented by your ADSs as to that question.

 

We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your shares are not voted as you requested.

 

Fees and Expenses

 

Persons depositing or withdrawing shares or ADS holders must pay: For:
   
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) · Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
     
  · Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
     
US$0.05 (or less) per ADS · Any cash distribution to ADS holders
     
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs · Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders
     
US$0.05 (or less) per ADS per calendar year · Depositary services
     
Registration or transfer fees · Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
     
Expenses of the depositary · Cable and facsimile transmissions (when expressly provided in the deposit agreement) 
     
  · Converting foreign currency to U.S. dollars
     
Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes · As necessary
     
Any charges incurred by the depositary or its agents for servicing the deposited securities · As necessary

 

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The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

 

From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.

 

The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.

 

Payment of Taxes

 

You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

 

Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities

 

The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.

 

If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.

 

If there is any change in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful and practical to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.

 

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If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.

 

If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon notice to the ADS holders.

 

Amendment and Termination

 

How may the deposit agreement be amended?

 

We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.

 

How may the deposit agreement be terminated?

 

The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if

 

  · 90 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment;
     
  · we delist our shares from an exchange in the United States on which they were listed and do not list the ADSs on another exchange in the United States or make arrangements for trading of ADSs on the U.S. over-the-counter market;
     
  · we delist our shares from an exchange outside the United States on which they were listed and do not list the shares on another exchange outside the United States;
     
  · the depositary has reason to believe the ADSs have become, or will become, ineligible for registration on Form F-6 under the Securities Act of 1933;
     
  · we appear to be insolvent or enter insolvency proceedings
     
  · all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;
     
  · there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or

 

  · there has been a replacement of deposited securities.

 

If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.

 

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After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities or reverse previously accepted surrenders of that kind if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but, after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.

 

Limitations on Obligations and Liability

 

Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs

 

The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

 

  · are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith, and the depositary will not be a fiduciary or have any fiduciary duty to holders of ADSs;
     
  · are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its ability to prevent or counteract with reasonable care or effort from performing our or its obligations under the deposit agreement;
     
  · are not liable if we or it exercises discretion permitted under the deposit agreement;
     
  · are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
     
  · have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;
     
  · may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person;
     
  · are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
     
  · the depositary has no duty to make any determination or provide any information as to our tax status, or any liability for any tax consequences that may be incurred by ADS holders as a result of owning or holding ADSs or be liable for the inability or failure of an ADS holder to obtain the benefit of a foreign tax credit, reduced rate of withholding or refund of amounts withheld in respect of tax or any other tax benefit.

 

In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

 

Requirements for Depositary Actions

 

Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:

 

  · payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;

 

  · satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

 

  · compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
     

 

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The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

 

Your Right to Receive the Shares Underlying your ADSs

 

ADS holders have the right to cancel their ADSs and withdraw the underlying Class A ordinary shares at any time except:

 

  · when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares;
     
  · when you owe money to pay fees, taxes and similar charges; or
     
  · when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.

 

This right of withdrawal may not be limited by any other provision of the deposit agreement.

 

Direct Registration System

 

In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.

 

In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.

 

Shareholder communications; inspection of register of holders of ADSs

 

The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.

 

Jury Trial Waiver

 

The deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law.

 

You will not, by agreeing to the terms of the deposit agreement, be deemed to have waived our or the depositary’s compliance with U.S. federal securities laws or the rules and regulations promulgated thereunder.

 

Arbitration Provision

 

The deposit agreement gives the depositary or an ADS holder asserting a claim against us the right to require us to submit that claim to binding arbitration in New York under the International Arbitration Rules of the International Centre for Dispute Resolution, including any securities law claim. However, a claimant could also elect not to submit its claim to arbitration and instead bring its claim in any court having jurisdiction of it. The deposit agreement does not give us the right to require anyone to submit any claim to arbitration.

 

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DESCRIPTION OF DEBT SECURITIES

 

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, senior subordinated debt or subordinated debt securities. We may also issue convertible debt securities. Debt securities issued under an indenture (which we refer to herein as an Indenture) will be entered into between us and a trustee to be named therein. It is likely that convertible debt securities will not be issued under an Indenture.

