Building DreamStar Technology Inc. [BDS] Filings

F-1 1 tm2036909-7_drsa.htm DRS/A tm2036909-7_drsa - none - 29.4532606s

TABLE OF CONTENTS

As filed with the Securities and Exchange Commission on February 25, 2021.

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM F-1

REGISTRATION STATEMENT
Under
The Securities Act of 1933

Building DreamStar Technology Inc.
(Exact name of Registrant as specified in its charter)

Cayman Islands
(State or other jurisdiction of
incorporation or organization)

7380
(Primary Standard Industrial
Classification Code Number)

Not Applicable
(I.R.S. Employer
Identification Number)

Suite 2016, King Building, No.5002 Shennan East Road
Luohu District, Shenzhen, Guangdong
People’s Republic of China 518001
+00852-21274570
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168
(800) 221-0102
(Name, address, including zip code, and telephone number, including area code, of agent for service)

	Copies to:
	Ying Li, Esq. Guillaume de Sampigny, Esq. Hunter Taubman Fischer & Li LLC 800 Third Avenue, Suite 2800 New York, NY 10022 212-530-2206			Richard I. Anslow, Esq. Jonathan H. Deblinger, Esq. Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, New York 10105

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, or the Securities Act, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☒

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☒

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to Be Registered	Amount to Be Registered		Proposed Maximum Offering Price per Share			Proposed Maximum Aggregate Offering Price(1)			Amount of Registration Fee(2)
Ordinary shares, par value US$0.0001 per share(3)		5,290,000		$	6.00		$	31,740,000		$	3,462.84

(1)

Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act. Includes the offering price attributable to additional shares that Univest Securities, LLC, the representative of the underwriters (the “Representative”) has the option to purchase to cover over-allotments, if any.

(2)

Calculated pursuant to Rule 457(a) under the Securities Act, based on an estimate of the proposed maximum aggregate offering price.

(3)

In accordance with Rule 416(a), we are also registering an indeterminate number of additional ordinary shares that shall be issuable pursuant to Rule 416 to prevent dilution resulting from share splits, share dividends or similar transactions.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a) may determine.

†

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

TABLE OF CONTENTS

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated February 25, 2021

PRELIMINARY PROSPECTUS

4,600,000 Ordinary Shares

Building DreamStar Technology Inc.

This is an initial public offering of our ordinary shares. We are offering on a firm commitment basis our ordinary shares, par value $0.0001 per share (“Ordinary Shares”). Prior to this offering, there has been no public market for our Ordinary Shares. We expect the initial public offering price to be in the range of $5.00 to $6.00 per Ordinary Share. We have reserved the symbol “BDS” for purposes of listing our Ordinary Shares on the Nasdaq Capital Market under the symbol “BDS.”

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 12 to read about factors you should consider before buying our Ordinary Shares.

We are an “emerging growth company” as defined under applicable U.S. securities laws and are eligible for reduced public company reporting requirements. Please read the disclosures beginning on page 4 of this prospectus for more information.

Per Share

Total

Initial public offering price(1)

US$

5.50

US$

25,300,000

Underwriting discounts(2)

US$

0.495

US$

2,277,000

Proceeds, before expenses, to us(3)

US$

5.005

US$

23,023,000

(1)

Initial public offering price per ordinary share is assumed as $5.50, the midpoint of the range set forth on the cover page of this prospectus.

(2)

We have agreed to pay the underwriters a discount equal to 9.0% of the gross proceeds of the offering, with the exception that the underwriters shall receive a discount of 4.5% for ordinary shares purchased by investors within our direct placement program. Underwriting discounts to be paid by us are calculated based on the assumption that no shares are purchased by investors within our direct placement program. See “Underwriting” in this prospectus for more information regarding our arrangements with the underwriters.

(3)

We expect our total cash expenses for this offering (including cash expenses payable to the Representative for its out-of-pocket expenses) to be approximately $883,463, exclusive of the above discounts. In addition, we will pay additional items of value in connection with this offering that are viewed by the Financial Industry Regulatory Authority, or FINRA, as underwriting compensation. These payments will further reduce proceeds available to us before expenses. See “Underwriting.”

This offering is being conducted on a firm commitment basis. The underwriters are obligated to take and pay for all of the Ordinary Shares if any such Ordinary Shares are taken. We have granted the Representative an option for a period of 45 days after the closing of this offering to purchase up to 15% of the total number of the Ordinary Shares to be offered by us pursuant to this offering (excluding Ordinary Shares subject to this option), solely for the purpose of covering over-allotments, at the public offering price less the underwriting discounts. If the Representative exercises the option in full, the total underwing discounts payable will be $2,618,550 based on an assumed offering price of $5.50 per Ordinary Share, and the total gross proceeds to us, before underwriting discounts and expenses, will be $29,095,000.

The underwriters expect to deliver the Ordinary Shares against payment as set forth under “Underwriting,” on or about [•], 2021.

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

Prospectus dated , 2021.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		1
THE OFFERING		8
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA		9
RISK FACTORS		12
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		42
USE OF PROCEEDS		44
DIVIDEND POLICY		45
CAPITALIZATION		46
DILUTION		47
ENFORCEABILITY OF CIVIL LIABILITIES		48
CORPORATE HISTORY AND STRUCTURE		50
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		54
INDUSTRY OVERVIEW		78
BUSINESS		84
REGULATION		101
MANAGEMENT		110
PRINCIPAL SHAREHOLDERS		117
RELATED PARTY TRANSACTIONS		119
DESCRIPTION OF SHARE CAPITAL		127
SHARES ELIGIBLE FOR FUTURE SALE		139
TAXATION		141
UNDERWRITING		149
EXPENSES RELATING TO THIS OFFERING		153
LEGAL MATTERS		154
EXPERTS		154
WHERE YOU CAN FIND ADDITIONAL INFORMATION		154
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely on the information contained in this prospectus or in any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free writing prospectus. We are offering to sell, and seeking offers to buy the Ordinary Shares, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Ordinary Shares.

Neither we nor the underwriters has taken any action to permit a public offering of the Ordinary Shares outside the United States or to permit the possession or distribution of this prospectus or any filed free-writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about and observe any restrictions relating to the offering of the Ordinary Shares and the distribution of this prospectus or any filed free-writing prospectus outside the United States.

Until , 2021 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade Ordinary Shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

TABLE OF CONTENTS

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our Ordinary Shares discussed under “Risk Factors,” before deciding whether to invest our Ordinary Shares. This prospectus contains information from an industry report which we commissioned from Frost & Sullivan, Inc., Shanghai Branch Co. (“Frost & Sullivan”), a third-party independent research firm, to prepare. We refer to this report as the Frost & Sullivan Report.

Our Mission

Our mission is to provide convenient and flexible co-working space solutions to enterprises.

Our Vision

Our vision is to build an internationally renowned co-working space ecosystem.

Overview

The rapid growth of cities and urban areas in the PRC and the transformation of work culture in China has led to a growing demand for shared working spaces, and has contributed to the growth of the co-working space industry in the PRC. We are a fast-growing integrated co-working space operator in China. According to Frost & Sullivan, as of June 30, 2020, among all co-working space operators in China, we ranked the second in the number of cities covered, and the fifth in the number of co-working spaces under operation.

Our co-working spaces are concentrated in the urban areas in the PRC, including many tier one, tier two and tier three cities. Our nationwide coverage and network provides our customers with flexible, convenient office space solutions at affordable costs. As we attract enterprise and non-corporate customers to our space, the cities and surrounding neighborhoods may also benefit economically from the growing work population and demand for goods and services.

Our customers typically spend eight hours in our spaces during weekdays. To build a vibrant community on our co-working spaces, we offer various services to meet our customers’ needs and preferences. Cooperating with third-party business partners, we provide our customers with a wide selection of ancillary services, such as access to conference rooms, printing services, high-speed internet, reception services, facilities and amenities maintenance, and social events, and value-added services, such as business consultation, business education, internal policy consultation, legal services, and tax services. We engage third party business partners with professional experience and expertise to provide those value-added services. We generate revenue from our customers for selected services we provide on a transactional basis.

While office spaces constitute our core service offering, we support our enterprise customers at most of their stages of development by offering business incubation and acceleration programs to start-ups and SMEs at selected spaces. As of December 31, 2020, we had a total of 49 spaces, with 11 spaces with business incubation and acceleration programs and a total of 363 customers moved in to such spaces with business incubation and acceleration programs. Currently, as part of our efforts to attract additional customers to our programs, we offer business incubation and acceleration program services for free to our program participants. Revenues generated in connection with our such services are from workspace leasing and government subsidies. We do not generate revenues from our incubation and acceleration programs.

TABLE OF CONTENTS

In addition, our total revenues increased from $14,740,098 in the fiscal year ended December 31, 2018 to $20,443,209 in the fiscal year ended December 31, 2019, and from $8,859,315 for the six months ended June 30, 2019 to $15,407,535 for the six months ended June 30, 2020. Our cost of revenues also grew from $15,449,067 in 2018 to $29,150,887 in 2019, and from $13,640,825 for the six months ended June 30, 2019 to $21,037,538 for the six months ended June 30, 2020. As a result, our net loss increased from $5,152,765 in 2018 to $18,438,216 in 2019, and from $6,621,791 for the six months ended June 30, 2019 to $10,146,764 for the six months ended June 30, 2020. See “Summary Consolidated Financial and Operating Data.” We believe that the quality of our services combined with the increasing needs of businesses and individuals for shared office space and business services have contributed to our growth.

Our Competitive Strengths

We believe that the following strengths have contributed to our success and differentiate us from our competitors:

•

one of the fast-growing integrated co-working office space operators in the PRC;

•

integrated co-working ecosystem empowering enterprise customers;

•

highly effective digital marketing strategies and established business partnership with real estate agents allowing us to maintain high occupancy rates; and

•

visionary and innovative management with proven track record.

Our Growth Strategies

•

strengthen our market position by pursuing expansion to additional regions in the PRC;

•

continue to invest in technology to enhance our operating efficiency;

•

further expand our lines of business; and

•

selectively pursue acquisition and investment opportunities.

Summary of Risk Factors

An investment in our Ordinary Shares is subject to a number of risks, including risks related to our business and industry, risks related to our corporate structure, risks related to doing business in China and risks related to our Ordinary Shares and this offering. You should carefully consider all of the information in this prospectus before making an investment in the Ordinary Shares. The following list summarizes some, but not all, of these risks. Please read the information in the section titled “Risk Factors” for a more thorough description of these and other risks.

Risks Relating to Our Business and Industry

•

Our limited operating history may not be indicative of our future growth and makes it difficult to predict our future prospectus, business and financial performance;

•

We may not be able to retain existing customers, especially those who enter into short-term contracts with us, or continue to attract new customers in sufficient numbers or at sufficient rates to sustain or grow our business;

•

Our rapid growth leads to increasing risks and uncertainties. If we are unable to manage our growth effectively, our business and results of operations may be materially and adversely affected;

•

Our financial condition and operational results are affected by our occupancy rates;

•

We may require a significant amount of capital to fund our operations and future growth. If we cannot obtain sufficient capital on reasonable terms, our business, financial conditions and prospects may be materially and adversely affected;

•

Growth of our business will partially depend on the recognition of our brand. Failure to maintain, protect and enhance our brand could limit our ability to expand or retain our customer base and materially and adversely affect our business, financial condition and results of operations; and

TABLE OF CONTENTS

•

We face vigorous competition. If we are not able to compete effectively with others, our business, financial conditions and results of operations may be materially and adversely affected.

Risks Related to our Corporate Structure

•

We rely on contractual arrangements with our VIE and its shareholders for a large portion of our business operations. These arrangements may not be as effective as direct ownership in providing operational control. Any failure by our VIE or its shareholders to perform their obligations under such contractual arrangements would have a material and adverse effect on our business;

•

The shareholders of our VIE may have actual or potential conflicts of interest with us, which may materially and adversely affect our business and financial condition;

•

We may lose the ability to use and enjoy assets held by our VIE that are material to the operation of certain portion of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding; and

•

Contractual arrangements in relation to our VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or our VIE owe additional taxes, which could negatively affect our financial condition and the value of your investment.

Risks Related to Doing Business in China

•

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations;

•

We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us and any tax we are required to pay could have a material adverse effect on our ability to conduct our business;

•

It may be difficult for overseas regulators to conduct investigation or collect evidence within China;

•

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment; and

•

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the prospectus based on foreign laws.

Risks Related to the Ordinary Shares and This Offering

•

The initial public offering price of our Ordinary Shares may not be indicative of the market price of our Ordinary Shares after this offering. In addition, an active, liquid and orderly trading market for our Ordinary Shares may not develop or be maintained, and our share price may be volatile;

•

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on a price appreciation of the Ordinary Shares for a return on your investment; and

•

As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.

In addition, we face risks and uncertainties related to our corporate structure, including risks associated with our control over Shenzhen Building DreamStar Technology Ltd., or Shenzhen Building DreamStar, our VIE, which is based on contractual arrangements rather than equity ownership.

We also face other challenges, risks and uncertainties that may materially adversely affect our business, financial condition, results of operations and prospects. You should consider the risks discussed in “Risk Factors” and elsewhere in this prospectus before investing in our Ordinary Shares.

TABLE OF CONTENTS

Corporate History and Structure

The following diagram illustrates our corporate structure, including our significant subsidiaries, our VIE and its significant subsidiaries, as of the date of this prospectus and upon the completion of this offering based on proposed number of 4,600,000 Ordinary Shares being offered. For more detail on our corporate history, please refer to “Corporate History and Structure.”

[MISSING IMAGE: tm2036909d7-fc_dreambwlr.jpg]

Corporate Information

Our principal executive offices are located at Suite 2016, King Building, No.5002 Shennan East Road, Luohu District, Shenzhen, Guangdong, People’s Republic of China, 518001. Our telephone number at this address is +00852-21274570. Our registered office in the Cayman Islands is located at Landmark Square, 1st Floor, 64 Earth Close, P.O. Box 715, Grand Cayman, KY1-1107, Cayman Islands, and the phone number of our registered office is +1-345-769-4423.

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our corporate website is http://www.zmzxbd.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 located at Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.

Implications of Being an Emerging Growth Company

As a company with less than US$1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended,

TABLE OF CONTENTS

or the JOBS Act. As long as we remain an emerging growth company, we may rely on exemptions from some of the reporting requirements applicable to public companies that are not emerging growth companies. In particular, as an emerging growth company, we:

•

may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or “MD&A;”

•

are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis”;

•

are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

•

are not required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes);

•

are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure;

•

are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and

•

will not be required to conduct an evaluation of our internal control over financial reporting until our second annual report on Form 20-F following the effectiveness of our initial public offering.

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions until we no longer meet the definition of an emerging growth company. The JOBS Act provides that we would cease to be an “emerging growth company” at the end of the fiscal year in which the fifth anniversary of our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, herein referred to as the Securities Act, occurred, if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our Ordinary Share held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Foreign Private Issuer Status

We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

•

we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;

•

for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;

•

we are not required to provide the same level of disclosure on certain issues, such as executive compensation;

•

we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;

TABLE OF CONTENTS

•

we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; and

•

we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.

