Form 424B5 Luokung Technology Corp.

September 20, 2021 5:31 PM EDT

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PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(5)
(To Prospectus dated August 16, 2019) File No. 333-233108

 

 

LUOKUNG TECHNOLOGY CORP.

 

27,333,300 Ordinary Shares,

Investor Warrants to Purchase 13,666,650 Ordinary Shares and

13,666,650 Ordinary Shares Underlying such Warrants

and

Placement Agent Warrants to Purchase 1,093,332 Ordinary Shares and

1,093,332 Ordinary Shares Underlying such Warrants

 

We are offering 27,333,300 of our ordinary shares, par value $0.01 per share, together with warrants to purchase up to 13,666,650 of our ordinary shares, directly to several institutional investors pursuant to this prospectus supplement, the accompanying prospectus, and that certain Securities Purchase Agreement, dated September 20, 2021, by and among Luokung Technology Corp. (the “Company”) and the institutional investors signatories thereto. The warrants are exercisable immediately, at an exercise price of $1.60 per ordinary share, and expire three years from the date of issuance.

 

The ordinary shares and warrants will be sold together as a unit consisting of one ordinary share and a warrant (to purchase 0.5 ordinary shares for each ordinary share included in the unit). The purchase price per unit will be $1.20. The ordinary shares and warrants will be issued separately but can only be purchased together in this offering. The ordinary shares issuable from time to time pursuant to the exercise of the warrants, including the ordinary shares issuable from time to time pursuant to the exercise of the warrant that we will issue to our placement agent for this offering, are also being offered pursuant to this prospectus supplement and the accompanying prospectus.

 

Our ordinary shares trade on the NASDAQ Capital Market under the symbol “LKCO.” The last reported sale price of our ordinary shares on the NASDAQ Capital Market on September 17, 2021 was $1.59 per share. There is no established public trading market for the warrants that we are offering and we do not expect a market to develop. For a more detailed description of the ordinary shares and the warrants, see the section entitled “Description of the Securities we are Offering” beginning on page S-18 of this prospectus supplement.

 

As of September 20, 2021, the aggregate market value of our outstanding ordinary shares held by non-affiliates was approximately $443,313,834 based on 355,068,924 ordinary shares outstanding, of which 76,255,192 shares were held by affiliates as of such date, and a price of $1.59 per share, which was the last reported sale price of our ordinary shares as quoted on the NASDAQ Capital Market on September 17, 2021. Accordingly, we are not subject to the limitations set forth in General Instruction I.B.5 of Form F-3.

 

   Per Unit   Total 
Offering price  $1.20   $32,799,960.00 
Placement Agent’s fees  $0.078   $2,131,997.40 
Proceeds, before other expenses, to us  $1.122   $30,667,962.60 

 

We have retained FT Global Capital, Inc. to act as exclusive placement agent (the “Placement Agent”) in connection with this offering. The Placement Agent has agreed to use its reasonable best efforts to sell the securities offered by this prospectus supplement and the accompanying prospectus. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities. The Placement Agent will receive compensation in addition to the Placement Agent fees. We have also agreed to issue warrants to purchase up to 1,093,332 ordinary shares to the Placement Agent, and to indemnify the Placement Agent. See “Plan of Distribution” beginning on page S-20 of this prospectus supplement for more information regarding these arrangements.

 

Investing in our securities involves a high degree of risk. We are a holding company incorporated in British Virgin Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our operating entities established in the People’s Republic of China, or the PRC, primarily our variable interest entities (the “VIEs”). Due to PRC legal restrictions on foreign ownership in any mobile application and data processing related businesses we explore and operate, we do not have any equity ownership of our VIEs, instead we control and receive the economic benefits of our VIEs’ business operations through certain contractual arrangements. Our ordinary shares offered in this prospectus are shares of our British Virgin Islands holding company that maintains service agreements with the associated operating companies. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless. For a description of our corporate structure and VIE contractual arrangements, and other risks of investing in our securities, see the section entitled “Risk Factors” beginning on page S-10 of this prospectus supplement and in the documents we incorporate by reference in this prospectus supplement and the accompanying prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus supplement and the accompanying prospectus, before you invest.

 

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

We expect to deliver the securities offered pursuant to this prospectus supplement on or about September 22, 2021.

 

The date of this prospectus supplement is September 20, 2021

 

 

 

 

 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT S-ii
FORWARD-LOOKING STATEMENTS S-iii
PROSPECTUS SUPPLEMENT SUMMARY S-1
RISK FACTORS S-10
USE OF PROCEEDS S-15
DILUTION S-16
CAPITALIZATION S-17
DESCRIPTION OF THE SECURITIES WE ARE OFFERING S-18
PLAN OF DISTRIBUTION S-20
LEGAL MATTERS S-22
EXPERTS S-22
WHERE YOU CAN FIND MORE INFORMATION S-22
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES S-22
IMPORTANT INFORMATION INCORPORATED BY REFERENCE S-23

 

PROSPECTUS  
PROSPECTUS INFORMATION 1
BUSINESS DESCRIPTION 2
RISK FACTORS 5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 6
USE OF PROCEEDS 6
CAPITALIZATION 7
PLAN OF DISTRIBUTION 8
DESCRIPTION OF SHARE CAPITAL 12
TAXATION 27
EXPENSES 27
LEGAL MATTERS 27
EXPERTS 27
WHERE YOU CAN FIND MORE INFORMATION 27
INFORMATION INCORPORATED BY REFERENCE 28
ENFORCEMENT OF CIVIL LIABILITIES 29
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 30

 

S-i

 

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This prospectus supplement is a supplement to the accompanying prospectus that is also a part of this document. This prospectus supplement and the accompanying prospectus, dated August 16, 2019, are part of a registration statement on Form F-3 (File No. 333-233108) that we filed with the Securities and Exchange Commission, or the SEC, utilizing a “shelf” registration process. Under this shelf registration process, we may offer and sell from time to time in one or more offerings the securities described in the accompanying prospectus.

 

This document is in two parts. The first part is this prospectus supplement, which describes the securities we are offering and the terms of the offering and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into the accompanying prospectus. The second part is the accompanying prospectus, which provides more general information, some of which may not apply to the securities offered by this prospectus supplement. Generally, when we refer to this “prospectus,” we are referring to both documents combined. To the extent there is a conflict between the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus or any document incorporated by reference therein, on the other hand, you should rely on the information in this prospectus supplement. We urge you to carefully read this prospectus supplement and the accompanying prospectus and any related free writing prospectus, together with the information incorporated herein and therein by reference as described under the heading “Where You Can Find Additional Information,” before buying any of the securities being offered.

 

You should rely only on the information that we have provided or incorporated by reference in this prospectus supplement and the accompanying prospectus and any related free writing prospectus that we may authorize to be provided to you. We have not, and the Placement Agent has not, authorized anyone to provide you with different information. No other dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus supplement and the accompanying prospectus or any related free writing prospectus that we may authorize to be provided to you. You must not rely on any unauthorized information or representation. This prospectus supplement is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus supplement and the accompanying prospectus or any related free writing prospectus is accurate only as of the date on the front of the document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or any related free writing prospectus, or any sale of a security.

 

This prospectus supplement contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus supplement is a part, and you may obtain copies of those documents as described below under the heading “Where You Can Find More Information.”

 

S-ii

 

 

FORWARD-LOOKING STATEMENTS

 

This prospectus supplement, accompanying prospectus and the documents that we have filed with the SEC that are incorporated by reference in this prospectus supplement contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and may involve material risks, assumptions and uncertainties. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “believe,” “might,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” and similar words, although some forward-looking statements are expressed differently.

 

Any forward looking statements contained in this prospectus supplement, accompanying prospectus and the documents that we have filed with the SEC that are incorporated by reference in this prospectus supplement are only estimates or predictions of future events based on information currently available to our management and management’s current beliefs about the potential outcome of future events. Whether these future events will occur as management anticipates, whether we will achieve our business objectives, and whether our revenues, operating results, or financial condition will improve in future periods are subject to numerous risks. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss under the heading “Risk Factors” and in other sections of our Annual Report on Form 20-F for the fiscal year ended December 31, 2020, as well as in our other reports filed from time to time with the SEC that are incorporated by reference into this prospectus supplement and the accompanying prospectus. You should read these factors and the other cautionary statements made in this prospectus supplement, the accompanying prospectus and in the documents we incorporate by reference into this prospectus supplement and the accompanying prospectus as being applicable to all related forward-looking statements wherever they appear in this prospectus supplement or the documents we incorporate by reference into this prospectus supplement and the accompanying prospectus. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

S-iii

 

 

PROSPECTUS SUPPLEMENT SUMMARY

 

This summary is not complete and does not contain all of the information that you should consider before investing in the securities offered by this prospectus. You should read this summary together with the entire prospectus supplement and accompanying prospectus, including our risk factors (as provided for herein and incorporated by reference), financial statements, the notes to those financial statements and the other documents that are incorporated by reference in this prospectus supplement, before making an investment decision. You should carefully read the information described under the heading “Where You Can Find More Information.” We have not authorized anyone to provide you with information different from that contained in this prospectus. 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 our securities.

 

Unless the context otherwise requires, the terms “LKCO,” “the Company,” “we,” “us,” and “our” in this prospectus each refer to Luokung Technology Corp., our subsidiaries, and our consolidated entities. “China” and the “PRC” refer to the People’s Republic of China. “Zhong Chuan Shi Xun” or the “VIE” refer to Beijing Zhong Chuan Shi Xun Technology Limited, the Company’s variable interest entity, unless otherwise indicated.

 

Overview

 

We are a holding company and conduct our operations through our wholly owned subsidiary named LK Technology Ltd., a British Virgin Islands limited liability company (“LK Technology”), and its wholly owned subsidiaries, MMB Limited and its respective subsidiaries, which possess two core brands “Luokuang” and “SuperEngine”. “Luokuang” is a mobile application to provide Business to Customer (B2C) location-based services and “SuperEngine” provides Business to Business (B2B) and Business to Government (B2G) services in connection with spatial-temporal big data processing. In May 2010, we consummated an initial public offering of our American Depository Shares, or ADSs, for gross proceeds of $16 million, and our ADSs were listed on the NASDAQ Capital Market under the ticker symbol “KONE”. On August 17, 2018, we completed the transactions contemplated by the Asset Exchange Agreement (“AEA”) with C Media Limited (“C Media”) entered into on January 25, 2018. On August 20, 2018, we changed our name to Luokung Technology Corp., our American Depository Shares (“ADSs”) were voluntarily delisted from the NASDAQ Capital Market on September 19, 2018 and on January 3, 2019 our ordinary shares started trading on NASDAQ under the ticker symbol “LKCO”.

 

We, through one of our two variable interest entities, Beijing Zhong Chuan Shi Xun Technology Limited (“Zhong Chuan Shi Xun”), are a China-based provider of location-based services and mobile application products for long distance travelers in China. Our primary mobile application, the Luokuang platform, consists of the Luokuang mobile applications, a series of supporting software at the server end, and rail-Wi-Fi hardware and equipment on the trains that we serve. The Luokuang platform incorporates technologies covered by 21 patents and about 48 software copyrights, and serves as a content and service distribution platform that is tailored for particular travel stages featuring geographic location and social interactions. The content and services distributed by Luokuang contain information, entertainment, travel, e-commerce, online to offline (“O2O”), advertisement and other marketing features.

 

Luokuang mainly provides personalized and targeted services to long distance travelers in two locations: on the train and at the destination. Based on the travel environment, the core elements of our users’ needs include staving off boredom on trains and discovering and exploring new locations upon arrival. The main services contain entertainment services (videos and audio, digital readings, games specific and tailored to the travel stage) and social services (satisfying the demand for value discovery of unfamiliar destinations through social interaction among strangers based on locations).