 

The Indenture or forms of Indentures, if any, will be filed as exhibits to the registration statement of which this prospectus is a part.

 

As you read this section, please remember that for each series of debt securities, the specific terms of your debt security as described in the applicable prospectus supplement will supplement and, if applicable, may modify or replace the general terms described in the summary below. The statement we make in this section may not apply to your debt security.

 

Events of Default Under the Indenture

 

Unless we provide otherwise in the prospectus supplement or free writing prospectus applicable to a particular series of debt securities, the following are events of default under the indentures with respect to any series of debt securities that we may issue:

 

  if we fail to pay the principal or premium, if any, when due and payable at maturity, upon redemption or repurchase or otherwise;

 

  if we fail to pay interest when due and payable and our failure continues for certain days;

 

  if we fail to observe or perform any other covenant contained in the Securities of a Series or in this Indenture, and our failure continues for certain days after we receive written notice from the trustee or holders of at least certain percentage in aggregate principal amount of the outstanding debt securities of the applicable series. The written notice must specify the Default, demand that it be remedied and state that the notice is a “Notice of Default”;

 

  if specified events of bankruptcy, insolvency or reorganization occur; and

 

  if any other event of default provided with respect to securities of that series, which is specified in a Board Resolution, a supplemental indenture hereto or an Officers’ Certificate as defined in the Form of Indenture.

 

We covenant in the Form of Indenture to deliver a certificate to the trustee annually, within certain days after the close of the fiscal year, to show that we are in compliance with the terms of the indenture and that we have not defaulted under the indenture.

 

Nonetheless, if we issue debt securities, the terms of the debt securities and the final form of indenture will be provided in a prospectus supplement. Please refer to the prospectus supplement and the form of indenture attached thereto for the terms and conditions of the offered debt securities. The terms and conditions may or may not include whether or not we must furnish periodic evidence showing that an event of default does not exist or that we are in compliance with the terms of the indenture.

 

The statements and descriptions in this prospectus or in any prospectus supplement regarding provisions of the Indentures and debt securities are summaries thereof, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Indentures (and any amendments or supplements we may enter into from time to time which are permitted under each Indenture) and the debt securities, including the definitions therein of certain terms.

 

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General

 

Unless otherwise specified in a prospectus supplement, the debt securities will be direct secured or unsecured obligations of our company. The senior debt securities will rank equally with any of our other unsecured senior and unsubordinated debt. The subordinated debt securities will be subordinate and junior in right of payment to any senior indebtedness.

 

We may issue debt securities from time to time in one or more series, in each case with the same or various maturities, at par or at a discount. Unless indicated in a prospectus supplement, we may issue additional debt securities of a particular series without the consent of the holders of the debt securities of such series outstanding at the time of the issuance. Any such additional debt securities, together with all other outstanding debt securities of that series, will constitute a single series of debt securities under the applicable Indenture and will be equal in ranking.

 

Should an indenture relate to unsecured indebtedness, in the event of a bankruptcy or other liquidation event involving a distribution of assets to satisfy our outstanding indebtedness or an event of default under a loan agreement relating to secured indebtedness of our company or its subsidiaries, the holders of such secured indebtedness, if any, would be entitled to receive payment of principal and interest prior to payments on the senior indebtedness issued under an Indenture.

 

Prospectus Supplement

 

Each prospectus supplement will describe the terms relating to the specific series of debt securities being offered. These terms will include some or all of the following:

 

  the title of debt securities and whether they are subordinated, senior subordinated or senior debt securities;

 

  any limit on the aggregate principal amount of debt securities of such series;

 

  the percentage of the principal amount at which the debt securities of any series will be issued;

 

  the ability to issue additional debt securities of the same series;

 

  the purchase price for the debt securities and the denominations of the debt securities;

 

  the specific designation of the series of debt securities being offered;

 

  the maturity date or dates of the debt securities and the date or dates upon which the debt securities are payable and the rate or rates at which the debt securities of the series shall bear interest, if any, which may be fixed or variable, or the method by which such rate shall be determined;