Conventions that Apply to this Prospectus

Unless we indicate otherwise, references in this prospectus to:

•

“Building DreamStar BVI” are to Building DreamStar Technology Limited, a BVI (as defined below) business company incorporated with limited liability under the laws of the BVI;

•

“BVI” are to the British Virgin Islands;

•

“China” and the “PRC” are to the People’s Republic of China, excluding, for the purposes of this prospectus only, Taiwan, the Hong Kong Special Administrative Region and the Macao Special Administrative Region;

•

“Dream Star Bamboo BVI” are to Dream Star Bamboo Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Wangxia Liu;

•

“Dream Star Fuhua BVI” are to Dream Star Fuhua Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Yin Zhan;

•

“Dream Star Fusheng BVI” are to Dream Star Fusheng Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Kaipeng Li;

•

“Dream Star Guangsheng BVI” are to Dream Star Guangsheng Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Houde Li;

•

“Dream Star Houde BVI” are to Dream Star Houde Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Houde Li;

•

“Dream Star Mofeng BVI” are to Dream Star Mofeng Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Hanbin Huang;

•

“Dream Star Moyi BVI” are to Dream Star Moyi Holdings Limited, a BVI business company incorporated in the BVI with limited liability in July 2019 and is wholly owned by Qingnv Li;

•

“HK Building DreamStar” are to HK Building DreamStar Technology Limited, a limited liability company incorporated in Hong Kong;

•

“HK$” and “Hong Kong dollars” are to the legal currency of Hong Kong;

•

“new tier-one cities” refer to the relatively developed cities, namely Chengdu, Hangzhou, Nanjing, Qingdao, Kunming, Shenyang, Tianjin, Wuhan, Xi’an, Changsha, Chongqing, Suzhou, Ningbo, Zhengzhou, and Dongguan;

•

“our VIE” or “Shenzhen Building DreamStar” are to Shenzhen Building DreamStar Technology Ltd., a limited liability company incorporated in the PRC on January 18, 2016;

•

“our WFOE” are to Hangzhou Building Dream Star Chuangxiang Technology Company Limited, a limited liability company incorporated in the PRC on November 2, 2020;

•

“RMB” and “Renminbi” are to the legal currency of China;

•

“shares,” “Shares,” or “Ordinary Shares” are to the ordinary shares of the Company, par value US$0.0001 per share;

•

“Shenzhen Chuangxiang” are to Shenzhen Building Dream Star Chuangxiang Technology Company Limited, a limited liability company incorporated in the PRC on September 1 ,2020;

•

“SMEs” are to small and medium enterprises;

•

“tier one cities” refer to Beijing, Shanghai, Guangzhou, and Shenzhen;

TABLE OF CONTENTS

•

“tier two cities” refer to regional central cities in economically developed regions, with relatively strong business activity. Most tier two cities are provincial capital cities, or regional central cities in the developed regions. There are approximately 30 tier two cities in the PRC;

•

“tier three cities” refer to cities with complete urban infrastructure, commercial facilities and transportation facilities, whose non-agricultural population are normally above one million. There are approximately 70 tier three cities in the PRC;

•

“US$,” “$” and “U.S. dollars” are to the legal currency of the United States; and

•

“we,” “us,” “our company,” “our” or “Building DreamStar” are to Building DreamStar Technology Inc., a Cayman Islands holding company, and its predecessor entity and its subsidiaries, consolidated affiliated entities and variable interest entity, or VIE, as the context requires.

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the Representative of its options to purchase additional Ordinary Shares.

We have made rounding adjustments to reach some of the figures included in this prospectus. Consequently, numerical figures shown as totals in some tables may not be arithmetic aggregations of the figures that precede them.

Our consolidated financial statements are presented in U.S. dollars. In this prospectus, we refer to assets, obligations, commitments, and liabilities in our consolidated financial statements in United States dollars. These dollar references are based on the exchange rate of RMB to U.S. dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets, including accounts receivable (expressed in dollars).

TABLE OF CONTENTS

THE OFFERING

Offering Price per Ordinary Share

We currently estimate that the initial public offering price will be between US$5.00 and US$6.00 per Ordinary Share.

Ordinary Shares offered by us

4,600,000 Ordinary Shares (or 5,290,000 Ordinary Shares if the Representative exercises in full the over-allotment option).

Ordinary Shares outstanding prior to the completion of this offering

36,000,000 Ordinary Shares

Ordinary Shares outstanding immediately after this offering

40,600,000 Ordinary Shares (or 41,290,000 Ordinary Shares if the Representative exercises in full the over-allotment option).

Over-Allotment Option

We have granted to the Representative an option, exercisable within 45 days from the date of this prospectus, to purchase up to an aggregate of 690,000 additional Ordinary Shares at the initial public offering price, less underwriting discounts.

Use of Proceeds

We estimate that we will receive net proceeds of approximately US$22.14 million (or US$25.59 million if the Representative exercises its options to purchase additional Ordinary Shares in full) from this offering, assuming an initial public offering price of US$5.50 per Ordinary Share, which is the mid-point of the estimated range of the initial public offering price, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We anticipate using the net proceeds of this offering primarily for (i) expanding our spaces and services offerings, (ii) strengthening our technologies and building our information management system, (iii) potential strategic investment and acquisitions, and (iv) general corporate purposes. See “Use of Proceeds” on page 44 for more information.

Lock-up

We, our directors and executive officers, our 5% or greater existing shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or otherwise dispose of any Ordinary Shares or similar securities or any securities convertible into or exchangeable or exercisable for our Ordinary Shares, for a period of twelve (12) months after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting.”

Listing

We intend to apply to have our Ordinary Shares listed on the Nasdaq Capital Market under the symbol “BDS.”

Payment and settlement

The underwriters expect to deliver the Ordinary Shares against payment on [•], 2021, through the facilities of The Depository Trust Company, or DTC.

Risk Factors

See “Risk Factors” and other information included in this prospectus for a discussion of risks you should carefully consider before investing in our Ordinary Shares.

TABLE OF CONTENTS

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following tables set forth selected historical statements of operations for the fiscal years ended December 31, 2019 and 2018, and balance sheet data as of December 31, 2019 and 2018, which have been derived from our audited consolidated financial statements for those periods. The following summary consolidated statements of operations data for the six months ended June 30, 2020 and 2019, summary consolidated balance sheet data as of June 30, 2020 have been derived from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair statement of our financial position and operating results for the periods presented. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in the prospectus.

	For the year ended December 31 2019			For the year ended December 31 2018			For the six months ended June 30 2020			For the six months ended June 30 2019
Revenues, net		$	20,443,209		$	14,740,098		$	15,407,535		$	8,859,315
Cost of revenues			29,150,887			15,449,067			21,037,538			13,640,825
Gross loss			(8,707,678)			(708,969)			(5,630,003)			(4,781,510)
Operating expenses:
Selling expenses			3,161,838			2,150,766			1,946,838			1,293,411
General and administrative expenses			7,520,869			2,993,282			3,354,473			2,088,775
Impairment loss on long-lived assets			1,432,742			—			—			—
Total operating expenses			12,115,449			5,144,048			5,301,311			3,382,186
Other operating income, net			309,750			125,376			160,646			274,691
Loss from operations			(20,513,377)			(5,727,641)			(10,770,668)			(7,889,005)
Other income (expenses):
Interest income			34,150			7,889			21,004			15,892
Interest expenses			(17,478)			—			(14,206)			(4,173)
Government subsidies			1,477,909			761,695			270,178			776,972
Other income			248,045			73,742			244,896			110,618
Other expenses			(356,425)			(281,989)			(193,351)			(3,918)
Total other income			1,386,201			561,337			328,521			895,391
Loss before income tax benefit			(19,127,176)			(5,166,304)			(10,442,147)			(6,993,614)
Income tax benefit			(688,960)			(13,539)			(295,383)			(371,823)
Net loss			(18,438,216)			(5,152,765)			(10,146,764)			(6,621,791)
Less: net loss attributable to non-controlling interests			(890,168)			(72,186)			(376,986)			(687,072)
Net loss attributable to Building DreamStar Technology Inc.		$	(17,548,048)		$	(5,080,579)		$	(9,769,778)		$	(5,934,719)
Comprehensive loss
Net loss		$	(18,438,216)		$	(5,152,765)		$	(10,146,764)		$	(6,621,791)

TABLE OF CONTENTS

	For the year ended December 31 2019			For the year ended December 31 2018			For the six months ended June 30 2020			For the six months ended June 30 2019
Other comprehensive Income:
Foreign currency translation adjustment			143,768			338,901			216,009			16,360
Total comprehensive loss			(18,294,448)			(4,813,864)			(9,930,755)			(6,605,431)
Less: Comprehensive loss attributable to non-controlling interests			(876,060)			(69,000)			(372,886)			(666,603)
Comprehensive loss attributable to Building DreamStar Technology Inc.		$	(17,418,388)		$	(4,744,864)		$	(9,557,869)		$	(5,938,828)
Net loss per ordinary share attributable to Building DreamStar Technology Inc.
Basic		$	(0.49)		$	(0.14)		$	(0.27)		$	(0.16)
Diluted		$	(0.49)		$	(0.14)		$	(0.27)		$	(0.16)
Weighted average ordinary shares outstanding
Basic			36,000,000			36,000,000			36,000,000			36,000,000
Diluted			36,000,000			36,000,000			36,000,000			36,000,000

	December 31 2019			December 31 2018			June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	3,837,094		$	7,095,867		$	3,906,529
Accounts receivable, net			394,095			204,449			786,983
Prepaid expenses			2,260,315			1,160,646			2,395,306
Due from related parties			2,879			5,618,191			1,686,491
Short-term investments			671,757			3,930,836			496,590
Loan receivable			861,228			—			—
Security deposits			332,140			—			—
VAT recoverables			853,414			225,749			509,573
Other current assets, net			420,415			26,325			616,261
Total current assets			9,633,337			18,262,063			10,397,733
Non-current assets:
Property and equipment, net			13,087,124			9,645,629			11,364,714
Intangible assets, net			1,713,349			80,629			1,862,309
Operating lease right-of-use assets, net			148,156,777			81,732,751			134,577,438
Long-term investments			491,218			380,364			368,652
Long-term prepaid expenses			69,301			56,820			63,204
Rental deposits			6,028,573			2,962,670			6,468,319
Goodwill			664,614			—			655,079
Total non-current assets			170,210,956			94,858,863			155,359,715
Total assets		$	179,844,293		$	113,120,926		$	165,757,448

TABLE OF CONTENTS

	December 31 2019			December 31 2018			June 30, 2020
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable		$	1,087,808		$	248,601		$	957,965
Short-term debt			705,489			—			553,889
Advances from customers			3,704,143			1,474,610			4,867,314
Operating lease liabilities, current			24,274,282			11,555,637			30,104,776
Due to related parties, current			2,621,536			7,833,156			37,310
Income tax payable			12,467			1,050			6,038
Deposits from customers, current			3,511,461			1,121,880			4,621,772
Accrued expenses and other current liabilities			801,117			1,090,376			4,033,702
Total current liabilities			36,718,303			23,325,310			45,182,766
Operating lease liabilities, non-current			133,255,212			74,703,739			115,242,597
Due to related parties, non-current			20,260,696			20,527,051			24,214,399
Deposits from customers, non-current			2,031,799			1,243,782			1,765,993
Deferred tax liabilities			627,694			53,182			717,634
Total non-current liabilities			156,175,401			96,527,754			141,940,623
Total liabilities			192,893,704			119,853,064			187,123,389
Shareholders’ deficit:
Ordinary shares ($0.0001 par value, 500,000,000 shares authorized; 36,000,000 shares issued and outstanding as of December 31, 2019 and 2018, and June 30, 2020)			3,600			3,600			3,600
Additional paid-in capital			18,339,285			8,044,393			19,691,928
Accumulated deficit			(33,287,943)			(15,739,895)			(43,057,721)
Accumulated other comprehensive loss			335,883			206,223			547,792
Total Building DreamStar Technology Inc. shareholders’ deficit			(14,609,175)			(7,485,679)			(22,814,401)
Non-controlling interests			1,559,764			753,541			1,448,460
Total shareholders’ deficit			(13,049,411)			(6,732,138)			(21,365,941)
Total liabilities and shareholders’ deficit		$	179,844,293		$	113,120,926		$	165,757,448

TABLE OF CONTENTS

RISK FACTORS

Investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described below represent our known material risks to our business. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, you may lose all or part of your investment. You should not invest in this offering unless you can afford to lose your entire investment.

Risks Related to Our Business and Industry

Our limited operating history may not be indicative of our future growth and makes it difficult to predict our future prospects, business and financial performance.

We launched our first co-working space in 2016, and we have since experienced rapid growth in our business. As of June 30, 2020, we had operations in 26 cities in the PRC. Our short operating history may not serve as an adequate basis for predicting our prospects and future operating results, including our key operating data, revenue, cash flows and operating margins. In addition, the co-working space industry in China is at an early stage of development and will continue to evolve in the future. As a result, you may not be able to fully discern the market dynamics that we are subject to and to assess our business prospects.

We have encountered, and may continue to encounter, risks, challenges and uncertainties frequently experienced by companies at an early stage, including those relating to our ability to adapt to the industry, to maintain and monetize our customer base, to introduce new offerings and services and to maintain consistent business growth. If we are unable to successfully address these risks, challenges and uncertainties, our business, financial condition and results of operations could be materially and adversely affected.

Our rental fees constitute an important part of our net revenue, and we depend on the enlargement of our customer base to build the vibrant community that we envision. Any failure to attract existing customers or bring new customers in adequate numbers may materially and adversely affect our business. To sustain our growth, we endeavor to retain our existing customers and continually add new customers to maintain or improve our occupancy rate.

Because the co-working space industry is relatively new and rapidly evolving, we face uncertainties and challenges in maintaining and growing our customer base. A significant number of our existing and prospective customers consists of SMEs and startups. These customers frequently have limited budgets and are more vulnerable to adverse economic conditions and unfavorable changes in the regulatory environment. If these businesses experience economic hardship, they may be unwilling or unable to use our services, which would reduce demand for our services, increase customer attrition and adversely affect our business, financial condition and results of operations. In addition, we may lose customers due to adverse changes in general economic conditions or the regulatory environment in the regions in which we operate or the industries in which our customers operate.

We have in the past experienced and expect to experience growth in our customer base. The number of our customers grew from 627 as of December 31, 2018 to 1,587 as of December 31, 2019 and further to 2,384 as of December 31, 2020. However, we may experience fluctuations in our customer base in the future. For example, our customers may want to terminate their lease agreements for our workstations or spaces and conditions to termination vary on a client by client basis and is subject to negotiation. Furthermore, our existing spaces may become unsuitable to customers for a number of reasons. For example, our community could become less attractive because of a shift in the local economic landscape, or our products and service offerings could become less attractive to our customers because of a change in their business plans or operations. Launching new spaces, as mentioned above, is expensive and involves certain risks. Likewise, it would be costly and risky to develop and introduce new lines of products or service offerings.

Even if we attract new customers, these new customers may not maintain the same level of involvement in our community. For example, they may not use or continue to use our value-added services. In addition,

TABLE OF CONTENTS

our revenue generated from new customers might be impacted by the discounts and other incentives we may offer to attract new customers and any marketing or other expenses to attract new customers. For these and other reasons, we could experience a decline in our revenue growth, which could adversely affect our results of operations.

Our rapid growth leads to increasing risks and uncertainties. If we are unable to manage our growth effectively, our business and results of operations may be materially and adversely affected.

We have experienced rapid growth in our business in the past few years. The total number of our operating co-working spaces facilities increased from 30 as of December 31, 2018 to 42 as of December 31, 2019, and further to 50 as of June 30, 2020. The number of workstations available in our operating spaces increased from approximately 31,126 as of December 31, 2018 to 31,966 as of December 31, 2019 and further to 44,646 as of June 30, 2020. We cannot assure you that we will be able to maintain our historical growth rates. Our growth rates may decline for a number of reasons, some of which are beyond our control, including declining growth of the co-working space industry generally in the PRC, increasing competition within the industry, or changes in government policies or general economic conditions. For example, a significant portion of our existing and target customer base consists of SMEs and startups, whose growth and expansion have benefited from favorable policies encouraging entrepreneurship and innovation in recent years in China. If changes in policies adversely affect the growth of SMEs and startups in the future, our growth rate may decline due to the reduction in co-working needs in general.

Rapid growth leads to increasing risks and uncertainties, and our failure to manage such growth will materially and adversely affect our business. As we grow, we expect our need for capital and other resources to increase significantly. Among other things, we would need to secure significant capital to invest in our infrastructure and technology systems, to attract, train and retain workforce to support our operations, and to establish, manage and maintain current and additional relationships with third-party business partners to upgrade our service to our customers. If we are not able to secure such resources effectively, we may not be able to execute managerial, operating or financial strategies to keep pace with our growth. In addition, our controls, systems and procedures need ongoing development in order to support our growth. In light of our fast development, failure to implement a variety of advanced systems of internal control and management would result in the erosion of our brand image in general and could materially and adversely affect our business.