 

We, through our VIE, Zhong Chuan Shi Xun, use the most valuable Wi-Fi location—the train Wi-Fi setting—as the entrance of our Luokuang platform and mobile applications. Passengers typically ride trains for long-distance and inter-provincial travel purposes. The long periods of monotonous journeys and the cost concerns for roaming traffic fees enable the combination of entertainment content service needs and Wi-Fi access needs. Our rail-Wi-Fi becomes a valuable and sophisticated Wi-Fi service in this setting—not just Wi-Fi connection service, but a provider of sophisticated services through a Wi-Fi connection. We do not define ourselves as a train Wi-Fi communication service operator but as a long-distance travel mobile service and location-based service provider. The rail Wi-Fi is our access point to a significant pool of users and the entrance to acquiring additional users.

 

The recommended services focus on providing targeted push services to users while travelling in unfamiliar cities. Local information and guidance service are precisely pushed according to individual user’s interest and taste, including restaurants, entertainment, living styles, local snacks, local products, scenic spots, cultural history and stories. The guidance service is User Generated Content which is shared and distributed by individual users including travelers, local residents and local businesses.

 

S-1

 

 

In June 2018, China Railway Gecent Technology Co., Ltd. (or “Gecent”) (established jointly by China Railway Investment Co., Ltd., Geely Holding Group and Tencent Holdings Ltd.) obtained the exclusive right to build and operate on-train Wi-Fi for all the High-speed trains in China. It provides a full-travelling service including on-train Wi-Fi, entertainments, news, online meals order, online specialty retailer and connecting travel. As the pathfinder in on-train Wi-Fi market in China, we have accumulated great experiences and resources in construction and operation on train Wi-Fi on express trains in China, which enable us to cooperate with Gecent to provide location-based services through the provision of our map SDKs (“Software Development Kit”) and APIs (“Application-programming Interface”), including services at train stations covering navigation and OTO services, and to provide movie content SDK, movie copyrights and operating services to the users of Gecent’s mobile application. Through the cooperation with Gecent, we are able to expand our services to more valuable high-speed train passengers.

 

In the first half of 2019, we gradually terminated the Wi-Fi provision for express trains because the increase in numbers of High-speed trains led to the shrinkage of the passenger trips on express trains. At the beginning of 2019, we established a Luokung Location-based services Data Marketing Platform (“LLDMP”), Luokung Location-based services (“LBS”) Data Marketing Platform, that combines our LBS strength with existing advertising tools. Our LBS capability including indoor floor maps, location information, and point of interest for more than twenty thousand commercial buildings covers high speed train stations, shopping malls, airports and so on.

 

On August 25, 2018, LK Technology entered into a Stock Purchase Agreement (the “Agreement”) with the shareholders of Superengine Holding Limited, a limited liability company incorporated under the laws of the British Virgin Islands, pursuant to which LK Technology acquired all of the issued and outstanding shares of SuperEngine for an aggregate purchase price of US$60 million (the “Purchase Price”), which was paid by the issuance of our ordinary shares in an amount equal to the quotient of (x) the Purchase Price divided by (y) the average of the closing prices of the ordinary shares on the NASDAQ Capital Market over the 12 months period preceding July 31, 2018. We are a party to the Agreement in connection with the issuance of the ordinary shares and certain other limited purposes.

 

Through the acquisition of SuperEngine, we obtained patented technologies in spatial-temporal big data indexing, storage, transmission and visualization that can support the full vector maps without tile, which can be effectively applied to high-definition (HD) maps, location-based services, smart cities, intelligent transportation systems, mapping and surveying, remote sensing and monitoring. We possess 25 patents and five patent application rights in U.S., Europe, Japan and China. We believe our graphics processing system is a thousand times more efficient than competing technologies in querying, retrieving, transmitting and rendering graphical information, and allowing Terabyte (TB) sized data to be released in seconds, which enable our customers to obtain real-time operational intelligence by harnessing the value of their database.

 

On August 28, 2019, the Company entered into a Share Purchase Agreement, pursuant to which the Company will acquire 100% of the equity interests of Saleya Holdings Limited (“Saleya”) from Saleya’s shareholders for an aggregate purchase price of RMB 836 million (approximately equivalent to $120 million), which includes approximately RMB 709 million (approximately equivalent to $101 million) in cash and the remaining RMB 127 million (approximately equivalent to $18 million) will be paid by issuance of the Company’s ordinary shares at the conversion rate of $7 per share. In connection with its acquisition of Saleya, as of December 31, 2019 and on January 21, 2020, the Company made a partial cash payment of $14,334,451 and $18,539,343, respectively, and on February 5, 2020 it issued 2,708,498 ordinary shares to certain shareholders of Saleya in accordance with Share Purchase Agreement. On December 5, 2020, the Company issued 1,500,310 of Series B preferred shares to two of the Saleya’s shareholders instead of a cash payment of $6,182,000 (RMB43,128,000) as a change of consideration for the acquisition of Saleya, On March 17, 2021, the Company closed the acquisition of 100% equity interests in Saleya, which is now a wholly owned subsidiary of the Company.

 

On May 10, 2019 and November 6, 2020, the Company entered into a Stock Purchase Agreement and The Supplementary Agreement to Stock Purchase Agreement with the shareholders of Botbrain AI Limited (“Botbrain”), a limited liability company incorporated under the laws of the British Virgin Islands, pursuant to which the Company acquired 67.36% of the issued and outstanding shares of Botbrain for an aggregate purchase price of $2.5 million (RMB 16.4 million), of which $1.5 million (RMB 9.6 million) was to be paid in cash to obtain 20% of Botbrain and the Company issued 1,789,618 ordinary shares to acquire the remaining 47.36% of Botbrain. The closing of the acquisition was completed on December 4, 2020.

 

S-2

 

 

On November 13, 2019, the Company entered into a Share Subscription Agreement with Geely Technology Group Co., Ltd. (“Geely Technology”) to issue 21,794,872 series A preferred shares at a purchase price of $1.95 per share for an aggregate purchase price of $42,500,000. Per the terms of the agreement, the Company recognized $32,910,257 as a loan. The Company received $21,743,857 as of December 31, 2019 and the remaining amount was received in January 2020. Geely Technology may request the repayment after November 2020, under such circumstance, the Company shall pay it back in January of 2021. On December 24, 2020, Geely Technology sent a notice of redemption. The Company is in negotiation for an extension with Geely Technology.

 

On November 13, 2019, the Company entered into a Securities Purchase Agreement with Acuitas Capital, LLC. And a Warrant to purchase the Company’s ordinary shares pursuant to which the Purchaser subscribed to purchase up to $100,000,000 of units with up to a $10,000,000 subscription at each closing, with each Unit consisting of one ordinary share and one warrant, where each whole warrant entitles the holder to purchase one ordinary share. The Securities Purchase Agreement contemplates periodic closings of $10,000,000. On July 16, 2020, the Company held the first closing pursuant to the Purchase Agreement and received $10,000,000. The Purchaser had received 7,763,975 ordinary shares on November 13, 2019 in consideration for such $10,000,000. The Purchaser also exercised the Warrant and received 15,897,663 ordinary shares upon the exercise of the Warrant. On December 31, 2020, the Purchase Agreement has been terminated.

 

On June 17, 2020, the Company entered into preferred stock subscription agreement with Daci Haojin Foundation Limited to issue 15,000,000 preferred shares for $45,000,000. Pursuant to the preferred stock subscription agreement the first closing will not occur until July 2020 and such closing will be for $13,500,000. Subsequent closings will occur on August 31 and September 30, 2020 for $13,500,000 and $18,000,000, respectively. However, due to the impact of the travel restriction as a result of Covid-19 between Hong Kong and Mainland China, Daci Haojin has not fulfilled their US dollars subscription obligations under the Preferred Financing Agreement and no such closings have occurred. As of December 31, 2020, Daci Haojin has wired RMB 17.4 million ($2.7 million) to the Company and has represented to the Company that they are working to be able to comply with their contractual obligations to fund the $45,000,000 to the Company. The Company cannot give any assurances as to whether it will receive any monies from Daci Haojin pursuant to the Preferred Financing Agreement.

 

On August 10, 2020, the Company entered into a cooperation framework agreement with Nanjing Antong Meteorological Data Limited (“Nanjing Antong”) and Nanjing Weida Electronic Technology Co., Ltd. (“Nanjing Weida”), pursuant to which the Company would invest $153,000 (RMB 1 million) each to Nanjing Antong and Nanjing Weida in order to establish a joint venture with Nanjing Antong. On August 27, 2020, the joint venture was established, SuperEngine, eMapgo Technologies (Beijing) Co., Ltd. (“EMG”) and Nanjing Antong hold 50%, 20% and 30% of equity of interest, respectively. The joint venture engages in real-time traffic information services for China’s high-class highways, urban roads, urban and rural roads, as well as expressway data and travel value-added services. 

 

On March 17, 2021, the Company consummated an acquisition of EMG, through the purchase of the equity interests of Saleya Holdings Limited (“Saleya”), which, through a series of contracts between its wholly owned subsidiary DMG Infotech Co., Ltd. and EMG, made EMG its variable interest entity. Pursuant to a Share Purchase Agreement dated August 28, 2019 (the “EMG SPA”) and a Supplemental Agreement dated February 24, 2021. The Company purchased 100% of the equity interest of Saleya for consideration of (i) a cash amount of USD equivalent to RMB709,567,913 and (ii) 7,111,428 ordinary shares, a number of the Company’s ordinary shares equivalent to RMB127,028,593 with an issuing price of USD 2.00 per share after deducting 2,708,498 shares already issued in 2019 pursuant to the EMG SPA.

 

VIE Arrangements with Beijing Zhong Chuan Shi Xun Technology Limited’s Subsidiaries and Their Respective Shareholders

 

To comply with the PRC legal restrictions on foreign ownership of companies that operate mobile application services, our subsidiaries operate in such restricted service areas in the PRC through certain PRC domestic companies, whose equity interests are held by certain management members or founders of LK Technology Ltd. Part of the registered capital of these PRC domestic companies was funded by certain management members or founders of LK Technology Ltd. LK Technology Ltd., through its subsidiary Shenzhen Luokuang Technology Limited previously known as Zhong Chuan Tian Xia Information and Technology (Shenzhen) Limited (the “WFOE”), has entered into an exclusive business cooperation agreement with Beijing Zhong Chuan Shi Xun Technology Limited (“Zhong Chuan Shi Xun” or the “VIE”) the PRC domestic company, which entitle the WFOE to receive a majority of the profit of Zhong Chuan Shi Xun. In addition, Shenzhen Luokuang Technology Limited has entered into certain agreements with those management members or founders, including an equity interest pledge agreement of the equity interests held by those management members or founders and an exclusive option agreement to acquire the equity interests in these companies when permitted by the PRC laws, rules and regulations. Details of the typical VIE structure of our significant consolidated VIEs, primarily domestic companies associated with the operations such as Zhong Chuan Shi Xun and its subsidiaries of Jiangsu Zhong Chuan Rui You Information and Technology Limited (“Zhong Chuan Rui You”), Huoerguosi Luokuang Information and Technology Limited (“Huoerguosi Luokuang”) and Shenzhen Jiu Zhou Shi Dai Digital and Technology Limited (“Jiu Zhou Shi Dai”), are set forth below:

 

S-3

 

 

Exclusive Business Cooperation Agreement

 

The VIE has entered into an exclusive business services agreement with the WFOE, pursuant to which the WFOE provides exclusive business services to the VIE. In exchange, the VIE pays a service fee to the WFOE which typically amounts to what would be substantially all of the VIE’s pre-tax profit, resulting in a transfer of substantially all of the profits from the VIE to the WFOE.

 

Exclusive Option Agreement

 

The VIE equity holders have granted the WFOE exclusive call options to purchase their equity interest in the VIE at an exercise price equal to the minimum price as permitted by applicable PRC laws. The WFOE may nominate another entity or individual to purchase the equity interest, if applicable, under the call options. Each call option is exercisable subject to the condition that applicable PRC laws, rules and regulations do not prohibit completion of the transfer of the equity interest pursuant to the call option. The VIE agrees not to distribute any dividends to the VIE equity holders without the approval of WFOE.