 

  the basis for calculating interest if other than 360-day year or twelve 30-day months;

 

  the date or dates from which any interest will accrue or the method by which such date or dates will be determined;

 

  the duration of any deferral period, including the maximum consecutive period during which interest payment periods may be extended;

 

  whether the amount of payments of principal of (and premium, if any) or interest on the debt securities may be determined with reference to any index, formula or other method, such as one or more currencies, commodities, equity indices or other indices, and the manner of determining the amount of such payments;

 

  the dates on which we will pay interest on the debt securities and the regular record date for determining who is entitled to the interest payable on any interest payment date;

 

  the place or places where the principal of (and premium, if any) and interest on the debt securities will be payable, where any securities may be surrendered for registration of transfer, exchange or conversion, as applicable, and notices and demands may be delivered to or upon us pursuant to the applicable Indenture;

 

  the rate or rates of amortization of the debt securities;

 

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  if we possess the option to do so, the periods within which and the prices at which we may redeem the debt securities, in whole or in part, pursuant to optional redemption provisions, and the other terms and conditions of any such provisions;

 

  our obligation or discretion, if any, to redeem, repay or purchase debt securities by making periodic payments to a sinking fund or through an analogous provision or at the option of holders of the debt securities, and the period or periods within which and the price or prices at which we will redeem, repay or purchase the debt securities, in whole or in part, pursuant to such obligation, and the other terms and conditions of such obligation;

 

  the terms and conditions, if any, regarding the option or mandatory conversion or exchange of debt securities;

 

  the period or periods within which, the price or prices at which and the terms and conditions upon which any debt securities of the series may be redeemed, in whole or in part at our option and, if other than by a board resolution, the manner in which any election by us to redeem the debt securities shall be evidenced;

 

  any restriction or condition on the transferability of the debt securities of a particular series;

 

  the portion, or methods of determining the portion, of the principal amount of the debt securities which we must pay upon the acceleration of the maturity of the debt securities in connection with any event of default if other than the full principal amount;

 

  the currency or currencies in which the debt securities will be denominated and in which principal, any premium and any interest will or may be payable or a description of any units based on or relating to a currency or currencies in which the debt securities will be denominated;

 

  provisions, if any, granting special rights to holders of the debt securities upon the occurrence of specified events;

 

  any deletions from, modifications of or additions to the events of default or our covenants with respect to the applicable series of debt securities, and whether or not such events of default or covenants are consistent with those contained in the applicable Indenture;

 

  any limitation on our ability to incur debt, redeem stock, sell our assets or other restrictions;

 

  the application, if any, of the terms of the applicable Indenture relating to defeasance and covenant defeasance (which terms are described below) to the debt securities;

 

  what subordination provisions will apply to the debt securities;

 

  the terms, if any, upon which the holders may convert or exchange the debt securities into or for our Ordinary Shares, preferred shares or other securities or property;

 

  whether we are issuing the debt securities in whole or in part in global form;

 

  any change in the right of the trustee or the requisite holders of debt securities to declare the principal amount thereof due and payable because of an event of default;

 

  the depositary for global or certificated debt securities, if any;

 

  any material federal income tax consequences applicable to the debt securities, including any debt securities denominated and made payable, as described in the prospectus supplements, in foreign currencies, or units based on or related to foreign currencies;

 

  any right we may have to satisfy, discharge and defease our obligations under the debt securities, or terminate or eliminate restrictive covenants or events of default in the Indentures, by depositing money or U.S. government obligations with the trustee of the Indentures;

 

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  the names of any trustees, depositories, authenticating or paying agents, transfer agents or registrars or other agents with respect to the debt securities;

 

  to whom any interest on any debt security shall be payable, if other than the person in whose name the security is registered, on the record date for such interest, the extent to which, or the manner in which, any interest payable on a temporary global debt security will be paid if other than in the manner provided in the applicable Indenture;

 

  if the principal of or any premium or interest on any debt securities is to be payable in one or more currencies or currency units other than as stated, the currency, currencies or currency units in which it shall be paid and the periods within and terms and conditions upon which such election is to be made and the amounts payable (or the manner in which such amount shall be determined);