We have a history of net losses and we may not achieve profitability in the future.

We had net losses of $5,152,765, $18,438,216 and $10,146,764, respectively, in 2018 and 2019 and the six months ended June 30, 2020. We also had negative cash flows from operating activities of $5,905,337, $7,225,962 and $1,710,220, respectively, in 2018 and 2019 and the six months ended June 30, 2020. We cannot assure you that we will be able to generate net profits or positive cash flow from operating activities in the future. Our ability to achieve profitability will depend in large part on our ability to increase our operating margin, either by growing our revenue at a rate faster than our costs and operating expenses increase, or by reducing our costs and operating expenses as a percentage of our net revenues. Accordingly, in order to increase operating margin and achieve profitability, we intend to continue to invest to acquire those office spaces with greater profit potential, terminate or assign leases of spaces generating significant negative cash flows with lower potential to attract new customers, expand our business operations with an emphasis on services provided to customers, and attract talents. These efforts may be more costly than we expect, and our net revenues may not increase sufficiently to offset the expenses. We may continue to take actions and make investments that do not generate optimal financial results and may even result in significantly increased operating and net losses in the short term with no assurance that we will eventually achieve our intended long-term benefits or profitability. These factors, among others set out in this “Risk Factors” section, may negatively affect our ability to achieve profitability in the near term, if at all.

We may fail to implement new business lines, or introduce new services to our customers, or we may fail to successfully expand our business.

Our ability to achieve profitability in the future is dependent upon our ability to implement new business lines and offer new services. See “— We have a history of net losses and we may not achieve

TABLE OF CONTENTS

profitability in the future.” There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or subject to substantial competition. We may invest significant time and resources in developing and marketing new lines of business and/or new services. Timetables for the introduction and development of new lines of business and/or new services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. In addition, new service offerings may not be accepted by the market or be as profitable as we expect. Furthermore, any new line of business and/or new service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new services could have a material adverse effect on our business, results of operations and financial conditions.

Our financial condition and operational results are affected by our occupancy rates.

In pre-opening process, our co-working spaces typically require a three to six months vacancy period to redevelop space and conduct other pre-opening preparation work. The vacancy period may be longer than expected if we cannot attract enough customers to our new spaces or maintain customers of our existing spaces.

In case the customers choose not to continue using our spaces, we may experience difficulty in having new customers to use the current space or would need additional time and cost to redevelop the space, which may result in longer vacancy periods and adversely affect our operational results.

We may require a significant amount of capital and resources for our operations and continued growth. We expect to make significant investments in the operations of our spaces and acquisition of new spaces in the PRC, which may significantly increase our net cash used in operating activities. Our sales and marketing expenses may also increase in an effort to keep attracting new customers and retaining existing customers. Furthermore, we will continue to invest in our technology systems, which are crucial to our daily operations. It may take a long time to realize returns on such investments, if at all.

To date, we have historically funded our cash requirements primarily through capital contributions from our shareholders and borrowings from our related parties. Upon the completion of this offering, we also plan to utilize the net proceeds we receive from this offering for funding our operations and growth. Our ability to obtain additional capital in the future, however, is subject to a number of uncertainties, including those relating to our future business development, financial condition and results of operations, general market conditions for financing activities by companies in our industry, and macro-economic and other conditions in China and globally. If we cannot obtain sufficient capital on reasonable terms to meet our capital needs, we may not be able to execute our growth strategies, and our business, financial condition and prospects may be materially and adversely affected.

We face vigorous competition. If we are not able to compete effectively with others, our business, financial conditions and results of operations may be materially and adversely affected.

While we have a significant presence in co-working space industry in the PRC in terms of the number of cities we operate in and the number of co-working spaces under operation according to Frost & Sullivan, the industry is still in its early stage of development with numerous opportunities. If new companies provide competing solutions in the markets we operate, we may face increased competition for customers. Our current competitors include other co-working space operators and owners of traditional working spaces or offices in the PRC. Some of our competitors may have more resources than we do, operate in more geographic areas, be more capitalized than we are, have access to better lease terms than we do, or offer products and services at a more competitive price. Our inability to compete effectively could hinder our growth or adversely impact our operating results.

TABLE OF CONTENTS

Our success depends on the continuing efforts of our key management and capable personnel as well as our ability to recruit new talent. If we fail to hire, retain or motivate our staff, our business may suffer.

Our future success depends largely on the continued service of our key management members, especially our founder and chairman of the board of directors, Mr. Houde Li. If we lose the services of any member of our key management, we may not be able to hire suitable or qualified replacements, and may incur additional expenses to recruit and train new staff which could severely disrupt our business and growth. If any member of our key management joins a competitor or forms a competing business, we may lose customers, know-how and key professionals and staff customers.

Our rapid growth also requires us to continually hire, train, and retain a wide range of personnel that can adapt to a dynamic, competitive and challenging business environment and are capable of helping us conduct effective marketing, innovate new service offerings, and develop technological capabilities. We may need to offer attractive compensation and other benefits package to attract and retain them. We also need to provide our employees with sufficient training to help them realize their career development and grow with us. Any failure to attract, train, retain or motivate experienced and capable personnel could severely disrupt our business and growth.

Unexpected termination of leases or other arrangements, failure to negotiate satisfactory terms for or duly perform leases or other arrangements, failure to renew the leases or other arrangements of our existing premises or to renew such leases or other arrangements at acceptable terms could materially and adversely affect our business, financial condition, results of operations and prospects.

We currently lease real estate for all of our space locations. Our ability to increase the number of spaces and to operate them profitably depends on the due execution and performance of the leases or other arrangements we enter into with lessors and whether we are able to negotiate these leases and other arrangements on satisfactory terms. Lessors may also not duly perform their obligations under the leases or other arrangements due to various reasons, such as lessors’ failure to deliver the possession of the premises as agreed.

The length of the initial term of our leases ranges from three to 19 years. The increases in rental rates, particularly those markets where initial terms under our leases are shorter, could adversely affect our business, financial condition, results of operations and prospects. Additionally, our ability to negotiate favorable terms to extend an lease agreement or in connection with an alternate space will depend on then-prevailing conditions in the real estate market, such as overall changes in lease expenses, competition from other would-be tenants for desirable leased spaces and our relationships with current and prospective building owners and landlords, or other factors that are not within our control. If we are not able to renew or replace an expiring lease agreement, we will incur significant costs related to vacating that space or redeveloping the space, which could result in loss of customers who may have chosen that space based on the design, location or other attributes of that particular space.

We believe the recognition of our brand among our customers and business partners has helped us in managing our customer acquisition costs and contributed to the growth of our business. As a result, maintaining, protecting and enhancing the recognition of our brand is critical to our business and market position, which depends on several factors, including, our ability to:

•

maintain and enhance the quality and attractiveness of the co-working spaces and services we offer;

•

maintain healthy business relationships with landlords and other business partners;

•

increase brand awareness and brand image through marketing activities;

•

comply with applicable laws and regulations;

•

compete effectively against existing and future competitors; and

TABLE OF CONTENTS

•

preserve our reputation and goodwill generally and in the event of any negative publicity on our services and data security, or other issues affecting us, and China’s co-working space industry in general.

A public perception that we, or other industry participants do not provide satisfactory services, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brand, undermine the trust and credibility we have established and have a negative impact on our ability to attract and retain customers, and our business, financial conditions and results of operations may be materially and adversely affected.

We are exposed to risks associated with the redevelopment and construction of the spaces we occupy.

Opening new spaces subjects us to risks that are associated with redevelopment projects in general, such as delays in construction, contract disputes and claims, fines or penalties levied by government authorities relating to our construction activities. We may also experience delays when opening a new space as a result of building owners or landlords not completing their base building work on time or as a result of delays in our obtaining all necessary land-use, building, occupancy and other required governmental permits and authorizations. Failure to open a space on schedule may cost us the lost revenue from that space and may damage our brand and cause us to incur expenses in order to rent and provide temporary space for our customers.

In developing our spaces, we rely in part on the continued availability and satisfactory performance of third-party general contractors and subcontractors to perform the actual construction work of our co-working spaces, and in many cases to select and obtain the related building materials. As such, the timing and quality of the redevelopment of our occupied spaces depends on the performance of these third-party contractors acting on behalf of us.

The contractors we engage in connection with a construction project are subject to the usual hazards associated with providing construction and related services on construction project sites, which can cause personal injury, damage to or destruction of property, plant and equipment, and environmental damage.

Despite our detailed specifications and our inspection, project management and quality control procedures, in some cases, general contractors and their subcontractors may use improper construction practices or defective materials. Improper construction practices or defective materials can result in the need to perform extensive repairs to our spaces and potentially lead to personal injury. We could also suffer damage to our reputation, and may be exposed to possible liability, if these third parties fail to comply with applicable laws.

Supply chain interruptions may increase our costs or reduce our revenues.

We depend on the effectiveness of our supply chain management systems to ensure reliable and sufficient supply, on reasonably favorable terms, of materially used in our construction and development and operating activities, such as furniture, lighting, millwork, flooring, security equipment and consumables. The materials we purchase and use in the ordinary course of business are sourced from a wide variety of suppliers in the PRC. Disruptions in the supply chain may result from weather-related events, natural disasters, acts of war, terrorist attacks, pandemics, third-party strikes or ineffective cross dock operations, work stoppages or slowdowns, shipping capacity constraints, supply or shipping interruptions or other factors beyond our control. In the event of disruptions in our existing supply chain, the labor and materials we rely on in the ordinary course of our business may not be available at reasonable rates or at all. In some cases, we may rely on a single source for procurement of construction materials or other supplies in a given region. Any disruption in the supply of certain materials could disrupt operations at our existing locations or significantly delay our opening of a new location, which may cause harm to our reputation and results of operations.

We incur significant costs related to the redevelopment of our spaces. We may be unable to recover these costs in a timely manner or at all.

Redevelopment of a space typically takes three to six months from the date we take possession of the space under the relevant occupancy agreement to the opening date. During this time, we incur substantial

TABLE OF CONTENTS

costs without generating any revenues from the space. If we are unable to complete our redevelopment and construction activities for any reason, or conditions in the real estate market or the broader economic landscape change in unfavorable ways, we may be unable to recover these costs in a timely manner or at all. Furthermore, our redevelopment activities are subject to cost and schedule overruns as a result of many factors, some of which are beyond our control and ability to foresee, including increases in the cost of materials and labor, inaccuracies in redevelopment planning, and errors in execution.

We incur costs relating to the maintenance, refurbishment and remediation of our spaces.

The terms of our lease agreements generally require that we ensure that the spaces we occupy are kept in good status throughout the term of the lease and we typically bear the obligation of maintenance and repair for spaces we decorated during the period. The costs associated with this maintenance, removal and repair work may be significant.

We also anticipate that we will be required to periodically refurbish our spaces to keep pace with the changing needs of our customers. Extensive refurbishments may be more costly and time-consuming than we expect and may adversely impact our operational results and financial performance. Our customer experience may also be adversely affected if extensive refurbishments disrupt our operations at our spaces.

Some of our customers pay rent for apportioned common area in our co-working spaces. We may be exposed to disputes with our customers on this pricing policy.

Our customers’ monthly rents may be calculated based on the number of workstations they lease or on the basis of the square footage they lease. For those customers whose rents are calculated on the basis of square footage, in addition to the actual usable square footage exclusive to each customer, we apportion a percentage of the total square footage of the common areas in that co-working space to them. As a result, a customer may pay its rent based on a larger number of square footage than the actual number of square footage of its rented office space. The extra number of square footage customers pay is closely related to the actual number of square footage they rent. As a result of this pricing policy, we have been involved, and may continue to get involved in legal or other disputes in the ordinary course of our business with our customers who disagree with this pricing policy. Although we specify this pricing policy with our customers in the leases, we cannot assure you that such disputes, which may result in significant legal and other costs, will not arise in the future.

The long-term and fixed cost nature of our leases may limit our operating flexibility and could adversely affect our liquidity.

We currently lease a significant majority of our spaces under long-term leases with terms ranging from three to 19 years. Under these agreements, our obligations to landlords extend for periods that significantly exceed the length of our rental agreements with our customers. Our leases generally require fixed monthly payments, which are not tied to customer usage or the size of our customer base, and all of our leases contain minimum lease payment obligations. As a result, if customers at a particular space terminate their lease agreements with us and if we are unable to attract our customers to actively use our spaces or services, our lease expenses may exceed our net revenue. In addition, in an environment where retail cost for real estate is decreasing, we may not be able to lower our fixed monthly payments under our leases to rates that are commensurate with prevailing market rates. At the same time, we would also be pressured to lower our rental fees charged to the customers, potentially resulting in our lease expense exceeding our net revenue. In such events, we would not have the ability to reduce our lease expenses or otherwise terminate the lease in accordance with its terms.

If we experience a prolonged reduction in net revenue at a particular space, our results of operations in respect of that space would be adversely affected unless and until either the lease expires, or we are able to assign the lease or sublease the space to a third party, or we default under the terms of the lease and cease operations at the leased spaces. Our ability to assign a lease or sublease the space to a third party may be constrained by provisions in the lease that restrict these transfers without the prior consent of the landlord. Additionally, we could incur significant costs if we decide to assign or sublease unprofitable leases, as we may incur transaction costs associated with finding and negotiating with potential transferees, and the ultimate transferee may require upfront payments or other inducements. A default under a lease could expose us to

TABLE OF CONTENTS

breach of contract and other claims which could result in direct and indirect costs to us, and could result in operational disruptions that could harm our reputation and brand.

If our promotional and marketing plans are not effective, our business and prospects may be negatively affected.

We have invested and we expect to continue investing in sales and marketing activities to promote our brand and our spaces and to deepen our relationship with customers. We also pay for online advertisements to platforms to sustain our exposure and publicity. To foster our customer base, we may offer discounts or other incentives to certain prospective customers, which incur costs. Moreover, our sales and marketing activities may not be well received by our existing customers, and may not attract new ones as anticipated. The evolving market landscape may require us to experiment with new marketing methods to keep pace with industry trends and customers’ preference. Failure to refine our existing marketing approaches or to introduce new marketing approaches in a cost-effective manner could reduce the number of our customers, occupancy rate and market share. We cannot assure you that we will be able to recover the costs of our sales and marketing activities or that these activities will be effective in attracting new customers and retaining existing ones or as successful as those of our competitors. In such events, our revenue, customer base and market share could decrease, thereby adversely impacting our results of operations.

A high number of our customers are concentrated in major metropolitan areas. An economic downturn in any of these areas may result in reduction of our customers and could adversely affect our results of operations.

A significant portion of our existing customer base and of our potential customers consists of SMEs and startups who may be disproportionately affected by adverse economic conditions. In addition, the concentration of our operations in specific cities magnifies the risk of localized economic conditions in those cities or the surrounding regions to any business. For the years ended December 31, 2018 and 2019 and the six months ended June 30, 2020, we generated the majority of our net revenue from our co-working spaces located in Shenzhen, Shanghai, Beijing and other major metropolitan areas. Adverse changes in general economic conditions or real estate market as well as relevant regulatory environment in these cities may have a disproportionate effect on our customer base, occupancy rates and/or pricing. Our business may also be affected by generally prevailing economic conditions in the markets where we operate, which may exert significant impacts on the real estate activity, demand for occupancy and our services and pricing of our spaces and services.

We are exposed to risks relating to our cooperation with our business partners.

We select and rely on a number of third-party business partners to provide various value-added services, such as business consultation, internal policy consultation, legal services and tax services to meet the needs of our enterprise customers. Due to the reliance on such business partners, any interruption of their operations, any failure of them to accommodate our fast growing business scale, any termination or suspension of our partnership arrangements, any change in cooperation terms, or any deterioration of cooperative relationships with them may materially and adversely affect our brand image and impact our operations.