 

Equity Interest Pledge Agreement

 

Pursuant to the equity pledge agreement, the VIE equity holders have pledged all of their interests in the equity of the VIE as a continuing first priority security interest in favor of the WFOE to secure the performance of obligations by the VIEs and/or the equity holders under the exclusive business cooperation agreement. The WFOE is entitled to exercise its right to dispose of the VIE equity holders’ pledged interests in the equity of the VIE and has priority in receiving payment by the application of proceeds from the auction or sale of such pledged interests, in the event of any breach or default under the exclusive business cooperation agreement, if applicable. These equity pledge agreements remain in force until all the obligations under the exclusive business cooperation agreement have been fulfilled.

 

The exclusive business cooperation agreement and equity interest pledge agreement described above also enable the Company to receive substantially all of the economic benefits from the VIE by typically entitling the WFOE to all dividends and other distributions declared by the VIE and to any distributions or proceeds from the disposal by the VIE equity holders of their equity interests in the VIE.

 

There are a number of uncertainties regarding the status of the rights of the British Virgin Islands holding company with respect to its contractual arrangements with the VIE, its founders and owners, including whether the PRC legal system could limit our ability to enforce these contractual agreements due to uncertainties under Chinese law and jurisdictional limits.

 

The VIE arrangements with eMapgo Technologies (Beijing) Co., Ltd. (“EMG”) and its shareholders

 

Applicable PRC laws and regulations prohibit foreign investors from (i) holding a majority equity interest in PRC surveying and mapping companies, (ii) holding equity interest in PRC companies engaging in the production of digital navigation maps and aerial photogrammetry, and (iii) holding a majority equity interest in PRC companies providing internet content or other value-added telecommunication services or internet map services. As a British Virgin Islands corporation, the Company is deemed a foreign legal person under PRC law. Accordingly, the Company’s wholly owned subsidiary DMG Infotech Co., Ltd. (“DMG”), as a foreign-invested company, is currently ineligible to engage in the aforementioned business in the PRC.

 

S-4

 

 

The Company therefore conducts substantially all of its spatial-temporal big data processing activities through EMG (for purposes of this Section, the “VIE”) in the PRC. To provide the Company with the power to control and the ability to receive the majority of the expected residual returns of the VIE, DMG entered into a series of contractual arrangements with EMG on November 1, 2006.

 

  Agreements that transfer economic benefits to DMG

 

Exclusive Business Cooperation Agreement. DMG and the VIE entered into an Exclusive Business Cooperation Agreement on November 1, 2006. Pursuant to this cooperation agreement, the VIE engages DMG as VIE’s exclusive service provider to provide the VIE with business support and technical and consulting services during the term of the cooperation agreement, in accordance with the terms and conditions of this cooperation agreement, which may include all services within the business scope of DMG, including, without limitation, technical services, business consultations, license of intellectual property rights, equipment or property leasing, sales, marketing, system integration, product research and development, systems maintenance and such other services necessary and desirable to the successful operation of VIE as may be determined in DMG’s sole discretion. There is no limit on the amount of services DMG can potentially provide to the VIE. Since the senior management teams of the VIE and those of DMG are all assigned by the Company, the agreement effectively entitles DMG to charge the VIE service fees that amount to substantially all of the net income of VIE. The term of this agreement is 10 years and shall be extended automatically unless a notice of termination is sent in writing by DMG prior to the expiration. DMG may terminate the agreement at any time by providing 30 days’ prior written notice to the VIE. The Exclusive Business Cooperation Agreement was re-signed on February 27, 2008 and March 24, 2021 respectively with the VIE arrangement unchanged. The term of the newest Exclusive Business Cooperation Agreement is extended to March 11, 2044 and shall be automatically extended 10 years unless a notice of termination is sent in writing by DMG prior to the expiration. The automatic renewal scheme remains effective so long as DMG does not send a written notice to terminate the cooperation agreement prior to the expiration.

 

Equity Pledge Agreements. DMG and the shareholders of the VIE entered into equity pledge agreements on November 1, 2006. Pursuant to the equity pledge agreements, the shareholders of the VIE pledge all of their equity interests in the VIE to DMG to guarantee the VIE’s performance of its obligations under the exclusive business cooperation agreements. If the VIE breaches its contractual obligations under those agreements, DMG, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. The shareholders of the VIE agree that, without prior written consent of DMG, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests that would prejudice DMG’s interest. During the term of the equity pledge agreements, DMG is entitled to receive all the dividends paid on the pledged equity interests. The equity pledge agreement will expire when the VIE has fully performed its obligations under the exclusive business cooperation agreement. The equity pledge agreements were re-signed on February 27, 2008, October 15, 2010, March 18,2018, and March 24, 2021 respectively due to changes of shareholders of the VIE.

 

  Agreements that provide DMG effective control over the VIE

 

Proxy Agreements. The shareholders of the VIE signed a proxy agreement on March 27, 2008 appointing Mr. Zhigang Wang, CEO of DMG, or any person subsequently designated by DMG as its attorney-in-fact to vote on their behalf on all matters of the VIE requiring shareholder approval under PRC laws and regulations and the articles of association of the VIE. The proxy agreement will remain in force until the shareholders of the VIE are instructed by DMG to designate another PRC citizen to be the shareholders’ attorney-in-fact. The shareholders of the VIE re-signed proxy agreements on October 15, 2010 and March 18, 2018, respectively, appointing Mr. Zhixun Wang, legal representative of the VIE, or any person subsequently designated by DMG as its attorney-in-fact to vote on their behalf on all matters of the VIE requiring shareholder approval under PRC laws and regulations and the articles of association of the VIE. The shareholders of the VIE re-signed a proxy agreement on March 24, 2021 appointing Mr. Jian Zhang, legal representative of the VIE, or any person subsequently designated by DMG as its attorney-in-fact to vote on their behalf on all matters of the VIE requiring shareholder approval under PRC laws and regulations and the articles of association of the VIE.

 

S-5

 

 

The articles of association of the VIE state that the major rights of the shareholders include the power to review and approve the annual budget, operating strategy and investment plan, elect the members of the board of directors and approve their compensation plan. Therefore, through the irrevocable power of attorney arrangement, DMG has the ability to exercise effective control over the VIE through shareholder votes and, through such votes, to also control the composition of the board of directors and thus appoint the senior management of the VIE.

 

Exclusive Call Option Agreements. DMG, the VIE and the shareholders of the VIE signed exclusive call option agreements on November 1, 2006, March 27, 2008, October 15, 2010, March 18, 2018, and March 24, 2021 respectively. Pursuant to the exclusive call option agreements, the VIE’s shareholders irrevocably grant DMG an exclusive option to purchase, or cause a person designated by it to purchase, to the extent permitted under PRC law, all or part of the equity interests in the VIE. The purchase price would be the legally allowed minimum amount. DMG has sole discretion to decide when to exercise the option, whether in part or in full. The term of the agreement will not expire unless all of the equity interests in the VIE has been purchased by DMG, or by persons or entities designated by DMG. Through the exclusive call option agreements, each of VIE’s shareholders irrevocably granted DMG an exclusive right to acquire, at any time, for its own account or through one or more PRC individuals or entities as nominee shareholders of its choice to replace the existing shareholders of the VIE, which constitutes a substantive kick-out right that is exercisable and enforceable under current PRC laws and regulations. This kick-out right reinforces DMG’s ability to direct the activities that most significantly impact the VIE’s economic performance.

 

As a result of these contractual arrangements, the Company, through its wholly owned subsidiary, DMG, has (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the right to receive benefits from the VIE. Consequently, DMG, ultimately the Company, is the primary beneficiary of the VIE and the Company has consolidated the financial results of the VIE in its financial statements since the later of the date of inception or acquisition.

 

In concluding that the Company is the primary beneficiary of the VIE, the Company believes that the powers of attorney are valid, binding and enforceable under existing PRC laws and regulations and enable the Company, through DMG, to vote on all matters requiring shareholder approval for the VIE. In addition, the Company believes that the exclusive call option agreements provide the Company, through DMG, with a substantive kick-out right. More specifically, the terms of the exclusive call option agreements are exercisable and enforceable under current PRC laws and regulations, and the minimum amount of consideration permitted by the applicable PRC law to exercise the purchase option does not represent a financial barrier or disincentive for the Company, through DMG, to exercise the purchase option. The Company’s rights under the powers of attorney and the exclusive call option agreements provide the Company with control over the shareholders of the VIE and thus provide the Company with the power to direct the activities that most significantly impact VIE’s economic performance. The Company believes that this ability to exercise control together with the equity pledge agreements ensure that the VIE will continue to execute and renew the exclusive business cooperation agreement and pay related service and license fees to DMG and that accordingly the Company, through its wholly owned subsidiary, DMG, has the rights to receive the economic benefits from the VIE.

 

S-6

 

 

Corporate Structure

 

 

S-7

 

 

Other Recent Developments

 

On each of February 5, 2021, February 11, 2021, and February 17, 2021, the Company entered into Securities Purchase Agreements (collectively, the “Purchase Agreements”) with certain institutional investors (the “Buyers”) pursuant to which the Company agreed to sell to the Buyers, in registered direct offerings, units consisting of one ordinary share of the Company and a warrant to purchase ordinary shares (“Units”). The Placement Agent served as, and received customary compensation for serving as, the placement agent in each of these offerings.

 

In the February 5, 2021 offering, the Company sold Units consisting of an aggregate of 9,615,387 ordinary shares and warrants exercisable to purchase 4,807,694 at a price of $0.52 per Unit, for aggregate gross proceeds to the Company of approximately $5 million before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The warrants sold in the February 5, 2021 offering are exercisable for up to three years from the date of issuance at $0.68 per ordinary share. The Placement Agent was paid a cash fee equal to 7.5% of the aggregate proceeds received by the Company from the sale of securities in the offering, and warrants, also exercisable at a price of $0.68 per ordinary share, to purchase 5.0% of the aggregate ordinary shares sold to the Buyers in the offering.

 

In the February 11, 2021 offering, the Company sold Units consisting of an aggregate of 16,891,892 ordinary shares and warrants to purchase 8,445,946 ordinary shares at a price of $0.888 per Unit, for aggregate gross proceeds to the Company of approximately $15 million before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The warrants sold in the February 11, 2021 offering are exercisable for up to three years from the date of issuance at $1.11 per ordinary share. The Placement Agent was paid a cash fee equal to 7.5% of the aggregate proceeds received by the Company from the sale of securities in the offering, and warrants, also exercisable at a price of $1.11 per ordinary share, to purchase 5.0% of the aggregate ordinary shares sold to the Buyers in the offering.

 

In the February 17, 2021 offering, the Company sold Units consisting of an aggregate of 48,076,923 ordinary shares and warrants to purchase 19,230,768 ordinary shares at a price of $2.08 per Unit, for aggregate gross proceeds to the Company of approximately $100 million before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The warrants sold in the February 17, 2021 offering were initially exercisable for up to three years from the date of issuance at $2.38 per ordinary share, which exercise price was lowered to $1.60 as a result of this offering and the anti-dilution provisions in the February 17, 2021 warrants. The Placement Agent was paid a cash fee equal to 7.0% of the aggregate proceeds received by the Company from the sale of securities in the offering, and warrants, exercisable at a price of $2.60 per ordinary share, to purchase 5.0% of the aggregate ordinary shares sold to the Buyers in the offering.

 

Corporate Information

 

Our principal executive office is located at B9-8, Block B, SOHO Phase II, No. 9, Guanghua Road, Chaoyang District, Beijing, People’s Republic of China 100020. Our website is www.luokung.com. We routinely post important information on our website. The information contained on our website is not a part of this prospectus.

 

Our agent for service of process in the United States is Worldwide Stock Transfer, LLC, the current transfer agent of the Company, with a mailing address of One University Plaza, Suite 505, Hackensack, New Jersey 07601.

 

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

 

S-8

 

 

The Offering

 

Issuer: Luokung Technology Corp.
   
Units offered by us: 27,333,300 units
   
Ordinary shares offered by us: 27,333,300 shares
   
Ordinary shares to be outstanding after this offering (assuming no exercise of the warrants offered by us): 382,402,224 shares
   
Warrants offered by us:

We are offering to investors warrants to purchase an aggregate of 13,666,650 ordinary shares at an exercise price of $1.60 per share. The warrants have a term of three years. We are also issuing to the Placement Agent the Placement Agent Warrants (as defined under “Plan of Distribution – Fees”) to purchase an aggregate of 1,093,332 ordinary shares at an exercise price of $1.60 per share.