 

  the portion of the principal amount of any debt securities which shall be payable upon declaration of acceleration of the maturity of the debt securities pursuant to the applicable Indenture if other than the entire principal amount;

 

  if the principal amount payable at the stated maturity of any debt security of the series will not be determinable as of any one or more dates prior to the stated maturity, the amount which shall be deemed to be the principal amount of such debt securities as of any such date for any purpose, including the principal amount thereof which shall be due and payable upon any maturity other than the stated maturity or which shall be deemed to be outstanding as of any date prior to the stated maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined); and

 

  any other specific terms of the debt securities, including any modifications to the events of default under the debt securities and any other terms which may be required by or advisable under applicable laws or regulations.

 

Unless otherwise specified in the applicable prospectus supplement, the debt securities will not be listed on any securities exchange. Holders of the debt securities may present registered debt securities for exchange or transfer in the manner described in the applicable prospectus supplement. Except as limited by the applicable Indenture, we will provide these services without charge, other than any tax or other governmental charge payable in connection with the exchange or transfer.

 

Debt securities may bear interest at a fixed rate or a variable rate as specified in the prospectus supplement. In addition, if specified in the prospectus supplement, we may sell debt securities bearing no interest or interest at a rate that at the time of issuance is below the prevailing market rate, or at a discount below their stated principal amount. We will describe in the applicable prospectus supplement any special federal income tax considerations applicable to these discounted debt securities.

 

We may issue debt securities with the principal amount payable on any principal payment date, or the amount of interest payable on any interest payment date, to be determined by referring to one or more currency exchange rates, commodity prices, equity indices or other factors. Holders of such debt securities may receive a principal amount on any principal payment date, or interest payments on any interest payment date, that are greater or less than the amount of principal or interest otherwise payable on such dates, depending upon the value on such dates of applicable currency, commodity, equity index or other factors. The applicable prospectus supplement will contain information as to how we will determine the amount of principal or interest payable on any date, as well as the currencies, commodities, equity indices or other factors to which the amount payable on that date relates and certain additional tax considerations.

 

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DESCRIPTION OF WARRANTS

 

We may issue warrants to purchase our ADSs or preferred shares. Warrants may be issued independently or together with any other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing and may be attached to, or separate from, such securities. To the extent warrants that we issue are to be publicly-traded, each series of such warrants will be issued under a separate warrant agreement to be entered into between us and a warrant agent. While the terms we have summarized below will apply generally to any warrants that we may offer under this prospectus, we will describe in particular the terms of any series of warrants that we may offer in more detail in the applicable prospectus supplement and any applicable free writing prospectus. The terms of any warrants offered under a prospectus supplement may differ from the terms described below.

 

We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from another report that we file with the SEC, the form of the warrant and/or warrant agreement, if any, which may include a form of warrant certificate, as applicable that describes the terms of the particular series of warrants we may offer before the issuance of the related series of warrants. We may issue the warrants under a warrant agreement that we will enter into with a warrant agent to be selected by us. The warrant agent will act solely as our agent in connection with the warrants and will not assume any obligation or relationship of agency or trust for or with any registered holders of warrants or beneficial owners of warrants. The following summary of material provisions of the warrants and warrant agreements is subject to, and qualified in its entirety by reference to, all the provisions of the form of warrant and/or warrant agreement and warrant certificate applicable to a particular series of warrants. We urge you to read the applicable prospectus supplement and any related free writing prospectus, as well as the complete form of warrant and/or the warrant agreement and warrant certificate, as applicable, that contain the terms of the warrants.

 

The particular terms of any issue of warrants will be described in the prospectus supplement relating to the issue. Those terms may include:

 

  the title of the warrants;

 

  the price or prices at which the warrants will be issued;

 

  the designation, amount and terms of the securities or other rights for which the warrants are exercisable;

 

  the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with each other security;

 

  the aggregate number of warrants;

 

  any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants;

 

  the price or prices at which the securities or other rights purchasable upon exercise of the warrants may be purchased;

 

  if applicable, the date on and after which the warrants and the securities or other rights purchasable upon exercise of the warrants will be separately transferable;

 

  a discussion of any material U.S. federal income tax considerations applicable to the exercise of the warrants;

 

  the date on which the right to exercise the warrants will commence, and the date on which the right will expire;
     
  the maximum or minimum number of warrants that may be exercised at any time;

 

  information with respect to book-entry procedures, if any; and

 

  any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.