In addition, we have limited control over our business partners. Failure by third parties to provide satisfactory services or comply with laws and regulations could subject us to reputational harm based on their association with us and our brand. In the event that we become subject to claims arising from services provided by our business partners, we may attempt to seek compensation from the relevant business partners. However, such compensation may be limited. If no claim can be asserted against a business partner, or amounts that we claim cannot be fully recovered from business partners, we may be required to bear such losses and compensation at our own costs. This could have a material and adverse effect on our business, financial condition and results of operations.

We have engaged in substantial transactions with related parties, and such transactions present possible conflicts of interest that could have a material and adverse effect on our business, financial conditions and results of operations.

We have entered into a substantial number of transactions with related parties. As of June 30, 2020 and December 31, 2019, our amounts due to related parties were $24,251,709 and $22,882,232, respectively. Our

TABLE OF CONTENTS

amounts due to Shenzhen Motian Star Enterprise Management Co., Ltd., a company controlled by Mr. Houde Li, our chairman of the board of directors and controlling shareholder, were $19,970,037 as of June 30, 2020 and $20,260,696 as of December 31, 2019, representing 82.3% and 88.5% the total amount due to related parties for the respective periods. For details, see “Related Party Transactions.” We may in the future enter into additional transactions with entities in which members of our management, board of directors and other related parties hold ownership interests.

Transactions with related parties present potential for conflicts of interest, as the interests of related parties may not align with the interests of our shareholders. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as the treatment of events of default.

Our board of directors intends to authorize the audit committee, upon its formation, to review and approve all material related party transactions. We rely on the laws of the Cayman Islands, which provides that directors owe a duty of care and a duty of loyalty to our Company. Under the laws of the Cayman Islands, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonable prudent person would exercise in comparable circumstances. See “Description of Ordinary Shares — Differences in Corporate Law” for additional information. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties and these transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.

We face risks arising from strategic transactions such as acquisitions and investments that we evaluate, pursue or undertake.

From time to time, we evaluate potential strategic or investment opportunities, and from time to time, we may pursue and undertake certain of those opportunities, some of which may be material and may not create the value that we expect. Any transactions that we enter into could be material to our financial condition and results of operations. We have limited experience in completing and integrating major acquisitions. The process of acquiring and integrating other companies could create unforeseen difficulties and expenditures and could entail unforeseen liabilities that are not recoverable under the relevant transaction agreements or otherwise.

We may make investments in, or enter into arrangements with, start-ups and SMEs and these investments or arrangements might not be profitable and could have negative impacts on our business.

We have and will continue to make investments in, or enter into arrangements with, start-ups and SMEs to acquire their equity interests. See “Business — Our Service Offerings — Business Incubation and Acceleration Programs — Equity-for-Rent Services.” Entering into these types of arrangements entails many risks, any of which could materially harm our business, including:

•

the business operations of invested enterprises may fail;

•

the valuation of invested enterprises may not increase;

•

diversion of management’s attention from other business concerns; and

•

incurring of significant costs.

Any of the foregoing or other factors could harm our ability to achieve anticipated levels of profitability from our investments or to realize other anticipated benefits of such investments. As a result, our profitability and results of operations may be materially and adversely affected.

We may not be able to effectively protect our intellectual property from unauthorized use by others.

Our trademarks and other intellectual properties are critical to our business. Any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. We cannot assure you that (i) our pending application for intellectual property rights will be approved, (ii) all of our intellectual property

TABLE OF CONTENTS

rights will be adequately protected, or (iii) our intellectual property rights will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Third parties may also take the position that we are infringing their rights, and we may not be successful in defending these claims. Additionally, we may not be able to enforce and defend our proprietary rights or prevent infringement or misappropriation, without incurring substantial expenses to us and a significant diversion of management time and attention from our business strategy.

To protect our trademarks, copyrights and other proprietary rights, we rely on and expect to continue to rely on a combination of protective agreements with our team customers and third parties including our business partners, physical and electronic security measures, and trademark, copyright, patent and trade secret protection laws. If the measures we have taken to protect our proprietary rights are inadequate to prevent the use or misappropriation by third parties or such rights are diminished due to successful challenges, the value of our brand and other intangible assets may be diminished and our ability to attract and retain customers may be adversely affected.

The proper functioning of technology we use is essential to our business, and any difficulty experienced by such system would materially and adversely affect us.

We use technology provided by our third-party service providers to support our business and our customer experience. For example, we maintain a data management system, which enables us to manage our leases with our landlords and customers. We are in the process of developing our own mobile app for our customers that consolidate various functions and services.

To the extent that the technologies and systems that we use to manage the daily operations of our business malfunction, our ability to operate our business, retain existing customers and attract new customers may be impaired. We may not be able to attract and retain sufficiently skilled and experienced professionals to operate and maintain these technologies and systems, and our current service offerings may not continue to be, and new service offerings may not be, supported by the applicable third-party service providers on commercially reasonable terms or at all. In addition, any harm to our customers’ personal computers or other devices caused by our software, or other sources of harm, such as hackers or computer viruses, could have an adverse effect on the customer experience and our reputation.

We need to invest heavily on our technology in order to sustain or grow our business, and the uncertainties associated with the evolving customer needs and emerging industry standards create risks with respect to such investment. On one hand, our ongoing investment in technology may not generate the expected level of returns; on the other hand, failure on our part to adopt new technologies to adapt to such changing environment may materially and adversely impact our business.

If our proprietary information and/or data we collect and store, particularly billing and personal data, were to be accessed by unauthorized persons, our reputation, competitive advantages and relationships with our customers could be harmed and our business could be materially and adversely affected.

We generate significant amounts of proprietary, sensitive and otherwise confidential information relating to our business and operations, and we collect, store and process confidential and personal data regarding our customers, including customer names and billing data. The collection, protection and use of personal data are governed by privacy laws and regulations enacted in the PRC. These laws and regulations continue to evolve. Compliance with applicable privacy laws and regulations may lead to increase in our operating costs and adversely impact our ability to conduct our business and market our products and services to our customers and potential customers.

Similar to other companies, our information technology systems face the threat of cyber-attacks, such as security breaches, phishing scams, malware and denial-of-service attacks. Our systems or the systems of third-party service providers could experience unauthorized intrusions or inadvertent data breaches, which could result in exposure or destruction of our proprietary information and/or customers’ data.

Because techniques used to obtain unauthorized access to systems or sabotage systems change frequently and may not be known until launched against us or the third parties we rely on, we and our partners may be unable to anticipate these attacks or implement adequate preventative measures. In addition, any party

TABLE OF CONTENTS

who is able to illegally obtain identification and password credentials could potentially gain unauthorized access to our systems or the systems of third parties we rely on. If any such event occurs, we may have to spend significant capital and other resources to mitigate the impact of the event and to develop and implement protection to prevent such future events of that nature from occurring. From time to time, employees make mistakes with respect to security policies that are not always immediately detected by compliance policies and procedures. These can include errors in software implementation or a failure to follow protocols and patch systems. Employee errors, even if promptly discovered and remediated, may disrupt operations or result in unauthorized disclosure of confidential information.

If a cybersecurity incident occurs, or is perceived to occur, we may be the subject of negative publicity and the perception of the effectiveness of our security measures and our reputation may be harmed, which could damage our relationships and result in the loss of existing or potential customers. In addition, even if there is no compromise of customer information, we could incur significant fines or lose the opportunity to support electronic payments from customers, which would limit the full effectiveness and efficiency of our payment processing.

The wide variety of payment methods that we accept subjects third-party payment processing-related risks.

We accept a variety of payment methods including bank transfers, online payments, and WeChat Pay and Alipay through third-party payment processors. We pay these payment processors varying service fees, which may increase over time and raise our operating costs. We may also be subject to fraud, security breaches and other illegal activities in connection with the various payment methods we offer. Furthermore, we are subject to various applicable regulations governing electronic funds transfers, which may continue to evolve in the future. If we fail to comply with these applicable regulations, we may be subject to fines, higher transaction fees, or restrictions on our ability to process electronic funds transfers, which could materially and adversely affect our business, financial condition and results of operations.

We may receive complaints from our customers, or adverse publicity involving our spaces and services.

We face an inherent risk of complaints from our customers. Most of the complaints we received from our customers in the past were related to the facilities of our spaces. We take these complaints seriously and endeavor to reduce such complaints by implementing various remedial measures. Nevertheless, we cannot assure you that we can successfully prevent or address all complaints.

Any complaints or claims against us, even if meritless and unsuccessful, may divert management attention and other resources from our business and adversely affect our business and operations. Customers may lose confidence in us and our brand, which may adversely affect our reputation, business and results of operations. Furthermore, negative publicity including but not limited to negative online reviews on social media and crowd-sourced review platforms, industry findings or media reports related to co-working spaces industry, whether or not accurate, and whether or not concerning our spaces, can adversely affect our business, results of operations and reputation.

Pending or future litigation could have a material and adverse impact on our business, financial condition and results of operations.

From time to time, we have been, and may in the future be, subject to lawsuits or other legal proceedings brought on by our customers, our competitors, third-party business partners, government agencies or other entities against us, in matters relating to contractual disputes. At times, the outcomes of actions we institute may not be successful or favorable to us. Lawsuits against us may also generate negative publicity that significantly harms our reputation, which may adversely affect our ability to expand our customer base. Claims against us, whether meritorious or not, could require significant expenses. In addition, managing and defending litigation and related indemnity obligations can significantly divert our management’s attention from operating our business. If any of these legal proceedings were to be determined adversely to us, or if we were to enter into settlement arrangements, we may be exposed to monetary damages or be forced to change the way in which we operate our business, which could have an adverse effect on our business, financial condition, results of operations and cash flows.

TABLE OF CONTENTS

After we become a publicly listed company, we may face additional exposure to claims and lawsuits. These claims could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merits of the claims. In some instances, we may elect or be forced to pay substantial damages if we are unsuccessful in our efforts to defend against these claims, which could harm our business, financial condition and results of operations.

A severe or prolonged downturn in the PRC or global economy could materially and adversely affect our business and our financial condition.

COVID-19 had a severe and negative impact on the Chinese and the global economy in the first quarter of 2020. China’s National Bureau of Statistics reported a negative GDP growth of 6.8% for the first quarter in 2020. Whether this will lead to a prolonged downturn in the economy is still unknown. Even before the outbreak of COVID-19, the global macroeconomic environment was facing challenges, including the end of quantitative easing by the U.S. Federal Reserve, the economic slowdown in the Eurozone since 2014, uncertainties over the impact of Brexit and the ongoing global trade disputes and tariffs. The growth of the Chinese economy has slowed down since 2012 compared to the previous decade and the trend may continue. According to the National Bureau of Statistics of China, China’s gross domestic product (GDP) growth was 6.6% in 2018 and 6.1% in 2019. There is considerable uncertainty over the long-term effects of the monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. In addition, there have also been concerns about the relationship between China and the United States resulted from the current trade tension between the two countries. There have been further uncertainties related to the drastic drop in oil prices and the U.S. Federal Reserve’s progressive policies to strengthen the market in early 2020. It is unclear whether these challenges and uncertainties will be contained or resolved and what effects they may have on the global political and economic conditions in the long term.

Economic conditions in China are sensitive to global economic conditions, changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. While the economy in China has grown significantly over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing in recent years. Although growth of China’s economy remained relatively stable, China’s economic growth may materially decline in the near future. Any severe or prolonged slowdown in the global or PRC economy may materially and adversely affect our business, results of operations and financial condition.

If we fail to implement and maintain an effective system of internal controls to remediate our material weakness over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of the Ordinary Shares may be materially and adversely affected.

Prior to this offering, we have been a private company with limited accounting and financial reporting personnel and other resources with which we address our internal control over financial reporting. In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2019, we and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, or PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses that have been identified relate to (i) lack of control procedures in place for timely training and implementation of new accounting standards and (ii) lack of sufficient review over acquisitions to ensure the complex transactions are appropriately accounted for. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control under the Sarbanes-Oxley Act for purposes of identifying and reporting any weakness in our internal control over financial reporting. To remedy the identified material weaknesses, we have adopted and will adopt further measures to improve our internal control over financial reporting. We plan to engage additional personnel to implement and develop a full set of U.S. GAAP accounting policies and financial reporting

TABLE OF CONTENTS

procedures as well as related internal control policies, including implementing a comprehensive accounting manual to guide accounting operation and end of period reporting work. We plan to recruit additional staffs with knowledge of U.S. GAAP and SEC regulations in our finance and accounting department. Also we intend to enhance internal training and development programs for financial reporting personnel. Additionally, when entering into complex transactions, we will utilize a third party consultant for accounting services as additional resources. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Internal Control Over Financial Reporting.” However, we cannot assure you that these measures may fully address the material weaknesses and deficiencies in our internal control over financial reporting or that we may conclude that they have been fully remediated.

Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report in our second annual report on Form 20-F after becoming a public company. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue an adverse opinion on the effectiveness of internal control over financial reporting because of the existence of a material weakness if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. If we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our businesses, financial condition, results of operations and prospects, as well as the trading price of the Ordinary Shares, may be materially and adversely affected. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

Recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and an act passed by the US Senate all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.

TABLE OF CONTENTS

On May 20, 2020, the Senate passed an act requiring a foreign company to certify it’s not owned or manipulated by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange.

Because we have substantial operations within the PRC, the audit workpapers prepared by our independent registered public accounting firm for auditing our Company might not be inspected by the PCAOB without the approval of the Chinese authorities. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

The recent developments would add uncertainties to our offering and may result in prohibitions on the trading of our Ordinary Shares on the Nasdaq Stock Market, if our auditors fail to meet the PCAOB inspection requirement in time.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

We expect the rules and regulations applicable to us after we become a public company to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC.

We face risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt our operations.

China has in the past experienced significant natural disasters, including earthquakes, extreme weather conditions, as well as health scares related to epidemic diseases, and any similar event could materially impact our business in the future. If a disaster or other disruption were to occur in the future that affects the regions where we operate our business, our operations could be materially and adversely affected due to loss

TABLE OF CONTENTS

of personnel and damage to property. Even if we are not directly affected, such a disaster or disruption could affect the operations or financial condition of our ecosystem participants, which could harm our results of operations.

Since early 2020, the disease caused by a novel strain of coronavirus, or the COVID-19, has severely impacted China and the rest of the world. The COVID-19 pandemic has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom of movement, gatherings of large numbers of people, and business operations such as travel bans, border closings, business closures, quarantines, shelter-in-place orders and social distancing measures. As a result, the COVID-19 pandemic and its consequences have caused many enterprises and individuals to work from home, resulting in a decline in the demand for co-working spaces.

The COVID-19 pandemic has subjected our business, operations and financial conditions to a number of risks:

•

The outbreak of COVID-19 has caused a decline in the demand for office space for enterprises and individuals from many industries. Depending on the individual circumstances of our customers, we offered rent relief to some customers as part of our efforts to retain existing customers.

•

In addition to the decrease in demand for co-working space by our customers, the growth rate in the number of our customers has also been adversely affected by the outbreak. The number of our customers as of June 30, 2020 grew by 416, or 26.2% from 1,587 as of December 31, 2019 to 2,003 as of June 30, 2020. The growth rate was lower than the growth rate in same period of 2019. The decline has recovered gradually since the second quarter of 2020. In addition, customers may require additional time to pay us or fail to pay us at all, which has increased the amount of accounts receivable and may require us to record additional allowance for doubtful accounts, write-off of bad debts, or reduction of recognized revenues and profits. The turnover days for the accounts receivable is likely to be affected as a result.

The impact of the COVID-19 pandemic is rapidly evolving, and the continuation or a future resurgence of the pandemic could precipitate or aggravate the other risk factors that we face, which in turn could further materially and adversely affect our business, financial condition, liquidity, results of operations and profitability, including in ways that are not currently known to us or that we do not currently consider to be present significant risks. The extent of the impact of the COVID-19 on our operational and financial performance in the longer term will depend on future developments, including the duration of the outbreak and related restrictions on businesses, and the impact of the COVID-19 on overall demand for co-working space, all of which are highly uncertain and beyond our control.