 

This prospectus also relates to the ordinary shares issuable upon exercise of the warrants that we are offering to investors and to the Placement Agent.

   
Use of proceeds: We intend to use the net proceeds from this offering solely for working capital and other general corporate purposes. There is no assurance that any of the warrants will ever be exercised for cash, if at all. See “Use of Proceeds” on page S-15.
   
Lock-up: We have agreed, subject to certain exceptions, not to sell, offer or otherwise dispose of or transfer, directly or indirectly, any of our capital stock (including ordinary shares) or any securities convertible into or exchangeable for our capital stock, during a period commencing on the date of this prospectus supplement and ending 60 days after the closing of this offering, without the prior consent of the Placement Agent. See “Plan of Distribution” in this prospectus supplement.
   
Risk factors: You should read the “Risk Factors” section beginning on page S-10 of this prospectus supplement, the “Risk Factors” section beginning on page 5 of the accompanying prospectus, and the “Risk Factors” section in our Annual Report for the year ended December 31, 2020 on Form 20-F for a discussion of factors to consider before deciding to purchase our securities.
   
Market for the shares and warrants: Our ordinary shares are quoted and traded on the NASDAQ Capital Market under the symbol “LKCO.” However, there is no established public trading market for the warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants on any securities exchange. The warrants are immediately separable from the shares being offered as part of the units.

 

The number of ordinary shares to be outstanding immediately after the completion of this offering is based on the actual number of shares outstanding as of September 20, 2021, which was 355,068,924, and does not include, as of that date:

 

  13,666,650 ordinary shares issuable to investors upon exercise of the warrants offered in this offering;

 

  1,093,332 ordinary shares issuable to the Placement Agent upon exercise of the Placement Agent Warrants to be issued in connection with this offering;
     
 

21,634,614 ordinary shares issuable upon the exercise of warrants to purchase ordinary shares at an initial exercise price of $2.38 per share that we issued to investors and to the Placement Agent in a registered direct offering of securities that closed on February 19, 2021 (such exercise price reduced to $1.60 as a result of this offering);

     
  849,910 (9,290,541 total warrants minus 8,440,631 warrants exercised) ordinary shares issuable upon the exercise of warrants to purchase ordinary shares at an exercise price of $1.11 per share that we issued to investors and to the Placement Agent in a registered direct offering of securities that closed on February 16, 2021;
     
  2,565 (5,288,464 total warrants minus 5,285,899 warrants exercised) ordinary shares issuable upon the exercise of warrants to purchase ordinary shares at an exercise price of $0.68 per share that we issued to investors and to the Placement Agent in a registered direct offering of securities that closed on February 9, 2021; and
     
  22,794,872 ordinary shares issuable upon the conversion of the outstanding shares of our preferred shares.

 

Unless otherwise stated, outstanding share information throughout this prospectus supplement excludes the above.

 

S-9

 

 

RISK FACTORS

 

Before you make a decision to invest in our securities, you should consider carefully the risks described below, together with other information in this prospectus supplement, the accompanying prospectus and the information incorporated by reference herein and therein. If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially and adversely affected. This could cause the trading price of our ordinary shares to decline and you may lose all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also significantly impair our business operations and could result in a complete loss of your investment.

 

You should also carefully consider the risk factors set forth under “Risk Factors” described in our annual report on Form 20-F for the fiscal year ended December 31, 2020, together with all other information contained or incorporated by reference in this prospectus supplement and in any related free writing prospectus in connection with a specific offering, before making an investment decision.

 

Risks Related to This Offering

 

Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.

 

Subject to any exceptions set forth in the offering documents, we have agreed to use the net proceeds from this offering solely for working capital and general corporate purposes. Our management will have significant flexibility in applying the net proceeds of this offering for working capital and general corporate purposes. You will be relying on the judgment of our management with regard to the use of these net proceeds, and subject to any agreed upon contractual restrictions under the terms of the subscription agreements, you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.

 

You will experience immediate dilution in the book value per share of the ordinary shares you purchase.

 

Because the price per ordinary share being offered is higher than the book value per ordinary share, you will suffer substantial dilution in the net tangible book value of the ordinary shares you purchase in this offering. Based on the offering price of $1.20 per ordinary share, if you purchase the ordinary shares offered in this offering, you will suffer immediate and substantial dilution per share in the net tangible book value of the ordinary shares.

 

There is no public market for the warrants to purchase ordinary shares in this offering.

 

There is no established public trading market for the warrants being sold in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants on any securities exchange. Without an active market, the liquidity of the warrants will be limited.

 

Future sales or other dilution of our equity could depress the market price of our ordinary shares.

 

Sales of our ordinary shares, preferred shares, warrants, debt securities or any combination of the foregoing in the public market, or the perception that such sales could occur, could negatively impact the price of our ordinary shares. We have a number of institutional and individual shareholders that own significant blocks of our ordinary shares. If one or more of these shareholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our ordinary shares could be negatively affected.

 

We may need to seek additional capital. If this additional financing is obtained through the issuance of equity securities, debt convertible into equity or options or warrants to acquire equity securities, our existing shareholders could experience significant dilution upon the issuance, conversion or exercise of such securities.

 

Holders of the warrants will have no rights as holders of ordinary shares until they acquire our ordinary shares.

 

Until you acquire our ordinary shares upon exercise of any of the warrants, you will have no rights with respect to our ordinary shares. Upon exercise of any warrants held, you will be entitled to exercise the rights of a holder of ordinary shares only as to matters for which the record date occurs after the exercise date.

 

S-10

 

 

Risks Related to Doing Business in China

 

Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

 

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations. Under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the United States, with significant policies changes being made from time to time without notice. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings. Only after 1979 did the Chinese government begin to promulgate a comprehensive system of laws that regulate economic affairs in general, deal with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade, as well as encourage foreign investment in China. Although the influence of the law has been increasing, 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. Also, because these laws and regulations are relatively new, and because of the limited volume of published cases and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, there have been constant changes and amendments of laws and regulations over the past 30 years in order to keep up with the rapidly changing society and economy in China. Because government agencies and courts provide interpretations of laws and regulations and decide contractual disputes and issues, their inexperience in adjudicating new business and new polices or regulations in certain less developed areas causes uncertainty and may affect our business. Consequently, we cannot predict the future direction of Chinese legislative activities with respect to either businesses with foreign investment or the effectiveness on enforcement of laws and regulations in China. The uncertainties, including new laws and regulations and changes of existing laws, as well as judicial interpretation by inexperienced officials in the agencies and courts in certain areas, may cause possible problems to foreign investors. Although the PRC government has been pursuing economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC through the allocation of resources, controlling payments of foreign currency, setting monetary policy and imposing policies that impact particular industries in different ways. We cannot assure you that the PRC government will continue to pursue policies favoring a market oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.

 

Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like us with significant China-based operations, all of which could increase our compliance costs, subject us to additional disclosure requirements.

 

The recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital raising activities in the United States. In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations. We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.

 

On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective. On August 1, 2021, the China Securities Regulatory Commission stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers. We cannot guarantee that we will not be subject to tightened regulatory review and we could be exposed to government interference in China.

 

If relations between the United States and China worsen, investors may be unwilling to hold or buy our stock and our stock price may decrease.

 

At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries that may affect our economic outlook both in the United States and in China. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our ordinary shares.

 

Future inflation in China may inhibit the profitability of our business in China.

 

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our services and products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services and products.

 

S-11

 

 

The PRC’s legal and judicial system may not adequately protect our business and operations and the rights of foreign investors.

 

The legal and judicial systems in the PRC are still rudimentary, and enforcement of existing laws is uncertain. As a result, it may be impossible to obtain swift and equitable enforcement of laws that do exist, or to obtain enforcement of the judgment of one court by a court of another jurisdiction. The PRC’s legal system is based on the civil law regime, that is, it is based on written statutes. A decision by one judge does not set a legal precedent that is required to be followed by judges in other cases. In addition, the interpretation of Chinese laws may be varied to reflect domestic political changes. 

 

The promulgation of new laws, changes to existing laws and the pre-emption of local regulations by national laws may adversely affect foreign investors. There can be no assurance that a change in leadership, social or political disruption, or unforeseen circumstances affecting the PRC’s political, economic or social life, will not affect the PRC government’s ability to continue to support and pursue these reforms. Such a shift could have a material adverse effect on our business and prospects. 

 

Because our principal assets are located outside of the United States and all of our directors and officers reside outside the United States, it may be difficult for you to enforce your rights based on U.S. federal securities laws against us and our officers and directors in the U.S. or to enforce a U.S. court judgment against us or them in the PRC. 

 

Our directors and officers reside outside the United States. In addition, our operating subsidiaries are located in the PRC and substantially all of their assets are located outside of the United States. It may therefore be difficult for investors in the United States to enforce their legal rights against us based on the civil liability provisions of the U.S. federal securities laws against us in the courts of either the U.S. or the PRC and, even if civil judgments are obtained in U.S. courts, it may be difficult to enforce such judgments in PRC courts.

 

Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it more difficult for us to pursue growth through acquisitions in China.

 

The M&A Rules established additional procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the MOFCOM must be notified in the event a foreign investor takes control of a PRC domestic enterprise. In addition, certain acquisitions of domestic companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic companies, are subject to approval by the MOFCOM. In addition, the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, require that mergers and acquisitions by foreign investors in “any industry with national security concerns” be subject to national security review by the MOFCOM. In addition, any activities attempting to circumvent such review process, including structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited. There is significant uncertainty regarding the interpretation and implementation of these regulations relating to merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and the required notification, review or approval process may materially delay or affect our ability to complete merger and acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and adversely affected. In addition, if the MOFCOM determines that we should have obtained its approval for our entry into contractual arrangements with our affiliated entities, we may be required to file for remedial approvals. There is no assurance that we would be able to obtain such approval from the MOFCOM. We may also be subject to administrative fines or penalties by the MOFCOM that may require us to limit our business operations in the PRC, delay or restrict the conversion and remittance of our funds in foreign currencies into the PRC or take other actions that could have material and adverse effect on our business, financial condition and results of operations. Moreover, according to the Anti-Monopoly Law of the PRC and the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings (the “Prior Notification Rules”) issued by the State Council, the concentration of business undertakings by way of mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the State Administration of Market Regulation (the “SAMR”) when the threshold is crossed and such concentration shall not be implemented without the clearance of prior notification.

 

S-12

 

 

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC subsidiary and affiliated entities, which could harm our liquidity and our ability to fund and expand our business.

 

As an offshore holding company of our PRC subsidiary, we may (i) make loans to our PRC subsidiary and affiliated entities, (ii) make additional capital contributions to our PRC subsidiary, (iii) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, and (iv) acquire offshore entities with business operations in China in an offshore transaction. However, most of these uses are subject to PRC regulations and approvals. For example:

 

  loans by us to our wholly owned subsidiaries in China, which are foreign-invested enterprises, cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange of the PRC (or SAFE) or its local counterparts;

 

  loans by us to our affiliated entities, which are domestic PRC entities, over a certain threshold must be approved by the relevant government authorities and must also be registered with SAFE or its local counterparts; and

 

  capital contributions to our wholly owned subsidiary must file a record with the MOFCOM or its local counterparts and shall also be limited to the difference between the registered capital and the total investment amount.

 

We cannot assure you that we will be able to obtain these government registrations or filings on a timely basis, or at all. If we fail to finish such registrations or filings, our ability to use the proceeds from our 2018 offering and to capitalize our PRC subsidiary’s operations may be adversely affected, which could adversely affect our liquidity and our ability to fund and expand our business.

 

On March 30, 2015, the State Administration of Foreign Exchange (SAFE) promulgated a notice relating to the administration of foreign-invested company of its capital contribution in foreign currency into Renminbi (Hui Fa [2015]19) (or Circular 19). Although Circular 19 has fastened the administration relating to the settlement of exchange of foreign-investment, allows the foreign-invested company to settle the exchange on a voluntary basis, it still requires that the bank review the authenticity and compliance of a foreign-invested company’s settlement of exchange in previous time, and the settled in Renminbi converted from foreign currencies shall deposit on the foreign exchange settlement account, and shall not be used for several purposes as listed in the “negative list”. As a result, the notice may limit our ability to transfer funds to our operations in China through our PRC subsidiary, which may affect our ability to expand our business. Meanwhile, the foreign exchange policy is unpredictable in China, it shall be various with the nationwide economic pattern, the strict foreign exchange policy may have an adverse impact in our capital cash and may limit our business expansion.  