 

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Exercise of Warrants

 

Each warrant will entitle the holder of warrants to purchase the number of ADSs or preferred shares of the relevant class or series at the exercise price stated or determinable in the prospectus supplement for the warrants. Warrants may be exercised at any time up to the close of business on the expiration date shown in the applicable prospectus supplement, unless otherwise specified in such prospectus supplement. After the close of business on the expiration date, if applicable, unexercised warrants will become void. Warrants may be exercised in the manner described in the applicable prospectus supplement. When the warrant holder makes the payment and properly completes and signs the warrant certificate at the corporate trust office of the warrant agent, if any, or any other office indicated in the prospectus supplement, we will, as soon as possible, forward the securities or other rights that the warrant holder has purchased. If the warrant holder exercises less than all of the warrants represented by the warrant certificate, we will issue a new warrant certificate for the remaining warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or part of the exercise price for warrants.

 

Prior to the exercise of any warrants to purchase ADSs or preferred shares of the relevant class or series, holders of the warrants will not have any of the rights of holders of ADSs or preferred shares purchasable upon exercise, including the right to vote or to receive any payments of dividends or payments upon our liquidation, dissolution or winding up on the ADSs or preferred shares purchasable upon exercise, if any.

 

Outstanding Warrants

 

On October 2, 2020, at the closing of our registered offering, we issued and sold 23,500,000 warrants at a public offering price of US$0.01 per warrant, each warrant then representing the right of the holders thereof to purchase one ADS at an exercise price of US$0.37 per ADS, each ADS then representing three Class A ordinary shares. On October 29, 2020, we issued and sold 3,525,000 warrants at a public offering price of US$0.01 per warrant, each warrant then representing the right of the holders thereof to purchase 0.1 ADS at an exercise price of US$3.7 per ADS, each ADS representing thirty Class A ordinary shares, pursuant to the exercise by the underwriter of our registered offering of its option to purchase additional warrants. As of the date of this prospectus, the holders have exercised 23,500,000 warrants to purchase 23,500,000 ADSs, representing 70,500,000 Class A ordinary shares. Such ADSs and the underlying Class A ordinary shares will be delivered in accordance with the prospects to the registration statement on Form F-1 (File No. 333-240331).

 

On October 2, 2020, in connection with and at the closing of our registered offering, we issued warrants to purchase 1,175,000 ADSs, each ADS then representing three Class A ordinary shares, to Maxim Partners LLC. As of the date of this prospectus, these warrants to purchase 1,175,000 ADSs, representing 3,525,000 Class A ordinary shares, are still outstanding.

 

On February 2, 2021, we issued 207,891,840 warrants in aggregate, each warrant representing the right to purchase one Class A ordinary share, to JPKONG Ltd., Qifeng Ltd., Luckylily Ltd. and Root Grace Ltd. The warrants are divided into four equal tranches: Tranche I Warrants, Tranche II Warrants, Tranche III Warrants and Tranche IV Warrants. As of the date of this prospectus, these 207,891,840 warrants are still outstanding. 

 

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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.

 

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DESCRIPTION OF UNITS

 

The following description, together with the additional information we may include in any applicable prospectus supplement, summarizes the material terms and provisions of the units that we may offer under this prospectus. While the terms we have summarized below will apply generally to any units that we may offer under this prospectus, we will describe the particular terms of any series of units in more detail in the applicable prospectus supplement and any related free writing prospectus. The terms of any units offered under a prospectus supplement may differ from the terms described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this prospectus or offer a security that is not registered and described in this prospectus at the time of its effectiveness.