In addition to COVID-19, our business could also be adversely affected by the outbreak of Ebola virus disease, H1N1 flu, H7N9 flu, avian flu, SARS, or other epidemics.

Risks Related to Our Corporate Structure

We have relied and expect to continue relying on contractual arrangements with our VIE and its shareholders to operate our business in China. The revenues contributed by our VIE and its subsidiaries constituted substantially all of our net revenue for the fiscal years of 2018 and 2019 and the six months ended June 30, 2020.

These contractual arrangements may not be as effective as direct ownership in providing us with control over our VIE. For example, our VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct its operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational

TABLE OF CONTENTS

level. However, under the current contractual arrangements, we rely on the performance by our VIE and its shareholders of their obligations under the contracts to exercise control over our VIE. The shareholders of our consolidated VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual arrangements with our VIE.

If our VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. For example, if the shareholders of our VIE refuse to transfer their equity interest in our VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third parties claim any interest in such shareholders’ equity interests in our VIE, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other disputes between the shareholders of our VIE and third parties were to impair our control over our VIE, our ability to consolidate the financial results of our VIE and its subsidiaries would be affected, which would in turn result in a material adverse effect on our business, operations and financial condition.

The shareholders of our VIE may have actual or potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

As of the date of this prospectus, we are not aware of any conflicts between the shareholders of our VIE and us. However, the shareholders of our VIE may have actual or potential conflicts of interest with us in the future. These shareholders may refuse to sign or breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and our VIE, which would have a material and adverse effect on our ability to effectively control our VIE and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with our VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

As part of our contractual arrangements with our VIE, the entity holds certain assets that are material to the operation of certain portion of our business, including permits, domain names and most of our IP rights. If our VIE goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, our VIE may not, in any manner, sell, transfer, mortgage or dispose of its assets or legal or beneficial interests in the business without our prior consent. If our VIE undergoes a voluntary or involuntary liquidation proceeding, the independent third party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Under the applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s-length basis

TABLE OF CONTENTS

in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of our VIE in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by our VIE for PRC tax purposes, which could in turn increase their tax liabilities without reducing our WFOE’s tax expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on our VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if the tax liabilities of our VIE increase or if it is required to pay late payment fees and other penalties.

Risks Related to Doing Business in China

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

All of our operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic, social conditions and government policies in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive position. COVID-19 had a severe and negative impact on Chinese and global economy in the first quarter of 2020. Whether this will lead to a prolonged downturn in the economy is still unknown. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. In addition, in the past the PRC government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results.

Uncertainties with respect to the PRC legal system could adversely affect us.

The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves uncertainties.

In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements

TABLE OF CONTENTS

and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

Substantial uncertainties exist with respect to the interpretation and implementation of newly enacted PRC Foreign Investment Law and its Implementation Rules and how they may impact the viability of our current corporate structure, corporate governance, and operations.

On March 15, 2019, the PRC National People’s Congress approved the PRC Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law, and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. On December 26, 2019, the PRC State Council approved the Implementation Rules of Foreign Investment Law, which came into effect on January 1, 2020. The PRC Foreign Investment Law and its Implementation Rules embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since the PRC Foreign Investment Law is relatively new, substantial uncertainties exist with respect to its interpretation and implementation.

The VIE structure has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “— Risks Related to Our Corporate Structure” and “Corporate History and Structure.” Under the PRC Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Although it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities in the future. In addition, the definition contains a catch-all provision providing that investments made by foreign investors through other methods specified in laws or administrative regulations or other methods prescribed by the State Council, which leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for contractual arrangements as a method of foreign investment. Given the foregoing, it is uncertain whether our contractual arrangements will be deemed to be in violation of the market entry clearance requirements for foreign investment under the PRC laws and regulations.

The PRC Foreign Investment Law specifies that foreign investments shall be conducted in line with the “negative list” issued by the State Council. A foreign invested enterprise under PRC law, or an FIE, would not be allowed to make investments in prohibited industries in the “negative list,” while the FIE must satisfy certain conditions stipulated in the “negative list” for investment in restricted industries. It is uncertain whether the co-working space industry, in which our VIE and its subsidiaries operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” to be issued in the future. Moreover, the PRC Foreign Investment Law does not indicate what actions must be taken by existing companies with a VIE structure to obtain the market entry clearance if such structure would be deemed as a method of foreign investment. If our VIE structure would be deemed as a method of foreign investment, and any of our business operation would fall in the “negative list,” and if the interpretation and implementation of the PRC Foreign Investment Law and the final “negative list” mandate further actions, such as market entry clearance granted by the PRC Ministry of Commerce, to be completed by companies with an existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all. There are uncertainties as to how the PRC Foreign Investment Law would be further interpreted and implemented. We cannot assure you that the interpretation and implementation of the PRC

TABLE OF CONTENTS

Foreign Investment Law made by the relevant governmental authorities in the future will not materially impact the viability of our current corporate structure, corporate governance and business operations in any aspect.

We are a Cayman Islands holding company and we may rely on dividends and other distributions on equity from our WFOE for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and for services of any debt we may incur. Our WFOE’s ability to distribute dividends in turn depends on the payment it receives from our VIE as service fees pursuant to certain contractual arrangements among our WFOE, our VIE and our VIE’s shareholders entered into to comply with certain restrictions under PRC law on foreign investment. For more information on such contractual arrangements, see “History and Corporate Structure — Contractual Arrangements among our VIE, its shareholders and us.”

Our WFOE’s ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our WFOE to pay dividends to their respective shareholders only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise such as our WFOE is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. If our WFOE and consolidated entities incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our WFOE to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

In response to the persistent capital outflow and RMB’s depreciation against U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures over recent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. For instance, the People’s Bank of China issued the Circular on Further Clarification of Relevant Matters Relating to Offshore RMB Loans Provided by Domestic Enterprises, or the PBOC Circular 306, on November 22, 2016, which provides that offshore RMB loans provided by a domestic enterprise to offshore enterprises that it holds equity interests in shall not exceed 30% of the domestic enterprise’s ownership interest in the offshore enterprise. The PBOC Circular 306 may constrain our WFOE’ ability to provide offshore loans to us. The PRC government may continue to strengthen its capital controls and our WFOE’ dividends and other distributions may be subjected to tighter scrutiny in the future. Any limitation on the ability of our WFOE to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Under the EIT Law and related regulations, dividends, interests, rent or royalties payable by a foreign invested enterprise, such as our WFOE, to any of its foreign non-resident enterprise investors, and proceeds from any such foreign enterprise investor’s disposition of assets (after deducting the net value of such assets) are subject to a 10% withholding tax, unless the foreign enterprise investor’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax. Undistributed profits earned by foreign-invested enterprises prior to January 1, 2008 are exempted from any withholding tax. The Cayman Islands, where Building DreamStar is incorporated, does not have such a tax treaty with China. Hong Kong has a tax arrangement with China that provides for a 5% withholding tax on dividends subject to certain conditions and requirements, such as the requirement that the Hong Kong resident enterprise own at least 25% of the PRC enterprise distributing the dividend at all times within the 12-month period immediately preceding the distribution of dividends and be a “beneficial owner” of the dividends. If our WFOE declares and distributes profits to us, such payments will be subject to withholding tax, which will increase our tax liability and reduce the amount of cash available to our company.

TABLE OF CONTENTS

Discontinuation of any of the government subsidies or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.

Our VIE and its subsidiaries have entered into cooperation agreements with PRC local government authorities, through which we received financial subsidies from these PRC local government authorities. The financial subsidies result from policies adopted by PRC local government authorities and are determined based on evaluations conducted by these local governments. Local governments may decide to discontinue with their current policies, or choose not to enter into such cooperation agreements with us in the future. The discontinuation of such financial subsidies or imposition of any additional taxes could adversely affect our financial condition and results of operations.

Any noncompliance with fire prevention examination and inspection requirements mandated by PRC laws and regulations may have a material and adverse impact on our business, financial condition and results of operations.

In accordance with applicable PRC laws and regulations, we are required to comply with fire prevention examination and inspection requirements for our spaces, and we are obliged to make fire safety filing with competent authorities. In addition, we are required to complete property leasing registration and filings with competent authorities. See “Regulation — Regulations Relating to Leasing Properties.”

If we fail to comply with applicable laws and regulations to our business, we may be subject to fines, confiscation of revenues generated from incompliance operations or suspension of relevant operations. We may also experience adverse publicity arising from such non-compliance with government regulations that negatively impact our corporate image.

As of the date of this prospectus, we have not completed the required fire prevention examination and inspection or fire safety filing for 12 out of the 49 spaces we currently operate. We may be ordered to stop using the spaces or suspend business, and may be imposed a fine ranging from RMB30,000 to RMB300,000 for each space for our spaces that fail to complete such required examination and inspection on fire prevention as required by the Fire Prevention Law . We may be ordered by the housing and urban-rural development department to rectify and be imposed a fine of not more than RMB5,000 for each space that fails to complete such fire safety filing following such examination and inspection on fire prevention. As of the date of this prospectus, we have not received any penalties or fines with respect our non-compliance with fire prevention examination and inspection requirements.

Noncompliance with filing requirements imposed by the PRC Law on Administration of Urban Real Estate may have an adverse impact on our business, financial condition and results of operations.

The PRC Law on Administration of Urban Real Estate, promulgated in July 1994 by the Standing Committee of the National People’s Congress (the “SCNPC”) and most recently amended in August 2019, provides that written lease contracts shall be registered and filed with competent real estate administration authorities. See “Regulation — Regulations Relating to Leasing Properties.”

As of the date of this prospectus, we have not registered and filed a majority of our leases with our landlords and tenants with competent authorities, and as such, we may be ordered by the authorities to rectify within a stipulated period of time. If we do not rectify as required within stipulated period of time, we may be subject to fine ranged from RMB 1,000 to 10,000 for each lease contract. As of the date of this prospectus, we have not received any penalties or fines with respect to our non-compliance with the filing requirements imposed by the RPC Law on Administration of Urban Real Estate.

Fluctuations in exchange rates could have a material adverse impact on our results of operations and the value of your investment.

The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies, among other things. We cannot assure you that Renminbi will not appreciate or depreciate

TABLE OF CONTENTS

significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

Significant fluctuation of the Renminbi may have a material adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any material hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive a significant portion of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries and VIE to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi.

In light of the recent flood of capital outflows of China due to the weakening RMB, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated by such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the Ordinary Shares.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering, to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC subsidiaries are subject to the information report with the MOFCOM or their respective local branches and registration

TABLE OF CONTENTS

with a local bank authorized by the State Administration of Foreign Exchange, or SAFE. In addition, any foreign loan procured by our PRC subsidiaries cannot exceed statutory limits and is required to be registered with SAFE or its respective local branches. Any medium or long-term loan to be provided by us to our VIE must be registered with the National Development and Reform Commission, or NDRC, and the SAFE or its local branches. We may not be able to complete such registrations on a timely basis, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to complete such registrations, our ability to use the proceeds of this offering, and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect on June 1, 2015. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities. As this circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. Violations of these Circulars could result in monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may limit our ability to use Renminbi converted from the net proceeds of this offering, to fund the establishment of new entities in China by our VIE, to invest in or acquire any other PRC companies through our PRC subsidiaries, or to establish new consolidated VIE in China, which may adversely affect our business, financial condition and results of operations.

On October 23, 2019, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Further Promoting the Convenience of Cross-border Trade and Investment, or the SAFE Circular 28, which, among other things, allows all foreign-invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments in China, as long as the equity investment is genuine, does not violate applicable laws, and complies with the negative list on foreign investment. However, since the SAFE Circular 28 is newly promulgated, it is unclear how SAFE and competent banks will carry this out in practice.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from our initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us.

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign

TABLE OF CONTENTS

Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.

Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change. If our shareholders who are PRC residents or entities fail to make the required registration or to update the previously filed registration, our PRC subsidiaries may be prohibited from distributing their profits and any proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

We have requested PRC residents who we know hold direct or indirect interest in the Company to make the necessary applications, filings and registrations as required under SAFE Circular 37, and we are aware that most of these shareholders have completed the initial foreign exchange registrations with relevant banks. We cannot assure you, however, that all of these individuals may continue to make required filings or updates in a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with SAFE regulations may subject us to fines or legal sanctions, restrict our cross-border investment activities, and limit our PRC subsidiaries’ ability to distribute dividends to us. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

It may be difficult for overseas regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence

TABLE OF CONTENTS

collection activities within China may further increase difficulties faced by you in protecting your interests. See also “— Risks related to the Ordinary Shares and this Offering — You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” for risks associated with investing in us as a Cayman Islands company.

The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. Such regulation requires, among other things, that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly Law requires that the anti-monopoly law enforcement authority shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the State Council that became effective in March 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and holders of our Ordinary Shares.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or SAT, issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular applies only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board customers or senior executives habitually reside in the PRC.

We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and

TABLE OF CONTENTS

uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that Building DreamStar is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from interest or dividends we pay to our noteholders and shareholders that are non-resident enterprises, including the holders of our Ordinary Shares. In addition, non-resident enterprise noteholders and shareholders (including holders of our Ordinary Shares) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of the Ordinary Shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders (including the holders of Ordinary Shares) and any gain realized on the transfer of the Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the Ordinary Shares.

We are an exempted company incorporated under the laws of the Cayman Islands, we conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all our senior executive officers reside within China for a significant portion of the time and all of them are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as none of them currently resides in the United States or has substantial assets located in the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

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 forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts 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 laws 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.

The enactment of Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong National Security Law”) could impact our Hong Kong holding subsidiary.

On June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories of offences — secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security — and their corresponding penalties. On July 14, 2020, U.S. President Donald Trump signed the Hong Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020 the U.S. government imposed HKAA-authorized sanctions on eleven individuals, including HKSAR chief executive Carrie Lam. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly

TABLE OF CONTENTS

affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our Hong Kong subsidiary is determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our business operations, financial position and results of operations could be materially and adversely affected.

Risks Related to the Ordinary Shares and This Offering

Prior to the completion of this offering, our Ordinary Shares were not traded on any market. Any active, liquid and orderly trading market for our Ordinary Shares may not develop or be maintained after this offering. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. The market price of our Ordinary Shares could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our Ordinary Shares, you could lose a substantial part or all of your investment in our Ordinary Shares. The initial public offering price will be determined by us, based on numerous factors and may not be indicative of the market price of our Ordinary Shares after this offering. Consequently, you may not be able to sell our Ordinary Shares at a price equal to or greater than the price paid by you in this offering.

The following factors could affect our share price:

•

our operating and financial performance;

•

quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

•

the public reaction to our press releases, our other public announcements and our filings with the SEC;

•

strategic actions by our competitors;

•

changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;

•

speculation in the press or investment community;

•

the failure of research analysts to cover our Ordinary Shares;

•

sales of our Ordinary Shares by us or other shareholders, or the perception that such sales may occur;

•

changes in accounting principles, policies, guidance, interpretations or standards;

•

additions or departures of key management personnel;

•

actions by our shareholders;

•

domestic and international economic, legal and regulatory factors unrelated to our performance; and

•

the realization of any risks described under this “Risk Factors” section.

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Ordinary Shares. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, diver our management’s attention and resources and harm our business, operating results and financial condition.

TABLE OF CONTENTS

There may not be an active, liquid trading market for our Ordinary Shares.

Prior to the completion of this offering, there has been no public market for our Ordinary Shares. An active trading market for our Ordinary Shares may not develop or be sustained following this offering. You may not be able to sell your shares at the market price, if at all, if trading in our shares is not active. The initial public offering price was determined by negotiations between us and our advisors based upon a number of factors. The initial public offering price may not be indicative of prices that will prevail in the trading market.