 

To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company are located in China, the PCAOB may not be able inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection. Additionally, the PCAOB’s potential inability to inspect such audit documentation could cause an exchange to determine to delist our securities, or cause us to be required to change auditors, either of which could have a material adverse effect on the market for and market price of our ordinary shares.

 

Our independent registered public accounting firm issued an audit opinion on the financial statements included in this prospectus filed with the SEC and will issue audit reports related to our company in the future. As auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the PCAOB. However, to the extent that our auditor’s work papers are or become located in China, such work papers will not be subject to inspection by the PCAOB because the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities. Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct inspections of our auditors’ work papers in China would make it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may consequently lose confidence in our reported financial information and procedures and the quality of our financial statements. As a result, our investors may be deprived of the benefits of PCAOB’s oversight of our auditors through such inspections. We cannot presently determine whether Nasdaq or regulatory Authorities, as a condition to continued listing on Nasdaq, we would be required to change auditors to a firm that is subject to inspection by the PCAOB. The possibility that we may be required to change auditors may have a material adverse effect upon the market for and market price of our ordinary shares. If we fail to change auditors to meet the Nasdaq requirement and we are required by the Holding Foreign Companies Accountable Act to delist from the Nasdaq Capital Market because our present auditor is located in China and the PCAOB is unable to conduct inspections on such auditor, and our ordinary shares is unable to be listed on another securities exchange by the time of such potential delisting, then such a delisting would substantially impair your ability to sell or purchase our common stock when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our ordinary shares.

 

S-13

 

 

Compliance with China’s new Data Security Law, Measures on Cybersecurity Review (revised draft for public consultation), Personal Information Protection Law (second draft for consultation), regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.

 

China has implemented or will implement rules and is considering a number of additional proposals relating to data protection. China’s new Data Security Law promulgated by the Standing Committee of the National People’s Congress of China in June 2021, or the Data Security Law, will take effect in September 2021. The Data Security Law provides that the data processing activities must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and prohibits entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by the Chinese government. As the Data Security Law has not yet come into effect, we may need to make adjustments to our data processing practices to comply with this law.

 

Additionally, China’s Cyber Security Law, requires companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on their networks. Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level to which the entity’s information and network systems belong-from the lowest Level 1 to the highest Level 5 pursuant to the Measures for the Graded Protection and the Guidelines for Grading of Classified Protection of Cyber Security. The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.

 

Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Measures on Cybersecurity Review, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.” On July 10, 2021, the Cyberspace Administration of China published a revised draft of the Measures on Cybersecurity Review, expanding the cybersecurity review to data processing operators in possession of personal information of over 1 million users if the operators intend to list their securities in a foreign country.

 

It is unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on the life sciences sector generally and the Company in particular. China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting from the U.S. stock market.

 

Also, on August 20, 2021, the National People’s Congress passed the Personal Information Protection Law, which will be implemented on November 1, 2021. The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinese cyberspace regulators are also required to store in China personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. Lastly, the draft contains proposals for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year.

 

Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement. Compliance with the Cyber Security Law and the Data Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market or the Stock Exchange of Hong Kong.

 

S-14

 

 

USE OF PROCEEDS

 

We estimate that the net proceeds we will receive from this offering will be approximately $30,407,963, after deducting estimated offering expenses of approximately $2,391,997. We will not receive any proceeds from the sale of ordinary shares issuable upon exercise of the warrants that we are offering unless and until such warrants are exercised.

 

If all of the warrants (warrants to purchase 14,759,982 ordinary shares, including the Placement Agent Warrants to purchase 1,093,332 ordinary shares) issued in connection with this offering are fully exercised for cash, we would receive additional aggregate proceeds of approximately $23,615,971.

 

We intend to use the net proceeds from this offering for general corporate purposes and working capital, including for research and development, general and administrative expenses, and potential ordinary course acquisitions of technologies that complement our business. We may separate certain proceeds from this offering for the purpose of indemnification of the Placement Agent.

 

We have not specifically identified the precise amounts we will spend on each of these areas or the timing of these expenditures. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including assessments of potential market opportunities and competitive developments. In addition, expenditures may also depend on the establishment of new collaborative arrangements with other companies, the availability of other financing, and other factors. Our management will have discretion in the application of the net proceeds from this offering. Our shareholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for purposes that may not result in our being profitable or increase our market value.

 

S-15

 

 

DILUTION

 

If you purchase any of the units offered by this prospectus supplement, you will experience dilution to the extent of the difference between the offering price per unit you pay in this offering and the net tangible book value per ordinary share immediately after this offering, assuming no value is attributed to the warrants included in the units. Our audited net tangible book value as of December 31, 2020 was approximately $(1.98) million, or approximately $(0.008) per ordinary share. Net tangible book value per share is equal to our total tangible assets minus total liabilities, divided by the number of ordinary shares outstanding.

 

After giving effect to the sale by us of 27,333,300 units in this offering at a public offering price of $1.20 per unit, assuming no value is attributed to the warrants included in the units, and after deducting estimated offering commissions and expenses payable by us, our as adjusted net tangible book value as of December 31, 2020 would have been approximately $28.4 million, or approximately $0.11 per ordinary share. This represents an immediate increase in net tangible book value of approximately $0.11 per share to existing shareholders and an immediate dilution of approximately $1.09 per share to new investors. Our net tangible book value calculation assumes no exercise of the warrants offered hereby. The following table illustrates this calculation on a per share basis:

 

Public offering price per unit           $ 1.20  
Net tangible book value per share as of December 31, 2020   $ (0.008)          
Increase in adjusted net tangible book value per share attributed to the investors purchasing shares issued in this offering     0.118          
Net tangible book value per share after giving effect to this offering             0.11  
Dilution to net tangible book value per share to new investors purchasing shares in this offering           $ 1.09  

 

To the extent that our outstanding options, warrants or subscription investment units are exercised, investors in this offering may suffer additional dilution.

 

The total number of ordinary shares reflected in the discussion and table above is based on 239,770,000 ordinary shares outstanding as of December 31, 2020, and excludes, as of such date:

 

13,666,650 ordinary shares issuable to investors upon exercise of the warrants offered in this offering;

 

  1,093,332 ordinary shares issuable to the Placement Agent upon exercise of the Placement Agent Warrants to be issued in connection with this offering;
     
 

21,634,614 ordinary shares issuable upon the exercise of warrants to purchase ordinary shares at an initial exercise price of $2.38 per share that we issued to investors and to the Placement Agent in a registered direct offering of securities that closed on February 19, 2021 (such exercise price reduced to $1.60 as a result of this offering);

 

  849,910 (9,290,541 total warrants minus 8,440,631 warrants exercised) ordinary shares issuable upon the exercise of warrants to purchase ordinary shares at an exercise price of $1.11 per share that we issued to investors and to the Placement Agent in a registered direct offering of securities that closed on February 16, 2021;
     
  2,565 (5,288,464 total warrants minus 5,285,899 warrants exercised) ordinary shares issuable upon the exercise of warrants to purchase ordinary shares at an exercise price of $0.68 per share that we issued to investors and to the Placement Agent in a registered direct offering of securities that closed on February 9, 2021; and
     
  22,794,872 ordinary shares issuable upon the conversion of the outstanding shares of our preferred shares.

 

S-16

 

 

CAPITALIZATION

 

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

 

on an actual basis; and

 

 

an as adjusted through September 20, 2021 giving effect to (i) the sale of 9,615,387 ordinary shares in the registered offering that closed on February 9, 2021 at an offering price of $0.52 per share, (ii) the exercise of 5,285,899 warrants sold in such closing at an exercise price of $0.68 per warrant, (iii) the sale of 16,891,892 ordinary shares in the registered offering that closed on February 16, 2021 at an offering price of $0.888 per share, (iv) the exercise of 8,440,631 warrants sold in such closing at an exercise price of $1.11 per warrant, (v) the sale of 48,076,923 ordinary shares in the registered offering that closed on February 19, 2021 at an offering price of $2.08 per share, (vi) 8,495,001 ordinary shares issued to employees for their services under the 2018 omnibus equity plan, (vii) 9,160,000 ordinary shares issued for strategic investment, (vi) 27,333,300 ordinary shares in this offering at an assumed offering price of $1.20 per share, after deducting the estimated offering expenses payable by us and (vii) Series B Preferred Shares redeemed in March 2021.

 

The pro forma information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the offering price of our ordinary shares. You should read this table in conjunction with our financial statements and notes thereto included in this prospectus, and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

   As of December 31,
2020
 
   Actual   Adjusted 
Long-term debt  $2,663,835   $2,663,835 
Shareholders’ equity:          
Preferred Shares ($0.01 par value; 1,000,000 shares authorized, issued and outstanding)   10,000    10,000 
Ordinary Shares ($0.01 par value; 500,000,000 shares authorized; 239,770,000 shares issued and outstanding)   2,397,701    3,730,716 
Series A Preferred Shares ($0.01 par value; 21,794,872 shares authorized, 21,794,872 shares issued and outstanding)   217,949    217,949 
Series B Preferred Shares ($0.01 par value; 1,500,310 shares authorized, 1,500,310 shares issued and outstanding)   15,003    - 
Additional Paid-in Capital   164,753,586    341,249,748 
Accumulated deficit   (113,242,512)   (124,625,813)
Accumulated Other Comprehensive Loss   (1,523,978)   (1,523,978)
Total Luokung Technology Corp. shareholders’ equity   52,627,749    219,058,622 
Total Equity   52,694,105    219,124,978 
Total Capitalization  $52,694,105   $219,124,978 

 

S-17

 

 

DESCRIPTION OF THE SECURITIES WE ARE OFFERING

 

In this offering, we are offering an aggregate of 27,333,300 units, which consists of 27,333,300 ordinary shares and warrants to purchase, in the aggregate, an additional 13,666,650 ordinary shares to the investors. The ordinary shares and warrants being sold to investors in this offering will be sold together as a unit consisting of one ordinary share and a warrant (to purchase 0.5 ordinary shares for each ordinary share included in the unit).

 

We are offering the units at a purchase price of $1.20 per unit. Units will not be issued or certificated. The ordinary shares and warrants included in the units are immediately separable and will be issued separately.

 

This prospectus supplement also relates to the offering of the Placement Agent Warrants and of the 1,093,332 ordinary shares issuable upon exercise, if any, of the Placement Agent Warrants.

 

Ordinary Shares

 

A description of the ordinary shares that we are offering pursuant to this prospectus supplement is set forth under the heading “Description of Share Capital - Ordinary Shares,” starting on page 12 of the accompanying prospectus. As of September 20, 2021, we had 355,068,924 outstanding ordinary shares.

 

Warrants

 

The material terms and provisions of the warrants being offered to investors pursuant to this prospectus supplement and the accompanying prospectus are summarized below. The summary is subject to, and qualified in its entirety by, the form of warrant which will be provided to each investor in this offering and will be filed as an exhibit to a Report on Form 6-K with the SEC in connection with this offering.

 

The warrants are exercisable for an aggregate of 13,666,650 ordinary shares at an exercise price of $1.60 per share.

 

Exercisability. The warrants are exercisable for a period of three years commencing immediately upon issuance. The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and payment in full in immediately available funds for the number of ordinary shares purchased upon such exercise. If a registration statement registering the issuance of the ordinary shares underlying the warrants under the Securities Act is not effective or available, the holder may, in its sole discretion, elect to exercise the warrants through a cashless exercise, in which case the holder would receive upon such exercise the net number of ordinary shares determined according to the formula set forth in the warrant. We have the right to request the mandatory exercise of the warrants if the volume weighted average price of the ordinary shares equals or exceeds $4.00 for 10 consecutive days, subject to certain other conditions being satisfied as set forth in the warrants.