 

We will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference from another report we file with the SEC, the form of unit agreement that describes the terms of the series of units we may offer under this prospectus, and any supplemental agreements, before the issuance of the related series of units. The following summaries of material terms and provisions of the units are subject to, and qualified in their entirety by reference to, all the provisions of the unit agreement and any supplemental agreements applicable to a particular series of units. We urge you to read the applicable prospectus supplement and any related free writing prospectus, as well as the complete unit agreement and any supplemental agreements that contain the terms of the units.

 

We may issue units consisting of any combination of the other types of securities offered under this prospectus in one or more series. We may evidence each series of units by unit certificates that we may issue under a separate agreement. We may enter into unit agreements with a unit agent. Each unit agent, if any, may be a bank or trust company that we select. We will indicate the name and address of the unit agent, if any, in the applicable prospectus supplement relating to a particular series of units. Specific unit agreements, if any, will contain additional important terms and provisions. We will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report that we file with the SEC, the form of unit and the form of each unit agreement, if any, relating to units offered under this prospectus.

 

If we offer any units, certain terms of that series of units will be described in the applicable prospectus supplement, including, without limitation, the following, as applicable

 

  the title of the series of units;

 

  identification and description of the separate constituent securities comprising the units;

 

  the price or prices at which the units will be issued;

 

  the date, if any, on and after which the constituent securities comprising the units will be separately transferable;

 

  a discussion of certain United States federal income tax considerations applicable to the units; and

 

  any other material terms of the units and their constituent securities.

 

The provisions described in this section, as well as those described under “Description of Share Capital” and “Description of Warrants” will apply to each unit and to any Ordinary Shares, preferred shares or warrant included in each unit, respectively.

 

Issuance in Series

 

We may issue units in such amounts and in numerous distinct series as we determine.

 

Depositary

 

Our depositary is the Bank of New York Mellon which administers our ADSs. Its principal executive office are located at 240 Greenwich Street, New York, New York 10286.

 

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Listing

 

Our ADSs representing our Class A ordinary shares are listed on the Nasdaq under the symbol “NCTY.”

 

PLAN OF DISTRIBUTION OF THE OFFERING

 

We or the selling shareholders may sell the securities offered through this prospectus (i) to or through underwriters or dealers, (ii) directly to purchasers, including our affiliates, (iii) through agents, or (iv) through a combination of any these methods. The securities may be distributed at a fixed price or prices, which may be changed, market prices prevailing at the time of sale, prices related to the prevailing market prices, or negotiated prices. The prospectus supplement will include the following information:

 

  the terms of the offering;

 

  the names of any underwriters or agents;

 

  the name or names of any managing underwriter or underwriters;

 

  the purchase price of the securities;

 

  any over-allotment options under which underwriters may purchase additional securities from us;

 

  the net proceeds from the sale of the securities;

 

  any delayed delivery arrangements;

 

  any underwriting discounts, commissions and other items constituting underwriters’ compensation;

 

  any initial public offering price;

 

  any discounts or concessions allowed or reallowed or paid to dealers;

 

  any commissions paid to agents; and

 

  any securities exchange or market on which the securities may be listed.

 

Sale Through Underwriters or Dealers

 

Only underwriters named in the prospectus supplement are underwriters of the securities offered by the prospectus supplement. If underwriters are used in the sale, the underwriters will acquire the securities for their own account, including through underwriting, purchase, security lending or repurchase agreements with us. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions. Underwriters may sell the securities in order to facilitate transactions in any of our other securities (described in this prospectus or otherwise), including other public or private transactions and short sales. Underwriters may offer securities to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. Unless otherwise indicated in the prospectus supplement, the obligations of the underwriters to purchase the securities will be subject to certain conditions, and the underwriters will be obligated to purchase all the offered securities if they purchase any of them. The underwriters may change from time to time any public offering price and any discounts or concessions allowed or reallowed or paid to dealers.

 

If dealers are used in the sale of securities offered through this prospectus, we will sell the securities to them as principals. They may then resell those securities to the public at varying prices determined by the dealers at the time of resale. The prospectus supplement will include the names of the dealers and the terms of the transaction.

 

We will provide in the applicable prospectus supplement any compensation we will pay to underwriters, dealers or agents in connection with the offering of the securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers.