You will experience immediate and substantial dilution.

The initial public offering price of our shares is substantially higher than the pro forma net tangible book value per share of our Ordinary Shares. Assuming the completion of the offering, if you purchase shares in this offering, you will incur immediate dilution of approximately $5.54 per share or approximately 101% from the offering price of $5.50 per share, and after deducting estimated underwriter fees and discounts and estimated offering expenses payable by us. Accordingly, if you purchase shares in this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on a price appreciation of the Ordinary Shares for a return on your investment.

We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the Ordinary Shares as a source for any future dividend income.

A sale or perceived sale of a substantial number of our Ordinary Shares may cause the price of our Ordinary Shares to decline.

If our shareholders sell substantial amounts of our Ordinary Shares in the public market, the market price of our Ordinary Shares could fall. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short our Ordinary Shares. These sales also make it more difficult for us to sell equity-related securities in the future at a time and price that we deem reasonable or appropriate.

There can be no assurance that we will not be a passive foreign investment company (“PFIC”) for United States federal income tax purposes for any taxable year, which could subject United States holders of our Ordinary Shares to significant adverse United States federal income tax consequences.

A non-United States corporation will be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (i) at least 75% of its gross income for such taxable year is passive income or (ii) at least 50% of the value of its assets (based on average of the quarterly values of the assets) during such year is attributable to assets that that produce or are held for the production of passive income. Based on the current and anticipated value of our assets and the composition of our income assets, we do not expect to be a PFIC for United States federal income tax purposes for our current taxable year ended December 31, 2020 or in the foreseeable future. However, the determination of whether or not we are a PFIC according to the PFIC rules is made on an annual basis and depend on the composition of our income and assets and the value of our assets from time to time. Therefore, changes in the composition of our income or assets or value of our assets may cause us to become a PFIC. The determination of the value of our assets (including goodwill not reflected on our balance sheet) may be based, in part, on the quarterly market value of Ordinary Shares, which is subject to change and may be volatile.

The classification of certain of our income as active or passive, and certain of our assets as producing active or passive income, and hence whether we are or will become a PFIC, depends on the interpretation of certain United States Treasury Regulations as well as certain IRS guidance relating to the classification of assets as producing active or passive income. Such regulations guidance is potentially subject to different interpretations. If due to different interpretations of such regulations and guidance the percentage of our

TABLE OF CONTENTS

passive income or the percentage of our assets treated as producing passive income increases, we may be a PFIC in one of more taxable years.

If we are a PFIC for any taxable year during which a United States person holds Ordinary Shares, certain adverse United States federal income tax consequences could apply to such United States person. For more information see “Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”

For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

We are classified as an “emerging growth company” under the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things, (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iii) provide certain disclosure regarding executive compensation required of larger public companies, or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.07 billion of revenues in a fiscal year, have more than $700 million in market value of our Ordinary Shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.

To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find our Ordinary Shares to be less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile.

If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to file a report by our management on our internal control over financial reporting, including an attention report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. The presence of material weakness in internal control over financial reporting could result in financial statement errors, which, in turn, could lead to error our financial reports and/or delays in our financial reporting, which could require us to restate our operating results. We might not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting. We will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.

If we are unable to conclude that we have effective internal controls over financial reporting, investors may lose confidence in our operating results, the price of the Ordinary Shares could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, the Ordinary Shares may not be able to remain listed on the exchange.

TABLE OF CONTENTS

Certain data and information in this prospectus were obtained from third-party sources and were not independently verified by us.

We have engaged Frost & Sullivan to prepare a commissioned industry report that analyzes the PRC co-working space industry. Information and data relating to the PRC co-working space industry have been derived from Frost & Sullivan’s industry report. Statistical data included in the Frost & Sullivan report also include projections based on a number of assumptions. The PRC co-working space industry may not grow at the rate projected by market data, or at all. Any failure of the PRC co-working space industry to grow at the projected rate may have a material adverse effect on our business and the market price of our Ordinary Shares. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.

We have not independently verified the data and information contained in the Frost & Sullivan report or any third-party publications and reports Frost & Sullivan has relied on in preparing its report. Data and information contained in such third-party publications and reports may be collected using third-party methodologies, which may differ from the data collection methods used by us. In addition, these industry publications and reports generally indicate that the information contained therein is believed to be reliable, but do not guarantee the accuracy and completeness of such information.

As a foreign private issuer, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual general meetings will be governed by Cayman Islands requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our Ordinary Shares.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq listing standards that allow us to follow Cayman Islands law for certain governance matters. Certain corporate governance practices in the Cayman Islands may differ significantly from corporate governance listing standards as, except for general fiduciary duties and duties of care, Cayman Islands law has no corporate governance regime which prescribes specific corporate governance standards. Currently, we do not intend to rely on home country practice with respect to our corporate governance after we complete with this offering. However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be

TABLE OF CONTENTS

under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. To the extent we choose to follow home country practice with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Cayman Islands Companies Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands company and substantially all of our assets are located outside of the United States. In addition, substantially all of our current directors and officers are nationals and/or residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands, see “Enforceability of Civil Liabilities.”

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Ordinary Shares are directly or indirectly held by residents of the U.S. and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq listing rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.

Our management team lacks experience in managing a U.S.-listed company and complying with laws applicable to such company, the failure of which may adversely affect our business, financial conditions and results of operations.

Our current management team lacks experience in managing a company publicly traded in the U.S., interacting with public company investors and complying with the increasingly complex laws pertaining to

TABLE OF CONTENTS

U.S.-listed public companies. Prior to the completion of this offering, we mainly operate our businesses as a private company in the PRC. As a result of this offering, our company will become subject to significant regulatory oversight and reporting obligations under the U.S. federal securities laws and the scrutiny of securities analysts and investors, and our management currently has no experience in complying with such laws, regulations and obligations. Our management team may not successfully or efficiently manage our transition to becoming a U.S.-listed public company. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial conditions and results of operations.

We have broad discretion in the use of the net proceeds from our initial public offering and may not use them effectively.

To the extent (i) we raise more money than required for the purposes explained in the section titled “Use of Proceeds” or (ii) we determine that the proposed uses set forth in that section are no longer in the best interests of our Company, we cannot specify with any certainty the particular uses of such net proceeds that we will receive from our initial public offering. Our management will have broad discretion in the application of such net proceeds, including working capital, possible acquisitions, and other general corporate purposes, and we may spend or invest these proceeds in a way with which our shareholders disagree. The failure by our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from our initial public offering in a manner that does not produce income or that loses value.

The price of the Ordinary Shares and other terms of this offering have been determined by us along with our underwriters.

If you purchase our Ordinary Shares in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay a price that was determined by us along with our underwriters. The offering price for our Ordinary Shares may bear no relationship to our assets, book value, historical results of operations or any other established criterion of value. The trading price, if any, of the Ordinary Shares that may prevail in any market that may develop in the future, for which there can be no assurance, may be higher or lower than the price you paid for our Ordinary Shares.

You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

Cayman Islands law 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. These rights, however, may be provided in a company’s articles of association. Our articles of association allow our shareholders holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition a general meeting of our shareholders, in which case our directors are obliged to call such meeting within twenty-one (21) days from the date of the deposit of the requisition proceed to convene the meeting. Advance notice of seven (7)clear days is required for the convening of any general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third of the total issued shares carrying the right to vote at a general meeting of the Company.

The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.

Upon completion of this offering, we will be a public company in the United States. As a public company, we will be required to file periodic reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our Company and shareholders. Although we may be able to attain confidential treatment of some of our developments, in some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our Company. Similarly, as a U.S. public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public company status could affect our results of operations.

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements about our current expectations and views of future events, which are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry Overview” and “Business.” These forward-looking statements relate to events that involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from those expressed or implied by these statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “could,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “propose,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The forward-looking statements included in this prospectus relate to, among other things:

•

our goals and strategies;

•

our business and operating strategies and plans for the development of existing and new businesses, ability to implement such strategies and plans and expected time;

•

our future business development, financial condition and results of operations;

•

expected changes in our revenues, costs or expenditures;

•

our dividend policy;

•

our expectations regarding demand for and market acceptance of our products and services;

•

our expectations regarding our relationships with our customer, third-party and business partners;

•

the trends in, expected growth in and market size of the co-working space industry in China and globally;

•

our ability to maintain and enhance our market position;

•

our ability to continue to develop new technologies and/or upgrade our existing technologies;

•

developments in, or changes to, laws, regulations, governmental policies, incentives and taxation affecting our operations, in particular in the co-working space industry;

•

relevant governmental policies and regulations relating to our businesses and industry;

•

competitive environment, competitive landscape and potential competitor behavior in our industry; overall industry outlook in our industry;

•

our ability to attract, train and retain executives and other employees;

•

our proposed use of proceeds from this offering;

•

the development of the global financial and capital markets;

•

fluctuations in inflation, interest rates and exchange rates;

•

general business, political, social and economic conditions in China and the overseas markets we have business;

•

the length and severity of the recent COVID-19 outbreak and its impact on our business and industry; and

•

assumptions underlying or related to any of the foregoing.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations and our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Prospectus Summary — Our Challenges,” “Risk Factors,” “Management’s Discussion and Analysis of Financial

TABLE OF CONTENTS

Condition and Results of Operations,” “Business,” “Regulation” and other sections in this prospectus. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should read thoroughly this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This prospectus contains information derived from government and private publications. These publications include forward-looking statements, which are subject to risks, uncertainties and assumptions. Although we believe the data and information to be reliable, we have not independently verified the accuracy or completeness of the data and information contained in these publications. Statistical data in these publications also include projections based on a number of assumptions. The co-working space industry may not grow at the rate projected by market data, or at all. Failure of these markets to grow at the projected rate may have a material and adverse effect on our business and the market price of the Ordinary Shares. In addition, the rapidly evolving nature of the co-working space industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. Therefore, you should not place undue reliance on these statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements in this prospectus are made based on events and information as of the date of this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results or performance may materially differ from what we expect.

TABLE OF CONTENTS

USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately US$22.14 million, or approximately US$25.59 million if the Representative exercises its over-allotment option in full, after deducting underwriting discounts and estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of US$5.50 per Ordinary Share, the mid-point of the estimated range of the initial public offering price set forth on the front cover of this prospectus.

We plan to use the net proceeds of this offering as follows in the order of priority:

•

approximately 40%, or US$8.86 million (assuming no exercise of the over-allotment option), for expanding our spaces and services offerings, such as online searching tool for office spaces;

•

approximately 35%, or US$7.75 million (assuming no exercise of the over-allotment option), for potential strategic investments and acquisitions including co-working spaces operated by competitors and businesses that are complementary to the Company’s current business operations in Chengdu, Shenzhen, Shanghai and other major cities in China, although we have not identified any specific investments or acquisition opportunities at this time; and

•

approximately 25%, or the remaining amount for general corporate purposes, which may include working capital needs and other corporate uses.

The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations, and the rate of growth, if any, of our business, and our plans and business conditions. The foregoing represents our intentions as of the date of this prospectus based upon our current plans and business conditions to use and allocate the net proceeds of this offering. However, our management will have significant flexibility and discretion in applying the net proceeds of this offering. Unforeseen events or changed business conditions may result in application of the proceeds of this offering in a manner other than as described in this prospectus.

If, for any reason, the anticipated proceeds are not sufficient to fund all the proposed purposes, we intend to seek capital investment from institutional investors or obtain short-term or long-term borrowings. If we are unable to obtain sufficient financing, we intend to adjust or downscale our plans for expanding spaces and service offerings and potential strategic investments and acquisitions.

As an offshore holding company, under PRC laws and regulations, we are only permitted to use the net proceeds of this offering to provide loans or make capital contributions to our PRC subsidiaries or to provide loans to our VIE. Provided that we make the necessary registrations with government authorities and obtain the required governmental approvals, we may extend inter-company loans or make additional capital contributions to our PRC subsidiaries to fund their capital expenditures or working capital requirements.

We may not be able to make such registrations or obtain such approvals in a timely manner, or at all. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering, to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

TABLE OF CONTENTS

DIVIDEND POLICY

We did not previously declared or paid cash dividends. We do not have any plan to declare or pay any cash dividends on our Ordinary Shares in the foreseeable future after this offering. We intend to retain most, if not all, of our available funds and future earnings to operate and expand our business.

Our board of directors has complete discretion as to whether to distribute dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely that we may only pay dividends out of profits or share premium, and provided that in no circumstances may a dividend be paid if it would result in us being unable to pay our debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our board of directors may deem relevant.

We are an exempted company with limited liability incorporated in the Cayman Islands. We rely principally on dividends distributed by our PRC subsidiaries and payments from our operating entities for our cash requirements, including distribution of dividends to our shareholders. Dividends distributed by our PRC subsidiaries are subject to PRC taxes.

In addition, PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us and only allow a PRC company to pay dividends out of its accumulated distributable after-tax profits as determined in accordance with its articles of association and the PRC accounting standards and regulations. See “Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us and any tax we are required to pay could have a material adverse effect on our ability to conduct our business” and “Regulation — Regulations Relating to Dividend Distribution.”

To the extent we pay any dividends on our Ordinary Shares, we will pay those dividends which are payable in respect of our Ordinary Shares to the depositary, as the registered holder of such Ordinary Shares, and the depositary then will pay such amounts to the holders of our Ordinary Share, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of Share Capital.” Cash dividends on our Ordinary Shares, if any, will be paid in U.S. dollars.

TABLE OF CONTENTS

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2020 presented on:

•

on an actual basis; and

•

on an as adjusted basis to reflect the issuance and sale of the Ordinary Shares by us in this offering at the assumed initial public offering price of $5.50 per Ordinary Share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the estimated discounts to the underwriters and the estimated offering expenses payable by us and assuming no exercise of the Representative exercises over-allotment option.

You should read this table in conjunction with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus:

	As of June 30, 2020
	Actual		As Adjusted(1)
	$		$
Non-current liabilities
Due to related parties, non-current		24,214,399		24,214,399
Shareholders’ deficit
Ordinary shares ($0.0001 par value, 500,000,000 shares authorized; 36,000,000 shares issued and outstanding on an actual basis as of June 30, 2020; and 40,600,000 shares issued and outstanding on an as adjusted basis as of June 30, 2020)		3,600		4,060
Additional paid-in capital(2)		19,691,928		41,831,005
Accumulated other comprehensive loss		547,792		547,792
Accumulated deficit		(43,057,721)		(43,057,721)
Non-controlling interests		1,448,460		1,448,460
Total shareholders’ deficit(2)		(21,365,941)		773,596
Total capitalization(2)		2,848,458		24,987,995

(1)

The as adjusted information discussed above is illustrative only. Our additional paid-in capital, total shareholders’ equity and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.

(2)

Reflects the sale of Ordinary Shares in this offering at an assumed initial public offering price of $5.50 per share, and after deducting the estimated underwriting discounts and estimated offering expenses payable by us. The as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. Additional paid-in capital reflects the net proceeds we expect to receive, after deducting the underwriting discounts and estimated offering expenses payable by us. We estimate that such net proceeds will be approximately $22.14 million.

TABLE OF CONTENTS

DILUTION

If you invest in our Ordinary Shares, your interest will be diluted for each Ordinary Share you purchase to the extent of the difference between the initial public offering price per Ordinary Share and our net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.

Our net tangible book value as of June 30, 2020 was $(23.88) million, or $(0.66) per Ordinary Share. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting the net tangible book value per Ordinary Share (as adjusted for the offering) from the initial public offering price per Ordinary Share and after deducting the estimated discounts to the underwriters and the estimated offering expenses payable by us.

After giving effect to our sale of 4,600,000 Ordinary Shares offered in this offering based on the initial public offering price of $5.50 per Ordinary Share after deduction of the estimated discounts to the underwriters and the estimated offering expenses payable by us, our as adjusted net tangible book value as of June 30, 2020, would have been $(1.74) million, or $(0.04) per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of $0.62 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of $5.54 per Ordinary Share to investors purchasing Ordinary Shares in this offering. The as adjusted information discussed above is illustrative only.