 

Exercise Limitation. A holder will not have the right to exercise any portion of the warrants if the holder (together with its affiliates and any other persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of our ordinary shares outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. Any holder may increase or decrease such percentage, but in no event may such percentage be increased to more than 9.99%, provided that any increase will not be effective until the 61st day after such election.

 

S-18

 

 

Exercise Price Adjustment. The exercise price of the warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our ordinary shares and also upon any distributions of assets, including cash, stock or other property to our shareholders. The exercise price of the warrants is also subject to adjustment in the event that we issue ordinary shares (or ordinary share equivalents) in subsequent transactions that have an exercise price that is lower than the then current exercise price of the warrants, subject to customary exceptions. The terms of the warrants, including these anti-dilution protections, may make it difficult for us to raise additional capital at prevailing market terms in the future.

   

Exchange Listing. There is no established trading market for the warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the warrants on any national securities exchange or other trading market. Without an active market, the liquidity of the warrants will be limited. In addition, in the event our ordinary share price does not exceed the per share exercise price of the warrants during the period when the warrants are exercisable, the warrants will not have any value.

 

Voluntary Adjustment By Company. Subject to the rules and regulations of Nasdaq, the Company may at any time during the term of the warrants, subject to the prior written consent of the holder, reduce the then current exercise price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

Fundamental Transactions. If (i) we, directly or indirectly, in one or more related transactions effect any merger or consolidation of the Company with or into another person, (ii) we, directly or indirectly, effect any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of our assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by us or another person) is completed pursuant to which holders of ordinary shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding ordinary shares, (iv) we, directly or indirectly, in one or more related transactions effect any reclassification, reorganization or recapitalization of the ordinary shares or any compulsory share exchange pursuant to which the ordinary shares are effectively converted into or exchanged for other securities, cash or property, or (v) we, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another person or group of persons whereby such other person or group acquires more than 50% of the outstanding ordinary shares (not including any ordinary shares held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination, each a “Fundamental Transaction,” then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the warrants with the same effect as if such successor entity had been named in the warrant itself. If holders of our ordinary shares are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder of warrants shall be given the same choice as to the consideration it receives upon any exercise of the warrants following such fundamental transaction.

 

In the event of a Fundamental Transaction, we or a successor entity, as applicable, shall, at the option of the warrant holder, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase the warrant from the applicable warrant holder by paying to the holder an amount of cash equal to the Black Scholes Value (as defined in the warrant) of the remaining unexercised portion of the holder’s warrant on the date of the consummation of such Fundamental Transaction; provided, if the Fundamental Transaction is not within our control, the applicable holder shall only be entitled to receive from our company or a successor entity, as applicable, the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the warrant, that is being offered and paid to the holders of our ordinary shares in connection with the Fundamental Transaction, whether that consideration be in the form of cash, shares or any combination thereof, or whether the holders of our ordinary shares are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction, provided further, if that if holders of ordinary shares of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of ordinary shares will be deemed to have received ordinary shares of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction.

 

Dividends. If, at any time while the warrants are outstanding, we declare or make any dividend or other distribution of our assets (or rights to acquire our assets) to holders of our ordinary shares, by way of return of capital or otherwise, then each holder of ordinary shares shall be entitled to participate in such distribution, subject to the beneficial ownership limitations, to the same extent that the holder would have participated therein if the holder had held the number of ordinary shares acquirable upon complete exercise of warrants immediately prior to the record date for such distribution.

 

S-19

 

 

PLAN OF DISTRIBUTION

 

Placement Agent Agreement

 

We have entered into a placement agency agreement (the “Placement Agent Agreement”), dated September 20, 2021, with FT Global Capital, Inc. (“FT Global Capital”), pursuant to which FT Global Capital agreed to act as our exclusive Placement Agent in connection with this offering. The Placement Agent Agreement with FT Global Capital was attached as Exhibit 99.1 to our Report on Form 6-K filed September 20, 2021.

 

The Placement Agent is not purchasing any securities offered by this prospectus supplement, nor is it required to arrange the purchase or sale of any specific number or dollar amount of securities, but the Placement Agent has agreed to use its reasonable best efforts to arrange for the direct sale of all of the securities in this offering pursuant to this prospectus supplement and the accompanying prospectus. There is no requirement that any minimum number or dollar amount of securities be sold in this offering and there can be no assurance that we will sell all or any of the securities being offered. Therefore, we may not sell the entire amount of securities offered pursuant to this prospectus supplement. We have agreed to indemnify the Placement Agent and purchasers against liabilities under the Securities Act and to contribute to payments that the Placement Agent may be required to make in respect of such liabilities.

 

We entered into a Securities Purchase Agreement, dated as of September 20, 2021 with certain investors purchasing the securities being issued pursuant to this offering. The form of the Securities Purchase Agreement is included as an exhibit to our Report on Form 6-K filed with the SEC in connection with this offering. The closing of this offering will take place on or around September 22, 2021, and the following will occur:

 

we will receive funds in the amount of the aggregate purchase price;

 

  the Placement Agent will receive the Placement Agent fees and the Placement Agent Warrants in accordance with the terms of the Placement Agent Agreement; and

 

we will deliver the units, consisting of ordinary shares and warrants.

 

We have also agreed to indemnify the investors against certain losses resulting from our breach of any of our representations, warranties, or covenants under agreements with the purchasers as well as under certain other circumstances described in the Securities Purchase Agreement.

 

In connection with this offering, the Placement Agent may distribute this prospectus supplement and the accompanying prospectus electronically.

 

The Placement Agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, or the Securities Act, and any fees or commissions received by it and any profit realized on the resale of securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the Placement Agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 415(a)(4) under the Securities Act and Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of ordinary shares by the Placement Agent. Under these rules and regulations, the Placement Agent: (i) may not engage in any stabilization activity in connection with our securities; and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.

 

We have agreed, subject to certain exceptions, not to sell, offer or otherwise dispose of or transfer, directly or indirectly, any of our capital stock (including ordinary shares) or any securities convertible into or exchangeable for our capital stock, during a period commencing on the date of this prospectus supplement and ending 60 days after the closing of this offering without the prior written consent of the Placement Agent.

 

Fees

 

In consideration for these placement agent services, we have agreed to pay the Placement Agent upon the closing of this offering a cash fee equal to 6.5% of the aggregate purchase price of the units sold under this prospectus supplement and the accompanying prospectus. In addition, we agreed to pay additional compensation in the form of warrants (the Placement Agent Warrants) to purchase that number of ordinary shares which equals 4.0% of the aggregate number of ordinary shares included in the units sold in this offering at an exercise price of $1.60 per share. Under the Placement Agent Agreement, the Placement Agent is also entitled to additional tail compensation for any financings consummated within the nine (9) month period following the termination of the Placement Agent Agreement to the extent that such financing is provided to us by investors that the Placement Agent had introduced to us. The Placement Agent Warrants issuable to the Placement Agent shall generally be on the same terms and conditions as the warrants offered to investors, provided that the Placement Agent Warrants are exercisable at $1.60 per share and will not provide for certain anti-dilution protections included in the warrants offered to investors in accordance with FINRA Rule 5110.

 

Pursuant to FINRA Rule 5110(e), with limited exceptions, any ordinary shares issued upon exercise of the Placement Agent Warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of this offering.

 

S-20

 

 

We have agreed to indemnify the Placement Agent and purchasers against liabilities under the Securities Act and to contribute to payments that the Placement Agent may be required to make in respect of such liabilities.

 

The following table shows the per unit and total fees we will pay to the Placement Agent in connection with the sale of the securities offered pursuant to this prospectus supplement assuming the purchase of all of the units offered hereby:

 

   Per Unit   Total 
Offering price  $1.20   $32,799,960 
Placement Agent’s fees*  $0.078   $2,131,997.40 
Proceeds, before other expenses, to us  $1.122   $30,667,962.60 

 

* Does not include any Placement Agent Warrants

 

Because there is no minimum offering amount in this offering, the actual total placement agent fees are not presently determinable and may be substantially less than the maximum amount set forth above.

 

We estimate the total offering expenses of this offering that will be payable by us, excluding the Placement Agent’s fees, will be approximately $200,000, which include legal and printing costs, various other fees and expenses. At the closing, our transfer agent will credit the ordinary shares to the respective accounts of the purchasers. We will mail the warrants directly to the purchasers at their respective addresses set forth in the Securities Purchase Agreement.

 

The foregoing does not purport to be a complete statement of the terms and conditions of the Placement Agent Agreement and the Securities Purchase Agreement. Copies of the each have previously been included, or will be included, as exhibits to our Reports on Form 6-K that have been or will be filed with the SEC and incorporated by reference into the Registration Statement of which this prospectus supplement forms a part.

 

S-21

 

 

LEGAL MATTERS

 

Selected legal matters with respect to the validity of the securities offered by this prospectus supplement will be passed upon for us by Conyers Dill & Pearman LLP, Hong Kong. Certain legal matters governed by the laws of New York will be passed upon for us by Pryor Cashman LLP, New York, New York. Certain legal matters will be passed upon for the Placement Agent by Morgan, Lewis & Bockius LLP, Washington, D.C.

 

EXPERTS

 

The consolidated financial statements as of December 2020 and 2019, and for the fiscal years ended December 31, 2020, 2019 and 2018, incorporated by reference into this prospectus supplement have been audited by Moore Stephens CPA Limited, an independent registered public accounting firm, to the extent and for the periods set forth in their report incorporated herein by reference, and are incorporated by reference in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement on Form F-3 under the Securities Act with respect to the securities we are offering under this prospectus supplement. This prospectus supplement and the accompanying prospectus do not contain all of the information set forth in the registration statement and the exhibits to the registration statement.

 

For further information with respect to us and the securities we are offering under this prospectus supplement, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus supplement as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at http:/www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Because our ordinary shares are listed on the NASDAQ Capital Market, you may also inspect reports, proxy statements and other information at the offices of the NASDAQ Capital Market. Information found on our website is not part of this prospectus supplement or any other report we file with or furnish to the Securities and Exchange Commission.

 

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by our company of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the ordinary shares being offered hereunder, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

S-22

 

 

IMPORTANT INFORMATION INCORPORATED BY REFERENCE

 

The SEC allows us to “incorporate by reference” the information we file with them into this prospectus supplement. This means that we can disclose important information about us and our financial condition to you by referring you to another document filed separately with the SEC instead of having to repeat the information in this prospectus supplement. The information incorporated by reference is considered to be part of this prospectus supplement and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering is completed:

  

our Annual Report on Form 20-F for the year ended December 31 filed with the SEC on May 14, 2021;

 

our Reports on Form 6-K furnished with the SEC on February 5, 2021, February 11, 2021, February 17, 2021, June 9, 2021, June 15, 2021 and July 2, 2021; and

 

the description of our ordinary shares contained in our registration statement on Form 8-A, filed on May 7, 2010 (SEC File No. 001-34738), and any other amendment or report filed for the purpose of updating such description.

 

Additionally, all reports and other documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act after the date of this prospectus supplement and prior to the termination or completion of this offering, shall be deemed to be incorporated by reference in this prospectus supplement and to be part hereof from the date of filing of such reports and other documents. Any information that we subsequently file with the SEC that is incorporated by reference as described above will automatically update and supersede any previous information that is part of this prospectus supplement.

  

You may request a copy of the filings incorporated herein by reference, including exhibits to such documents that are specifically incorporated by reference, at no cost, by writing or calling us at the following address or telephone number:

 

Luokung Technology Corp.

Attention: Investor Relations

B9-8, Block B, SOHO Phase II, No. 9

Guanghua Road, Chaoyang District

Beijing People’s Republic of China 100020

(86) 10-65065217

 

Statements contained in this prospectus supplement as to the contents of any contract or other documents are not necessarily complete, and in each instance you are referred to the copy of the contract or other document filed as an exhibit to the registration statement or incorporated herein, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto.

 

S-23

 

 

PROSPECTUS

 

The information in this prospectus is not complete and may be changed. The selling shareholders may not sell these ordinary shares until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these ordinary shares, and it is not soliciting an offer to buy these ordinary shares in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED AUGUST 7, 2019

 

PROSPECTUS

 

$290,000,000
Ordinary Shares
Preferred Shares
Warrants
Subscription Rights
Debt Securities
Units

 

LUOKUNG TECHNOLOGY CORP.