 

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Direct Sales and Sales Through Agents

 

We may sell the securities offered through this prospectus directly. In this case, no underwriters or agents would be involved. Such securities may also be sold through agents designated from time to time. The prospectus supplement will name any agent involved in the offer or sale of the offered securities and will describe any commissions payable to the agent. Unless otherwise indicated in the prospectus supplement, any agent will agree to use its reasonable best efforts to solicit purchases for the period of its appointment.

 

We may sell the securities directly to institutional investors or others who may be deemed to be underwriters within the meaning of the Securities Act with respect to any sale of those securities. The terms of any such sales will be described in the prospectus supplement.

 

Delayed Delivery Contracts

 

If the prospectus supplement indicates, we may authorize agents, underwriters or dealers to solicit offers from certain types of institutions to purchase securities at the public offering price under delayed delivery contracts. These contracts would provide for payment and delivery on a specified date in the future. The contracts would be subject only to those conditions described in the prospectus supplement. The applicable prospectus supplement will describe the commission payable for solicitation of those contracts.

 

Market Making, Stabilization and Other Transactions

 

Unless the applicable prospectus supplement states otherwise, other than our ADSs, all securities we offer under this prospectus will be a new issue and will have no established trading market. We may elect to list offered securities on an exchange or in the over-the-counter market. Any underwriters that we use in the sale of offered securities may make a market in such securities, but may discontinue such market making at any time without notice. Therefore, we cannot assure you that the securities will have a liquid trading market.

 

Any underwriter may also engage in stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Rule 104 under the Securities Exchange Act. Stabilizing transactions involve bids to purchase the underlying security in the open market for the purpose of pegging, fixing or maintaining the price of the securities. Syndicate covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover syndicate short positions.

 

Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the securities originally sold by the syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the securities to be higher than it would be in the absence of the transactions. The underwriters may, if they commence these transactions, discontinue them at any time.

 

General Information

 

Agents, underwriters, and dealers may be entitled, under agreements entered into with us, to indemnification by us against certain liabilities, including liabilities under the Securities Act. Our agents, underwriters, and dealers, or their affiliates, may be customers of, engage in transactions with or perform services for us, in the ordinary course of business.

 

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SELLING SHAREHOLDERS

 

Selling shareholders (if any) to be named in a prospectus supplement may, from time to time, offer and sell Class A ordinary shares or ADSs of our company held by them pursuant to this prospectus and the applicable prospectus supplement. Such selling shareholders may sell Class A ordinary shares or ADSs to or through underwriters, dealers or agents or directly to purchasers or as otherwise set forth in the applicable prospectus supplement. See “Plan of Distribution.” Such selling shareholders may also sell, transfer or otherwise dispose of Class A ordinary shares or ADSs in transactions exempt from the registration requirements of the Securities Act.

 

If any selling shareholder is to offer and sell Class A ordinary shares or ADSs pursuant to this prospectus, we will provide you with a prospectus supplement that sets forth the name of each such selling shareholder and the number of Class A Ordinary Shares or ADSs beneficially owned by each such selling shareholder. The prospectus supplement also will disclose whether any of the selling shareholders have held any position or office with, have been employed by, or otherwise have had a material relationship with us during the three years prior to the date of the prospectus supplement.

 

LEGAL MATTERS

 

Except as otherwise set forth in the applicable prospectus supplement, certain legal matters in connection with the securities offered pursuant to this prospectus will be passed upon for us by Hunter Taubman Fischer & Li LLC to the extent governed by the laws of the State of New York. The validity of the Class A ordinary shares represented by the ADSs offered in this offering will be passed upon for us by Maples and Calder (Hong Kong) LLP. Certain legal matters as to PRC law will be passed upon for us by Grandall Law Firm.

 

EXPERTS

 

The audited consolidated financial statements incorporated by reference in this prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance on the report of Grant Thornton, an independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.

 

The registered business address of Grant Thornton is located at level 45, Raffles City, 268 Xizang Zhong Road, Huangpu District, Shanghai, People’s Republic of China. 

 

INFORMATION INCORPORATED BY REFERENCE

 

The SEC allows us to “incorporate by reference” into this prospectus the 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 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.