The following table illustrates such dilution:

	Post-Offering(1)			Full Exercise of Over-Allotment Option
Assumed Initial public offering price per Ordinary Share		$	5.50		$	5.50
Net tangible book value per Ordinary Share as of June 30, 2020		$	(0.66)		$	(0.66)
As adjusted net tangible book value per Ordinary Share attributable to payments by new investors		$	0.62		$	0.70
As adjusted net tangible book value per Ordinary Share immediately after this offering		$	(0.04)		$	0.04
Amount of dilution in net tangible book value per Ordinary Share to new investors in the offering		$	5.54		$	5.46

(1)

Assumes that the Representative does not exercise its over-allotment option.

If the Representative exercises its over-allotment option in full, the as adjusted net tangible book value per Ordinary Share after the offering would be $0.04, the increase in net tangible book value per Ordinary Share to existing shareholders would be $0.70, and the immediate dilution in net tangible book value per Ordinary Share to new investors in this offering would be $5.46.

The following table summarizes, on an as adjusted basis as of June 30, 2020, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per ordinary share and per Ordinary Share paid before deducting underwriting discounts and estimated offering expenses payable by us.

	Ordinary Shares Purchased				Total Consideration			Average Price per Ordinary Share
	Number		Percent		Amount	Percent		Average Price per Ordinary Share
	(US$, except number of shares and percentages)
Existing shareholders		36,000,000		89%	US$3,600		0%		US$	0.0001
New investors		4,600,000		11%	US$25,300,000		100%		US$	5.5000
Total		40,600,000		100.0%	US$25,303,600		100.0%		US$	0.6232

The as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of the Ordinary Shares and other terms of this offering determined at pricing.

TABLE OF CONTENTS

ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands in order to enjoy the following benefits associated with being a Cayman Islands exempted company:

•

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:

•

the Cayman Islands has a less exhaustive body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and

•

Cayman Islands companies may not have standing to sue before the federal courts of the United States.

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

We conduct substantially all of our operations in China, and substantially all of our assets are located in China. Substantially all of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult or impossible for a shareholder to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. It may also be difficult for shareholder to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our executive officers and directors.

We have appointed Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168 as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

Ogier, our counsel as to Cayman Islands law, and Zhong Lun Law Firm, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts in the Cayman Islands and the PRC, respectively, would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in the Cayman Islands or the PRC against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

Ogier has informed us that it is uncertain whether the courts of the Cayman Islands will allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. We have

TABLE OF CONTENTS

been further advised by Ogier that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment:

(a)

is given by a foreign court of competent jurisdiction;

(b)

imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;

(c)

is final;

(d)

is not in respect of taxes, a fine or a penalty; and

(e)

was 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.

Zhong Lun Law Firm has further advised us that the PRC Civil Procedures Law governs the recognition and enforcement of foreign judgments. PRC courts may recognize and enforce foreign judgments in accordance with 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.

The PRC does not have any treaties or other agreements 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 determine that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether 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.

In addition, it will be difficult for U.S. shareholders to originate actions against us in China in accordance with PRC laws because we are incorporated under the laws of the Cayman Islands and it will be difficult for U.S. shareholders, by virtue only of holding our Ordinary Shares, to establish a connection to China for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.

TABLE OF CONTENTS

CORPORATE HISTORY AND STRUCTURE

Corporate History

We commenced our operations in January 2016 through our VIE, Shenzhen Building DreamStar Technology Ltd. We have expanded our operations to a number of cities in China since 2018.

Our holding company, Building DreamStar Technology Inc., or Building DreamStar, was incorporated on September 10, 2019 as an exempted company with limited liability in the Cayman Islands. On September 20, 2019, Building DreamStar Technology Limited, or Building DreamStar BVI, was incorporated in the BVI as a business company with limited liability, which is a wholly owned subsidiary of Building DreamStar. On March 25, 2019, we incorporated HK Building DreamStar Technology Limited, or HK Building DreamStar, in Hong Kong as a wholly owned subsidiary of Building DreamStar BVI.

On September 1, 2020, we incorporated Shenzhen Building Dream Star Chuangxiang Technology Company Limited, or Shenzhen Chuangxiang, a limited liability company incorporated in the PRC. Shenzhen Chuangxiang is a wholly owned subsidiary of HK Building DreamStar.

On November 2, 2020, we incorporated Hangzhou Building Dream Star Chuangxiang Technology Company Limited, or our WFOE, a PRC limited liability company. Our WFOE is a wholly owned subsidiary of HK Building DreamStar and has entered into certain contractual arrangements with our VIE and our VIE’s shareholders. See “— Contractual Arrangements among Our VIE, its Shareholders and Us.”

We conduct our operations in the PRC mainly through our VIE and its subsidiaries. We have effective control over our VIE through a series of contractual arrangements by and among our WFOE, our VIE and our VIE’s shareholders. These contractual arrangements, as described in more detail below, collectively allow us to (1) exercise effective control over our VIE, (2) receive substantially all of the economic benefits of our VIE and (3) purchase all or part of the equity interests in our VIE pursuant to exclusive call option exercisable when so permitted under PRC laws. For more details, including risks associated with the VIE structure, see the section of this prospectus captioned “Risk Factors — Risks Related to Our Corporate Structure.”

As a result of our contractual arrangements with our VIE and its shareholders, we are the primary beneficiary of our VIE, and, therefore, have consolidated the financial results of our VIE in our consolidated financial statements in accordance with U.S. GAAP.

Corporate Structure

The following diagram illustrates our corporate structure, including our significant subsidiaries, our VIE and its significant subsidiaries, as of the date of this prospectus:

TABLE OF CONTENTS

Contractual Arrangements among our VIE, its shareholders and us

The following is a summary of the currently effective contractual arrangements by and among our wholly-owned PRC subsidiary, namely Hangzhou Building Dream Star Chuangxiang Technology Company Limited, or our WFOE, our VIE, Shenzhen Building DreamStar, and the shareholders of our VIE, or the VIE Shareholders. These contractual arrangements enable us to (i) exercise effective control over our VIE; (ii) receive substantially all of the economic benefits of our VIE; and (iii) have an exclusive option to purchase all or part of the equity interests in and/or assets of our VIE when and to the extent permitted by PRC laws.

As a result of these contractual arrangements, we are the primary beneficiary of our VIE and have consolidated their financial results in our consolidated financial statements in accordance with U.S. GAAP. However, these contractual arrangements may not be as effective in providing operational control as direct ownership and the use of the contractual arrangements in some jurisdictions where we operate exposes us to certain risks. See “Risk Factors — Risks Related to Our Corporate Structure.”

Agreements that provide us with effective control over our VIE

Voting Rights Proxy Agreement and Powers of Attorney. Under the Voting Rights Proxy Agreement, dated November 3, 2020 by and among our WFOE, our VIE and the VIE Shareholders, and the related powers of attorney executed by the VIE Shareholders on the same date pursuant to the Voting Rights Proxy Agreement, each of our VIE Shareholders irrevocably authorized our WFOE or its designee, to (i) convene, hold and attend shareholders’ meetings of our VIE, (ii) exercise all voting rights of the VIE Shareholders with

TABLE OF CONTENTS

respect to all matters to be discussed and voted on in the shareholders’ meetings of our VIE, (iii) exercise all voting rights of the VIE Shareholders under the PRC laws promulgated from time to time, and (iv) exercise all voting rights of the VIE Shareholders in accordance with law and the articles of association of our VIE. The powers of attorney will remain effective until the shareholders are no longer registered shareholders of the VIE. The Voting Rights Proxy Agreement will remain effective until terminated by the VIE shareholders upon a 30-day prior written notice.

Equity Pledge Agreement. On November 3, 2020, the VIE Shareholders and our WFOE entered into an equity pledge agreement. Under this agreement, the VIE Shareholders pledged their equity interests in our VIE to our WFOE to secure the performance of their obligations under the exclusive option agreement and the power of attorney, and our VIE’s payment obligations under the exclusive business cooperation agreement as described below. Without our WFOE’s prior written consent, the VIE Shareholders shall not transfer the equity interests pledged thereunder or create any other pledge or encumbrance on such equity interests during the term of the Equity Interest Pledge Agreement. The equity interest pledge agreements remain effective unless otherwise terminated by our WFOE upon a 30-day prior written notice or terminated pursuant to other agreements entered into among all parties to the Equity Pledge Agreement.

Spousal Consent Letters.

On November 3, 2020, Ms. Wangxia Liu, the spouse of Mr. Houde Li, the 46.69% shareholder of our VIE, signed a spousal consent letter confirming and acknowledging that the equity interests held by Mr. Houde Li in our VIE are the personal assets of Mr. Houde Li and shall not constitute the community property of the couple. The signing spouse also irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection with the equity interests of our VIE held by Mr. Houde Li.

On November 3, 2020, Mr. Houde Li, the spouse of Ms. Wangxia Liu, the 9.45% shareholder of our VIE, signed a spousal consent letter confirming and acknowledging that the equity interests held by Ms. Wangxia Liu in our VIE are the personal assets of Ms. Wangxia Liu and shall not constitute the community property of the couple. The signing spouse also irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection with the equity interests of our VIE held by Ms. Wangxia Liu.

Agreement that allows us to receive economic benefits from our VIE

Exclusive Business Cooperation Agreement. On November 3, 2020, our VIE and our WFOE entered into an exclusive service agreement. Under this agreement, our WFOE will be the exclusive provider of services and support required by our VIE, including technical support and marketing services, services related to the transfer, leasing and disposal of equipment or assets, information technology and consulting services, the development, maintenance and update of computer system, hardware and database. Without our WFOE’s written consent, our VIE shall not accept any technology consulting and services covered by this agreement from any third party. Our VIE agrees to pay a service fee at an amount equivalent to all of its net income to our WFOE. The Exclusive Service Agreement will remain effective unless otherwise terminated by our WFOE upon a 30-day prior written notice or terminated pursuant to other agreements entered into among all parties to the Exclusive Business Cooperation Agreement.

Agreement that provides us with the option to purchase the equity interest in our VIE

Exclusive Option Agreement. On November 3, 2020, the VIE Shareholders, our VIE and our WFOE entered into an exclusive option agreement. Pursuant to the agreement, the VIE Shareholders granted our WFOE an irrevocable and exclusive right to purchase, or designate one or more persons to purchase, at its discretion, all or part of the equity interests in our VIE held by the VIE Shareholders at the price paid by the VIE Shareholders for acquiring such equity interests or the lowest price permitted under PRC law, whichever is lower. Without the prior written consent of our WFOE, the VIE Shareholders shall not dispose of or encumber any of their equity interests in our VIE, and our VIE shall not dispose of or transfer any of its assets or income or distribute any dividends to the VIE Shareholders in any manner. The Exclusive Purchase Agreement remains effective unless otherwise terminated by our WFOE or terminated pursuant to other agreements entered into among all parties to the Exclusive Option Agreement.

TABLE OF CONTENTS

In the opinion of Zhong Lun Law Firm, our PRC legal counsel:

•

the ownership structures of our WFOE and our VIE, both currently and immediately after giving effect to this offering, are not and will not result in any violation of PRC laws or regulations currently in effect; and

•

the contractual arrangements among our WFOE, our VIE and the VIE Shareholders governed by PRC law both currently and immediately after giving effect to this offering are valid, binding and enforceable, and does not result in any violation of PRC laws or regulations currently in effect.

However, we have been advised by our PRC legal counsel that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may take a view that is contrary to or otherwise different from the above opinion of our PRC legal counsel. See “Risk Factors — Risks Related to Our Corporate Structure — We rely on contractual arrangements with our VIE and its shareholders for a large portion of our business operations. These arrangements may not be as effective as direct ownership in providing operational control. Any failure by our VIE or its shareholders to perform their obligations under such contractual arrangements would have a material and adverse effect on our business.

TABLE OF CONTENTS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Summary Consolidated Financial and Operating Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

Our co-working spaces are concentrated in the urban areas in the PRC, including many tier one, tier two and tier three cities. Our nationwide coverage and network provide our customers with flexible, convenient office space solutions at affordable costs. As we attract enterprise and non-corporate customers to our space, the cities and surrounding neighborhoods may also benefit economically from the growing work population and demand for goods and services.

While office spaces constitute our core service offering, we support our enterprise customers at most of their stages of development by offering business incubation and acceleration programs to start-ups and SMEs at selected spaces. As of December 31, 2020, we had a total of 49 spaces, with 11 spaces with business incubation and acceleration programs and a total of 363 customers moved in to such spaces with business incubation and acceleration programs. Currently, as part of our efforts to attract additional customers to our programs, we offer business incubation and acceleration program services for free to our program participants. Revenues generated in connection with our such services are from workspace leasing and government subsidies .We do not generate revenues from our incubation and acceleration programs.

We have experienced substantial growth since our inception. The number of our customers has grown from 627 as of December 31, 2018 to 1,587 as of December 31, 2019 and further to 2,384 as of December 31, 2020, representing growth of 153% and 50% from the previously periods, respectively. The number of our co-working spaces also grew from 30 as of December 31, 2018 to 42 as of December 31, 2019 and further to 49 as of December 31, 2020, representing growth of 40% and 17% from the previous periods, respectively. Our total revenues increased from approximately $14,740,098 in the fiscal year ended December 31, 2018 to $20,443,209 in the fiscal year ended December 31, 2019, and further to approximately $15,407,535 for the six months ended June 30, 2020. Our cost of revenues also grew from $15,449,067 in 2018 to $29,150,887 in 2019, and from $13,640,825 for the six months ended June 30, 2019 to $21,037,538 for the six months ended June 30, 2020. As a result, our net loss increased from $5,152,765 in 2018 to $18,438,216 in 2019, and from $6,621,791 for the six months ended June 30, 2019 to $10,146,764 for the six months ended June 30, 2020. See “Summary Consolidated Financial and Operating Data.” We believe that the quality of our services

TABLE OF CONTENTS

combined with the increasing needs of businesses and individuals for shared office space and business services have contributed to our growth.

Key Operating Data

We regularly monitor several operating metrics in order to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies and making strategic decisions.

	As of December 31, 2018		As of December 31, 2019		As of June 30, 2020
Number of cities in the PRC		21		23		26
Number of spaces		30		42		50
Managed area (sq. feet)		2,167,313		2,273,499		2,977,222
Managed area in operation (sq. feet)		1,148,563		2,019,805		2,479,811
Number of workstations		31,126		31,966		44,646
Number of customers		627		1,587		2,003
Number of non-corporate customers		150		429		516
Number of enterprise customers		477		1,158		1,487
Occupancy rate for move-in spaces(1)		74%		77%		76%

(1)

Move-in spaces refer to each of furnished, move-in-ready spaces and include spaces in operation.

Key Factors Affecting Our Results of Operations

We operate in China’s co-working space industry, and our results of operations and financial condition are influenced by the macroeconomic factors affecting this industry, such as China’s economic growth, the emergence of China’s new economy and internet companies under favorable policies encouraging entrepreneurship and innovation, and urbanization of the workforce. Our financial condition and results of operations are also affected by a number of emerging market trends, such as companies’ rising needs for cost-efficient and flexible office space solutions and one-stop services for both corporates and employees, and new demand for intelligent office systems and working environments.

Our results of operations and financial condition are also subject to changes in the regulatory regime governing China’s co-working space industry, as well as the value-added professional services we provide. The PRC government regulates various aspects of our business and operations, such as leasing, design and build and the operation of office spaces and online advertising and branding content.

Additionally, we believe that our results of operations and financial condition are also affected by a number of company-specific factors, including the factors discussed below.

Expansion of Our Co-working Space Network

Given that the majority of our net revenue is from workspace leasing, our net revenue growth depends primarily on the expansion of our customer base.

Since the launch of our first co-working space in June 2016, we have expanded our operations across 26 cities in mainland China primarily through our self-operating model. For our co-working spaces, we typically lease properties from landlords, engage professional third-party construction and design teams to provide interior design, constructions and decoration services, and lease move-in ready co-working spaces to our customers.