 

We may offer, issue and sell from time to time up to $290,000,000, or its equivalent in any other currency, currency units, or composite currency or currencies, of our ordinary shares, including in the form of preferred shares, warrants to purchase ordinary shares or preferred shares, subscription rights, debt securities and a combination of such securities, separately or as units, in one or more offerings. This prospectus provides a general description of offerings of these securities that we may undertake.

 

We refer to our ordinary shares, preferred shares, warrants, subscription rights, debt securities, and units collectively as “securities” in this prospectus.

 

Each time we sell our securities pursuant to this prospectus, we will provide the specific terms of such offering in a supplement to this prospectus. The prospectus supplement may also add, update, or change information contained in this prospectus. You should read this prospectus, the accompanying prospectus supplement, together with the additional information described under the heading “Where You Can More Find Information,” before you make your investment decision.

 

We may, from time to time, offer to sell the securities, through public or private transactions, directly or through underwriters, agents or dealers, on or off The NASDAQ Capital Market, at prevailing market prices or at privately negotiated prices. If any underwriters, agents or dealers are involved in the sale of any of these securities, the applicable prospectus supplement will set forth the names of the underwriter, agent or dealer and any applicable fees, commissions or discounts.

 

Our Ordinary Shares are listed on The NASDAQ Capital Market under the symbol “LKCO”. On August 6, 2019, the last reported price of our Ordinary Shares on The NASDAQ Capital Market was $9.22 per ordinary share. As of August 6, 2019, the aggregate market value of our issued and outstanding ordinary shares held by non-affiliates was $884,666,358 based on 200,317,558 issued and outstanding ordinary shares and 1,000,000 preferred shares, of which 95,950,798 ordinary shares are held by non-affiliates, and a per share price of $9.22 which was the closing sale price of our ordinary shares as quoted on the Nasdaq Capital Market on August 6, 2019. We have not offered any securities pursuant to General Instruction I.B.5. of Form F-3 during the prior 12 calendar month period that ends on and includes the date hereof.

 

INVESTING IN OUR ORDINARY SHARES INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” ON PAGE 5, AS WELL AS THE RISKS DISCUSSED UNDER THE CAPTION “RISK FACTORS” IN THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is August 7, 2019

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
Prospectus Information 1
   
Business Description 2
   
Risk Factors 5
   
Special Note Regarding Forward–Looking Statements 6
   
Use Of Proceeds 6
   
Capitalization 7
   
Plan of Distribution 8
   
Description of Share Capital 12
   
Taxation 27
   
Expenses 27
   
Legal Matters 27
   
Experts 27
   
Where You Can Find More Information 27
   
Information Incorporated By Reference 28
   
Enforcement of Civil Liabilities 29
   
Disclosure Of Commission Position On Indemnification For Securities Act Liabilities 30

 

You should rely only on the information contained or incorporated by reference in this prospectus or any supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and any underwriter or agent is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

 

i

 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, using a “shelf” registration process. Under this shelf registration process, we may sell our securities described in this prospectus in one or more offerings up to a total dollar amount of $290,000,000. Each time we offer our securities, we will provide you with a supplement to this prospectus that will describe the specific amounts, prices and terms of the securities we offer. The prospectus supplement may also add, update or change information contained in this prospectus. This prospectus, together with applicable prospectus supplements and the documents incorporated by reference in this prospectus and any prospectus supplements, includes all material information relating to this offering. Please read carefully both this prospectus and any prospectus supplement together with additional information described below under “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.”

 

You should rely only on the information contained in or incorporated by reference in this prospectus and any applicable prospectus supplement. We have not authorized anyone to provide you with different or additional information. If anyone provides you with different or inconsistent information, you should not rely on it. 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 any sale of securities described in this prospectus. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement, as well as information we have previously filed with the SEC and incorporated by reference, is accurate as of the date on the front of those documents only. Our business, financial condition, results of operations and prospects may have changed since those dates. This prospectus may not be used to consummate a sale of our securities unless it is accompanied by a prospectus supplement.

 

In this prospectus, unless we indicate otherwise, “we”, “us”, “our”, “the Company” and “Luokung” refere to Luokung Technology Corp., as consolidated with its various subsidiaries. References to “ordinary shares”, “preference shares”, “warrants” and “share capital” refer to the ordinary shares, preference shares, warrants and share capital, respectively, of Luokung.

 

Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

 

We have not authorized anyone to provide you with information that is different from that contained in this prospectus, any amendment or supplement to this prospectus, or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. For investors outside of the United States: We have not taken any action to permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

1

 

 

In this prospectus, we have used industry and market data obtained from our own internal estimates and research as well as from industry publications and research, surveys and studies conducted by third parties. We have compiled, extracted and reproduced industry and market data from external sources that we believe to be reliable. We caution prospective investors not to place undue reliance on the above mentioned data. Unless otherwise indicated in the prospectus, the basis for any statements regarding our competitive position is based on our own assessment and knowledge of the market in which we operate. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

 

Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. The trademarks, trade names and service marks in this prospectus are the property of other respective owners.

 

We are a “foreign private issuer” as defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As a result, our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act and transactions in our equity securities by our officers and directors are exempt from Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

 

BUSINESS DESCRIPTION

 

LUOKUNG TECHNOLOGY CORP.

 

We are a holding company and conduct our operations through our wholly-owned subsidiary named LK Technology Ltd., a company incorporated under the laws of the British Virgin Islands(“LK Technology”), and its wholly-owned subsidiaries, MMB Limited and its respective subsidiaries, which possess two core brands “Luokuang” and “SuperEngine”. “Luokuang” is a mobile application to provide Business to Customer (B2C) location-based services and “SuperEngine” provides Business to Business (B2B) and Business to Government (B2G) services in connection with spatial-temporal big data processing.

 

We are a China-based provider of location-based services and mobile application products for long distance travelers in China. Our primary mobile application, the Luokuang platform, consists of the Luokuang mobile applications, a series of supporting software at the server end, and rail-Wi-Fi hardware and equipment on the trains that we serve. The LuoKuang platform incorporates technologies covered by 22 patents and about 34 software copyrights, and serves as a content and service distribution platform that is tailored for particular travel stages featuring geographic location and social interactions. The content and services distributed by Luokuang contain information, entertainment, travel, e-commerce, online to offline (“O2O”), advertisement and other marketing features. 

 

Luokuang mainly provides personalized and targeted services to long distance travelers in two locations: on the train and at the destination. Based on the travel environment, the core elements of our users’ needs include staving off boredom on trains and discovering and exploring new locations upon arrival. The main services contain entertainment services (videos and audio, digital readings, games specific and tailored to the travel stage) and social services (satisfying the demand for value discovery of unfamiliar destinations through social interaction among strangers based on locations). As of December 31, 2018, the Luokuang platform featured about 51 million users. 

 

2

 

 

We use the most valuable Wi-Fi location—the train Wi-Fi setting—as the entrance of our Luokuang platform and mobile applications. Passengers typically ride trains for long-distance and inter-provincial travel purposes. The long periods of monotonous journeys and the cost concerns for roaming traffic fees enable the combination of entertainment content service needs and Wi-Fi access needs. Our rail-Wi-Fi becomes a valuable and sophisticated Wi-Fi service in this setting—not just Wi-Fi connection service, but a provider of sophisticated services through a Wi-Fi connection. We do not define ourselves as a train Wi-Fi communication service operator but as a long-distance travel mobile service and location-based service provider. The rail Wi-Fi is our access point to a significant pool of users and the entrance to acquiring additional users.

 

The recommender services focus on providing targeted push services to users while travelling in unfamiliar cities. Local information and guidance service are precisely pushed according to individual user’s interest and taste, including restaurants, entertainment, living styles, local snacks, local products, scenic spots, cultural history and stories. The guidance service is User Generated Content which is shared and distributed by individual users including travelers, local residents and local businesses.

 

In June 2018, China Railway Gecent Technology Co., Ltd. (or “Gecent”) (established jointly by China Railway Investment Co., Ltd., Geely Holding Group and Tencent Holdings Ltd.) obtained the exclusive right to build and operate on train Wi-Fi for all the High-speed trains in China. It provides a full-travelling service including on train Wi-Fi, entertainments, news, online meals order, online specialty retailer and connecting travel. As the pathfinder in on-train Wi-Fi market in China, we have accumulated great experiences and resources in construction and operation on train Wi-Fi on express trains in China, which enable us to cooperate with Gecent to provide location-based services through the provision of our map SDKs (Software Development Kit) and APIs (Application-programming Interface), including services at train stations covering navigation and OTO services, and to provide movie content SDK, movie copyrights and operating services to the users of Gecent’s mobile application. Through the cooperation with Gecent, we are able to expand our services to more valuable high-speed train passengers, while the high-speed train Wi-Fi in China will cover about 3 billion passenger trips till the year of 2020.

 

Through the acquisition of Superengine Holding Limited (“Superengine”), we obtained patented technologies in spatial-temporal big data indexing, storage, transmission and visualization that can support the full vector maps without tile, which can be effectively applied to HD maps, location-based services, smart cities, intelligent transportation systems, mapping and surveying, remote sensing and monitoring. We possess fifteen patents and nine patent application rights in U.S., Europe, Japan and China. Our graphics processing system is a thousand times more efficient than competing technologies in querying, retrieving, transmitting and rendering graphical information, and allowing TB (Terabyte) sized data to be released in seconds, which enable our customers to obtain real-time operational intelligence by harnessing the value of their database.

 

3

 

 

Other Recent Events

 

We are a holding company and conduct our operations through our wholly-owned subsidiary named LK Technology Ltd., a company incorporated under the laws of the British Virgin Islands(“LK Technology”), and its wholly-owned subsidiaries, MMB Limited and its respective subsidiaries, which possess two core brands “Luokuang” and “SuperEngine”. “Luokuang” is a mobile application to provide Business to Customer (B2C) location-based services and “SuperEngine” provides Business to Business (B2B) and Business to Government (B2G) services in connection with spatial-temporal big data processing. In May 2010, we consummated an initial public offering of our American Depository Shares, or ADSs, for gross proceeds of $16 million, and our ADSs were listed on the NASDAQ Capital Market under the ticker symbol “KONE”. On August 17, 2018, we completed the transactions contemplated by the Asset Exchange Agreement (“AEA”) with C Media Limited (“C Media”) entered into on January 25, 2018. On August 20, 2018, we changed our name to Luokung Technology Corp., our American Depository Shares (“ADSs”) were voluntarily delisted from the NASDAQ Capital Market on September 19, 2018 and on January 3, 2019 our ordinary shares started trading on NASDAQ under the ticker symbol “LKCO”.

 

On August 17, 2018, we consummated an asset exchange transaction, pursuant to which we exchanged all issued and outstanding capital stock in Topsky Info-Tech Holdings Pte Ltd., the parent of Xi’an Softech Co., Ltd, for the issued and outstanding capital stock of LK Technology (the “Asset Exchange”). In connection with the Asset Exchange, we changed our name on August 20, 2018, and on September 20, 2018, issued to the shareholders of C Media Limited, the former parent of LK Technology, (i) 185,412,599 of our ordinary shares, par value $0.01 per share and (ii) 1,000,000 of our preferred shares. Upon the consummation of the Asset Exchange, we ceased our previous business operations and became a company focused on the provision of location-based service and mobile application products for long distance rail travelers in China.

 

On August 25, 2018, LK Technology entered into a Stock Purchase Agreement (the “Agreement”) with the shareholders of Superengine, a limited liability company organized under the laws of the British Virgin Islands, pursuant to which LK Technology acquired all of the issued and outstanding capital stock of Superengine for an aggregate purchase price of US$60 million (the “Purchase Price”), which are paid by the issuance of our Ordinary Shares in an amount equal to the quotient of (x) the Purchase Price divided by (y) the average of the closing prices of the Ordinary Shares on the NASDAQ Capital Market over the 12 months period preceding July 31, 2018. We are a party to the Agreement in connection with the issuance of the Ordinary Shares and certain other limited purposes.