 

We hereby incorporate by reference into this prospectus the following documents that we have filed with the SEC under the Exchange Act:

 

  (1) the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020, filed with the SEC on March 29, 2021, as amended on March 30, 2021;

 

  (2) the description of ordinary shares and ADSs incorporated by reference in our registration statement on Form 8-A, as amended (File No. 001-34238) filed with the Commission on April 30, 2020, including any amendment and report subsequently filed for the purpose of updating that description;

 

  (3) the Company’s current reports on Form 6-K, filed with the SEC on March 29, 2021 and March 30, 2021; and

 

  (4) any future reports 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 in this prospectus.

 

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All documents that we file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (and in the case of a Current Report on Form 6-K, so long as they state that they are incorporated by reference into this prospectus, and other than Current Reports on Form 6-K, or portions thereof, furnished under Form 6-K) (i) after the initial filing date of the registration statement of which this prospectus forms a part and prior to the effectiveness of such registration statement and (ii) after the date of this prospectus and prior to the termination of the offering shall be deemed to be incorporated by reference in this prospectus from the date of filing of the documents, unless we specifically provide otherwise. Information that we file with the SEC will automatically update and may replace information previously filed with the SEC. To the extent that any information contained in any Current Report on Form 6-K or any exhibit thereto, was or is furnished to, rather than filed with the SEC, such information or exhibit is specifically not incorporated by reference.

 

Upon request, we will provide, without charge, to each person who receives this prospectus, a copy of any or all of the documents incorporated by reference (other than exhibits to the documents that are not specifically incorporated by reference in the documents).

 

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.the9.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our principal executive office is located at 17 Floor, No. 130 Wu Song Road, Hong Kou District, Shanghai 201203, People’s Republic of China, and our telephone number is +86 (21) 6108-6080. Our registered office in the Cayman Islands is located at the offices of CARD Corporate Services Ltd, c/o Collas Crill Corporate Services Limited, Floor 2, Willow House, Cricket Square, PO Box 709, Grand Cayman KY1-1107 Cayman Islands.

 

WHERE YOU CAN FIND MORE 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 the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and, in accordance with these requirements, we file annual and current reports and other information with the SEC. You may inspect, read (without charge) and copy the reports and other information we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website at www.sec.gov that contains our filed reports and other information that we file electronically with the SEC.

 

We maintain a corporate website at http://www.the9.com/. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

 

We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

 

  · political and economic stability;
     
  · an effective judicial system;
     
  · a favorable tax system;
     
  · the absence of exchange control or currency restrictions; and
     
  · the availability of professional and support services.

 

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to:

 

  · the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors as compared to the United States; and
     
  · Cayman Islands companies may not have standing to sue before the federal courts of the United States.

 

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

 

Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. Most of our directors and executive officers are nationals or residents of jurisdictions other than the United States and most of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these individuals, or 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 securities laws of the United States or any state in the United States.

 

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We have appointed Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, Delaware 19711 as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

 

Maples and Calder (Hong Kong) LLP, our legal counsel as to Cayman Islands law, and Grandall Law Firm, our legal counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

 

  · 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
     
  · entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

 

We have been advised by our Cayman Islands legal counsel, Maples and Calder (Hong Kong) LLP, that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States and that the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments, the courts of the Cayman Islands will, at common law, recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without re-examination of the merits of the underlying disputes based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the liquidated sum for which judgment has been given provided certain conditions are met. For such a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty and not obtained in a manner and is not of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

 

Grandall Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against 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 or the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law 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 ADSs or Class A ordinary shares. 

 

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

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THE9 LIMITED

 

 

 

Prospectus  

 

 

 

March 30, 2021

 

 

 

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The9 Limited

 

3,765,100 American Depositary Shares,

representing 112,953,000 Class A ordinary shares, and

ADS Warrants to Purchase 2,823,825 American Depositary Shares,

representing 84,714,750 Class A ordinary shares

(and Class A Ordinary Shares in the form of ADSs issuable upon exercise of the ADS warrants)

 

 

Sole Book-Running Manager

 

Maxim Group LLC

 

 

 

The date of this prospectus supplement is March 31, 2021.