We believe our highly effective operational capabilities provide us with the means to scale rapidly. We have historically expanded rapidly. For example, our managed area in operation increased from 1,148,563 sq. feet as of December 31, 2018 to 2,019,805 sq. feet as of December 31, 2019, and further to 2,479,811 sq.

TABLE OF CONTENTS

feet as of June 30, 2020. However, we may not be able to maintain our historical expansion pace, since our growth will be subject to various factors, such as the development of China’s co-working space industry, industry competitive landscape, government policies, required capital for opening new spaces, and performance of spaces in operation. However, we believe that we have the ability to improve the performance of our spaces in operation leveraging on our management capabilities and our experience of expanding into new markets. We plan to enhance our position by executing our expansion strategy with a focus on tier-one, new tier-one, and tier two cities in China. Specifically, in the upcoming few years, we plan to open approximately 36 additional co-working spaces in tier one, new tier-one, and tier two cities, and approximately 20 additional spaces in tier three cities. We intend to carefully select co-working spaces for future acquisition based on several factors, including but not limited to: location of the space, rental price of the space, and for acquisition of spaces under operation by other competitors, we also evaluate the current occupancy rate of the space, and the contractual terms of their original leases.

Growth in Our Customer Base and Pricing of Our Co-working Space Services

We generate our net revenue from providing various co-working space solutions to our customers from whom we collect rent pursuant to lease agreements. Our customers’ monthly rents may be calculated based on the number of workstations they lease or on the basis of the square footage they lease. The key contract terms and services provided under both rental models are identical. Therefore, our results of operations are directly affected by the growth in our customer base and the pricing of our co-working space services.

We have continually expanded our co-working network since the launch of our first co-working space in June 2016. We offer prospective customers with various discounts and incentives. For example, from time to time, we may offer concessions such as one month of free rent to customers signing leases with terms longer than one year, zero deposit for spaces rented, or discounted pricing on conference room and auditorium rental. We also offer special discounts to technology-based enterprises with growth potential to become our customers. The number of non-corporate customers and enterprise customers increased by approximately 186% and 143% from approximately 150 and 477 as of December 31, 2018 to approximately 429 and 1,158 as of December 31, 2019, respectively, and as of June 30, 2020, we had 516 non-corporate customers and 1,487 enterprise customers, respectively.

The pricing of our co-working space services is affected by, among other things, our service positioning strategy, locations of our spaces, brand recognition, the competitive landscape of the co-working space industry in China and the design and build and maintenance cost of our co-working spaces. Our ability to maintain or increase the pricing of our co-working space services will largely depend on our ability to compete effectively and differentiate our services through our strong brand recognition, our unique and nationwide co-working space network and our ability to meet our customers’ needs for office space solutions.

Our Ability to Manage Costs and Expenses Effectively

Our ability to manage our costs and expenses effectively is critical to the success of our business. We have benefited from the use of technologies and the standardization of our processes and achieved economies of scale as we have developed a core competency in the efficient sourcing, design and build, and operation of our spaces.

The financial and business performance of our co-working spaces is highly dependent on our ability to source and lease suitable properties on reasonable terms. We plan to leverage our management team’s expertise in commercial real estate and our strong relationships with landlords to identify new locations that are suitable for the expansion of our business and to negotiate leasing terms of such properties to effectively manage our costs and expenses.

We have a history of net losses of $5,152,765, $18,438,216 and $10,146,764, respectively, in 2018 and 2019 and the six months ended June 30, 2020. We also had negative cash flows from operating activities of $5,905,337, $7,225,962 and $1,710,220, respectively, in 2018 and 2019 and the six months ended June 30, 2020. See “Risk Factors — Risks Related to our Business and Industry — We have a history of net losses and we may not achieve profitability in the future.”

As of now, the substantial majority of our revenues are generated in the form of rent paid by our customers leasing our co-working spaces. The operation of co-working spaces requires substantial upfront

TABLE OF CONTENTS

costs and expenses. We expect our costs and expenses to increase in absolute amount as we expand our business and to decrease as a percentage of our net revenue as we continue to improve operational efficiency, achieve economies of scale and enhance our brand recognition. Further, our management will assess the profitability of each operating space on a regular basis, and we may terminate or transfer leases that generate substantial negative cash flows with lower potential of earning profits in the foreseeable future.

In addition, we plan to generate more revenues from our services in the future. First, we intend to expand, diversify, and monetize from our spatial ancillary services and spatial value-added services. We also plan to enter into fee sharing arrangements with additional third-party services providers, and we expect to generate revenues in the future from such arrangements. Furthermore, we plan to expand our lines of business to include services with asset-light models. For instance, we identified growth opportunities in office building operation and management services and we plan to offer such services to commercial building owners. For details, see “Business — Our Growth Strategies — Further Expand our Lines of Business.” We believe that with these strategies and efforts, we are capable of increasing our operating gross margin, thereby achieving profitability in the future.

Selectively Pursue Acquisition and Investment Opportunities

We plan to continuously evaluate various investment opportunities, including acquiring local co-working brands with strong regional influence to expand our coverage, and service companies that may help us further integrate and refine our services.

Furthermore, we plan to pursue additional investment opportunities through investing in start-ups and SMEs in our incubation and acceleration programs. With the support of our platform and ecosystem, we expect that the investees’ business will grow with us, and the services provided by our investees could help satisfy the demands of our other customers.

Business Incubation and Acceleration Programs

Many of our customers are SMEs, start-ups and groups of individuals who are starting their own businesses. As the businesses of these customers develop and grow, they typically have strong demand for financing and business consulting services. With supports from local governments, to meet the demand of such customers, we offer business incubation and acceleration programs at selected spaces.

For new spaces signed for business incubation and acceleration programs, however, we typically enter into agreements with local governments and lease the spaces from them at rates substantially lower than market or for free with qualified terms. The term of such agreements range from three to ten years, with the most common term of five years. We qualify for lower or zero rental rates for the spaces if, based on good faith evaluations conducted by the local governments on a yearly basis, the growth of the enterprise participants of such incubation and acceleration programs has met the standards set forth in the rental agreements for that year. Our business incubation and acceleration programs focus on three major services: (i) general corporate services, (ii) investment and financing services, and (iii) public offering advisory services.

The factors taken into account by local governments may include the number of participants in the programs, the occupancy rate of the property, the total number of new job created by participants, the number of participants recognized as high and new technology enterprises, or HTNEs, the amount of intellectual property developed by the participants, the number of participants that got listed on a national exchange or National Equities Exchange Quotations in China, and the total amount of tax revenue generated by all participants in the space assigned to business incubation and acceleration programs. The specific evaluation requirements of each program may vary according to the needs of each local government. Based on contractual terms with local governments, if our programs deliver outstanding performance during the evaluation period, we are eligible for additional subsidies typically ranging from RMB1 million to RMB2 million from local governments. As of June 30, 2020, we operated a total of 11 spaces with business incubation and acceleration programs. As of the years ended December 31, 2018 and 2019 and the six months ended 2020, we received and recognized $761,695, $1,477,909, and $270,178 in government subsidies from local governments for our spaces as no further conditions need to be met, respectively. See “Risk

TABLE OF CONTENTS

Factors — Risks Related to Doing Business in China — Discontinuation of any of the government subsidies or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.”

Impact of COVID-19

Beginning in January 2020, the outbreak of COVID-19 severely impacted China and the rest of the world. Our business and operations were also affected as a result. In early 2020, as a result of government mandates to contain the spread of COVID-19, many corporate offices, retail stores, and manufacturing facilities across China were closed temporarily. Given the strict implementation of quarantine measures during this period, the demand for office spaces for enterprises and individuals declined in the first quarter of 2020.

Due to the overall weakening customer demand as a result of the impact of COVID-19, the growth rate in the number of our customers has been affected by the outbreak. The number of our customers as of June 30, 2020 grew by 416, or 26.2% from 1,587 as of December 31, 2019 to 2,003 as of June 30, 2020. The growth rate was lower than the growth rate in same period of 2019. The decline in customer demand has recovered gradually since the second quarter of 2020. The number of our customers as of December 31, 2020 grew by 381, or 19% from 2,003 as of June 30, 2020. The number of our customers as of December 31, 2019 grew by 647, or 69%, from 940 as of June 30, 2019. The growth rate in the six months ended December 31, 2020 was lower than that in the same period of 2019. In February 2020, we decided to grant temporary rent relief of ten to fifteen days to our customers applying for such relief and up to three months’ of rent relief for customers in Wuhan, Hubei. As a result of this policy, we estimate that we roughly collected $853,150 less rent from our customers in total. However, we do not believe that this policy has a material impact on our liquidity or financial positions.

We have benefited from favorable tax policies promulgated by the national and local governments of the PRC, which contributed to our recovery from the impact of COVID-19. For instance, according to a notice co-issued by the Ministry of Finance and the State Taxation Administration, revenues subject to an original value-added tax rate of 3% and generated from March 1, 2020 to December 31, 2020 were reduced to 1%, which applied to revenues generated by eleven subsidiaries of our VIE.

The quarantine measures within China have been relaxed as of the date of this prospectus, and we have resumed our normal business operations. The global spread of COVID-19 pandemic in major countries of the world may also result in global economic distress, and the extent to which it may affect our results of operations will depend on future developments of the COVID-19 pandemic, which are highly uncertain and difficult to predict. See “Risk Factors — Risks Related to Our Business and Industry — We face risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt our operations.”

Key Components of Results of Operations

We have one operating segment with four revenue streams including (i) workspace leasing and services revenue, (ii) utility service revenue, (iii) temporary meeting room usage service revenue, and (iv) other services revenue. Operating segments are defined as components of an enterprise engaging in business activities for which separate financial information is available and is regularly evaluated by our chief operating decision makers in deciding how to allocate resources and assess performance. We operate in a single operating segment. See our consolidated financial statements included elsewhere in this prospectus for additional information regarding our operating segment with four revenue streams.

Revenues, net

The following table sets forth a breakdown of our net revenue, in absolute amounts and as percentages of total net revenue, for the periods indicated.

TABLE OF CONTENTS

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2019				2018				2020				2019
	US$		%		US$		%		US$		%		US$		%
Revenues, net
Workspace leasing and services revenue		19,714,185		97%		13,343,875		91%		15,152,044		98%		8,572,801		97%
Utility service revenue		268,015		1%		340,935		2%		89,574		1%		112,347		1%
Temporary meeting room usage service revenue		391,136		2%		1,055,288		7%		165,098		1%		138,458		2%
Other services revenue		69,873		0%		—		0%		819		0%		35,709		0%
Total revenues, net		20,443,209		100%		14,740,098		100%		15,407,535		100%		8,859,315		100%

Workspace leasing and services revenue. We provide various co-working space solutions to our customers. For customers leasing on the basis of square footage, we generate leasing revenue mainly in the form of rental fees on a predetermined frequency based on contractual terms, ranging from monthly payments to quarterly payments. For customers leasing workstations, we generate leasing revenue mainly in the form of management services fees. The customers leasing on a workstation basis, similar to customers leasing on a square footage basis, also have access to office space, use of a shared internet connection, and access to certain facilities such as common areas, lounge and kitchen.

Utility service revenue. We generate utility service revenue by collecting utilities from our existing customers, such as water and electricity. Revenue is recognized during the period when the utility expenses are incurred. Utility revenue is recognized and presented on a gross basis, as we obtain control of the goods and services before they are transferred to customers.

Temporary meeting room usage service revenue. Revenue is recognized from customers when they temporarily rent out meeting rooms in our spaces. Revenue is recognized at a point in time when service is provided.

Other services revenue. Other services revenue consists of special customized operation services fees. This is usually project-based cooperation with other parties, we are responsible for collecting and paying fees on behalf of cooperation partners, as well as some other services, and in return, we charge cooperation partner monthly fixed service fee.

Our net revenue increased by approximately $5,703,111, or 39%, from approximately $14,740,098 for the year ended December 31, 2018 to approximately $20,443,209 for the year ended December 31, 2019. Our net revenue increased by approximately $6,548,220, or 74%, from approximately $8,859,315 for the six months ended June 30, 2019 to approximately $15,407,535 for the six months ended June 30, 2020. More than 90% of our total net revenue is generated from our workspace leasing and services offerings, and we expect this trend to continue in the future.

Cost of revenues

The following table sets forth a breakdown of our cost of revenue, in absolute amounts and as percentages of total cost of revenue, for the periods indicated.

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2019				2018				2020				2019
	US$		%		US$		%		US$		%		US$		%
Cost of revenues
Lease cost		18,832,685		65%		10,146,886		65%		14,699,872		70%		8,835,161		65%
Depreciation and amortization		4,195,038		14%		1,287,658		8%		2,229,837		11%		2,224,758		16%
Property management cost		5,055,271		17%		2,671,119		18%		3,404,446		16%		2,357,160		17%

TABLE OF CONTENTS

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2019				2018				2020				2019
	US$		%		US$		%		US$		%		US$		%
Other costs		1,067,893		4%		1,343,404		9%		703,383		3%		223,746		2%
Total cost of revenues		29,150,887		100%		15,449,067		100%		21,037,538		100%		13,640,825		100%

Cost of revenues primarily consist of (i) lease cost we paid to the landlords, (ii) depreciation and amortization, (iii) property management cost, and (iv) other costs, such as costs for daily maintenance and cleaning, and insurance costs.

Selling expenses

Our selling expenses consist primarily of (i) amortization and depreciation expenses, (ii) payroll expenses representing compensation for our sales and marketing personnel, (iii) transportation expenses, (iv) marketing and promotion expenses, and (vi) other expenses, including transportation expenses, onsite selling office expenses, renovation expense, internet and telecommunication expenses and recruitment expenses.

	For the Year Ended December 31,								For Six Months Ended June 30,
	2019				2018				2020				2019
	US$		%		US$		%		US$		%		US$		%
Depreciation and amortization		73,410		2%		62,770		3%		67,209		3%		29,181		2%
Payroll expense		2,058,540		65%		1,151,916		54%		1,008,209		52%		894,533		69%
Marketing and promotion expense		883,871		28%		911,860		42%		846,375		43%		328,237		25%
Other expenses		146,017		5%		24,220		1%		25,045		2%		41,460		4%
Total selling expenses		3,161,838		100%		2,150,766		100%		1,946,838		100%		1,293,411		100%

General and administrative expenses

Our general and administrative expenses consist primarily of (i) amortization and depreciation expenses, (ii) payroll expense representing compensation for our management and administrative personnel, (iii) property management expense, (iv) office expense, (v) transportation expense, (vi) renovation expense, (vii) brand management expense, (viii) write-off of prepayments for failed acquisitions, and (ix) other administrative expenses including communication expense, hiring and welfare expenses.

	For the Year Ended December 31,								For Six Months Ended June 30,
	2019				2018				2020				2019
	US$		%		US$		%		US$		%		US$		%
Depreciation and amortization		283,929		4%		185,452		7%		164,177		5%		103,360		5%
Payroll expense		3,099,967		41%		1,985,695		66%		1,837,644		55%		1,223,802		59%
Property management expense		343,174		5%		373,396		13%		206,899		6%		175,428		9%
Office expense		387,665		5%		130,659		4%		170,667		5%		51,723		2%
Transportation expense		315,148		4%		134,660		4%		43,508		1%		73,972		4%
Renovation expense		321,118		4%		19,232		1%		66,661		2%		8,188		0%
Brand management expense		154,339		2%		68,924		2%		435,974		13%		93,041		4%
Write-off of prepayments for failed acquisitions		1,795,228		24%		—		0%		—		0%		—		0%

TABLE OF CONTENTS

	For the Year Ended December 31,								For Six Months Ended June 30,
	2019				2018				2020				2019
	US$		%		US$		%		US$		%		US$		%
Other expenses		820,301		11%		95,264		3%		428,943		13%		359,261		17%
Total general and administrative expenses		7,520,869		100%		2,993,282		100%