 

Corporate Information

 

Our principal executive offices are located at LAB32, SOHO 3Q, No 9, Guanghua Road, Chaoyang District, Beijing, People’s Republic of China 100020.   Our website is www.luokung.com.  We routinely post important information on our website.  The information contained on our website is not a part of this annual report.

 

Our agent for service of process in the United States is Worldwide Stock Transfer, LLC, the current transfer agent of the Company, with a mailing address of One University Plaza, Suite 505, Hackensack, New Jersey 07601.

 

4

 

 

RISK FACTORS

 

An investment in our ordinary shares involves risk. Before you invest in ordinary shares issued by us, you should carefully consider the risks involved. Accordingly, you should carefully consider:

 

  the information contained in or incorporated by reference into this prospectus;

 

  the risks described in page 3 to page 19 of our Annual Report on Form 20-F, filed on April 24, 2019, for our most recent fiscal year, which are incorporated by reference into this prospectus; and

 

  other risks and other information that may be contained in, or incorporated by reference from, other filings we make with the SEC.

 

The risk factors related to our business contained in or incorporated by reference into this prospectus comprise the material risks of which we are aware. If any of the events or developments described actually occurs, our business, financial condition or results of operations would likely suffer.

 

Going Concern Note

 

The Company’s consolidated financial statements that are incorporated by reference have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations. The Company incurred losses from operations of $10,819,852, $6,871,542 and $12,283,219 for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, the Company had cash of $1,192,218 and a working capital deficit of $2,195,377. These conditions indicate the existence of substantial doubt over the Company’s ability to continue as a going concern. In order to alleviate the substantial doubt, the Company intend to meet the cash requirements for the next 12 months from the issuance date of this report through a combination of debt and equity financing such as by way of private placements.

 

5

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our Company and industry and involve risks and uncertainties. All statements other than statements of historical fact in this prospectus are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.

 

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” 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. These forward-looking statements include, but are not limited to, statements about: 

 

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

 

  expected changes in our net revenues and certain cost or expense items;

 

  our ability to attract and retain customers; and

 

  trends and competition in the spatial-temporal big-data processing and interactive location-based services market.

 

You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to this prospectus completely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this annual report discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, 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. We qualify all of our forward-looking statements by these cautionary statements. 

 

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in 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.

 

USE OF PROCEEDS

 

Except as otherwise provided in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities offered by this prospectus for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures and the acquisitions of new technologies and investments.

 

6

 

 

CAPITALIZATION

 

The following table sets forth our capitalization as of December 31, 2018. You should read this table in conjunction with our consolidated financial statements and the related notes included in our annual report on Form 20-F for the year ended December 31, 2018, which are incorporated by reference herein.

 

The capitalization table does not include pro-forma adjustments for the number of shares which are being registered on the registration statement of which this prospectus is a part and may be sold under the prospectus, because the full number of shares that may be sold cannot be specifically determined as it will be based on the market price of an ordinary share from time to time when puts are made by the Company.

 

   As of December 31,
2018
 
   USD$ 
Long term borrowings   244,755 
Shareholders’ equity:     
Preferred Shares ($0.01 par value; 1,000,000 shares authorized, issued and outstanding)   10,000 
Ordinary Shares ($0.01 par value; 250,000,000 shares authorized; 199,317,558 shares issued and outstanding)   1,993,176 
Additional paid in capital   102,125,814 
Accumulated deficit   (41,863,694)
      
Accumulated other comprehensive loss   835,463 
Total Luokung Technology Corp.  shareholders’ equity   63,100,759 
      
Total equity   63,100,759 
Total capitalization   63,345,514 

 

7

 

 

PLAN OF DISTRIBUTION

 

The Securities being offered by this prospectus may be sold:

 

  through agents;

 

  to or through one or more underwriters on a firm commitment or agency basis;

 

  through put or call option transactions relating to the securities;

 

  to or through dealers, who may act as agents or principals, including a block trade (which may involve crosses) in which a broker or dealer so engaged will attempt to sell as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

  through privately negotiated transactions;

 

  purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus;

 

  directly to purchasers, including our affiliates, through a specific bidding or auction process, on a negotiated basis or otherwise; to or through one or more underwriters on a firm commitment or best efforts basis;

 

  exchange distributions and/or secondary distributions;

 

  ordinary brokerage transactions and transactions in which the broker solicits purchasers;

 

  in “at-the-market” offerings, within the meaning of Rule 415(a)(4) of the Securities Act to or through a market maker or into an existing trading market, on an exchange or otherwise;

 

  transactions not involving market makers or established trading markets, including direct sales or privately negotiated transactions;

 

  transactions in options, swaps or other derivatives that may or may not be listed on an exchange or

 

  through any other method permitted pursuant to applicable law; or

 

  through a combination of any such methods of sale.

 

At any time a particular offer of the securities covered by this prospectus is made, a revised prospectus or prospectus supplement, if required, will be distributed which will set forth the aggregate amount of securities covered by this prospectus being offered and the terms of the offering, including the name or names of any underwriters, dealers, brokers or agents, any discounts, commissions, concessions and other items constituting compensation from us and any discounts, commissions or concessions allowed or re-allowed or paid to dealers. Such prospectus supplement, and, if necessary, a post-effective amendment to the registration statement of which this prospectus is a part, will be filed with the SEC to reflect the disclosure of additional information with respect to the distribution of the securities covered by this prospectus. In order to comply with the securities laws of certain states, if applicable, the securities sold under this prospectus may only be sold through registered or licensed broker-dealers. In addition, in some states the securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from registration or qualification requirements is available and is complied with.

 

8

 

 

The distribution of securities may be effected from time to time in one or more transactions, including block transactions and transactions on The NASDAQ Capital Market or any other organized market where the securities may be traded. The securities may be sold at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices relating to the prevailing market prices or at negotiated prices. The consideration may be cash or another form negotiated by the parties. Agents, underwriters or broker-dealers may be paid compensation for offering and selling the securities. That compensation may be in the form of discounts, concessions or commissions to be received from us or from the purchasers of the securities. Any dealers and agents participating in the distribution of the securities may be deemed to be underwriters, and compensation received by them on resale of the securities may be deemed to be underwriting discounts. If any such dealers or agents were deemed to be underwriters, they may be subject to statutory liabilities under the Securities Act.

 

Agents may from time to time solicit offers to purchase the securities. If required, we will name in the applicable prospectus supplement any agent involved in the offer or sale of the securities and set forth any compensation payable to the agent. Unless otherwise indicated in the prospectus supplement, any agent will be acting on a best efforts basis for the period of its appointment. Any agent selling the securities covered by this prospectus may be deemed to be an underwriter, as that term is defined in the Securities Act, of the securities.

 

To the extent that we make sales to or through one or more underwriters or agents in at-the-market offerings, we will do so pursuant to the terms of a distribution agreement between us and the underwriters or agents. If we engage in at-the-market sales pursuant to a distribution agreement, we will sell any of our listed securities to or through one or more underwriters or agents, which may act on an agency basis or on a principal basis. During the term of any such agreement, we may sell any of our listed securities on a daily basis in exchange transactions or otherwise as we agree with the underwriters or agents. The distribution agreement will provide that any of our listed securities which are sold will be sold at prices related to the then prevailing market prices for our listed securities. Therefore, exact figures regarding proceeds that will be raised or commissions to be paid cannot be determined at this time and will be described in a prospectus supplement. Pursuant to the terms of the distribution agreement, we also may agree to sell, and the relevant underwriters or agents may agree to solicit offers to purchase, blocks of our listed securities. The terms of each such distribution agreement will be set forth in more detail in a prospectus supplement to this prospectus.

 

If underwriters are used in a sale, securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale, or under delayed delivery contracts or other contractual commitments. Securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. If an underwriter or underwriters are used in the sale of securities, an underwriting agreement will be executed with the underwriter or underwriters, as well as any other underwriter or underwriters, with respect to a particular underwritten offering of securities, and will set forth the terms of the transactions, including compensation of the underwriters and dealers and the public offering price, if applicable. The prospectus and prospectus supplement will be used by the underwriters to resell the securities.

 

9

 

 

If a dealer is used in the sale of the securities, we or an underwriter will sell the securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of resale. To the extent required, we will set forth in the prospectus supplement the name of the dealer and the terms of the transactions.

 

We may directly solicit offers to purchase the securities and may make sales of securities directly to institutional investors or others. These persons may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale of the securities. To the extent required, the prospectus supplement will describe the terms of any such sales, including the terms of any bidding or auction process, if used.

 

Agents, underwriters and dealers may be entitled under agreements which may be entered into with us to indemnification by us against specified liabilities, including liabilities incurred under the Securities Act, or to contribution by us to payments they may be required to make in respect of such liabilities. If required, the prospectus supplement will describe the terms and conditions of the indemnification or contribution. Some of the agents, underwriters or dealers, or their affiliates may be customers of, engage in transactions with or perform services for us or our subsidiaries.

 

Any person participating in the distribution of securities registered under the registration statement that includes this prospectus will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the applicable SEC rules and regulations, including, among others, Regulation M, which may limit the timing of purchases and sales of any of our securities by that person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of our securities to engage in market-making activities with respect to our securities. These restrictions may affect the marketability of our securities and the ability of any person or entity to engage in market-making activities with respect to our securities.

 

Certain persons participating in an offering may engage in over-allotment, stabilizing transactions, short-covering transactions, penalty bids and other transactions that stabilize, maintain or otherwise affect the price of the offered securities. These activities may maintain the price of the offered securities at levels above those that might otherwise prevail in the open market, including by entering stabilizing bids, effecting syndicate covering transactions or imposing penalty bids, each of which is described below:

 

  a stabilizing bid means the placing of any bid, or the effecting of any purchase, for the purpose of pegging, fixing or maintaining the price of a security.

 

  a syndicate covering transaction means the placing of any bid on behalf of the underwriting syndicate or the effecting of any purchase to reduce a short position created in connection with the offering.

 

  a penalty bid means an arrangement that permits the managing underwriter to reclaim a selling concession from a syndicate member in connection with the offering when offered securities originally sold by the syndicate member are purchased in syndicate covering transactions.

 

10

 

 

These transactions may be effected on an exchange or automated quotation system, if the securities are listed on that exchange or admitted for trading on that automated quotation system, or in the over-the-counter market or otherwise.

 

If so indicated in the applicable prospectus supplement, we will authorize agents, underwriters or dealers to solicit offers from certain types of institutions to purchase offered securities from us at the public offering price set forth in such prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions set forth in the prospectus supplement and the prospectus supplement will set forth the commission payable for solicitation of such contracts.

 

In addition, the securities may be issued upon conversion of or in exchange for debt securities or other securities.

 

Any underwriters to whom offered securities are sold for public offering and sale may make a market in such offered securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The offered securities may or may not be listed on a national securities exchange. No assurance can be given that there will be a market for the offered securities.

 

Any securities that qualify for sale pursuant to Rule 144 or Regulation S under the Securities Act, may be sold under Rule 144 or Regulation S rather than pursuant to this prospectus.

 

In connection with offerings made through underwriters or agents, we may enter into agreements with such underwriters or agents pursuant to which we receive our outstanding securities in consideration for the securities being offered to the public for cash. In connection with these arrangements, the underwriters or agents may also sell securities covered by this prospectus to hedge their positions in these outstanding securities, including in short sale transactions. If so, the underwriters or agents may use the securities received from us under these arrangements to close out any related open borrowings of securities.

 

We may enter into derivative transactions with third parties or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, such third parties (or affiliates of such third parties) may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, such third parties (or affiliates of such third parties) may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of shares, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of shares. The third parties (or affiliates of such third parties) in such sale transactions will be underwriters and will be identified in the applicable prospectus supplement (or a post-effective amendment).

 

We may loan or pledge securities to a financial institution or other third party that in turn may sell the securities using this prospectus. Such financial institution or third party may transfer its short position to investors in our securities or in connection with a simultaneous offering of other securities offered by this prospectus or in connection with a simultaneous offering of other securities offered by this prospectus.

 

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DESCRIPTION OF SHARE CAPITAL

 

As of the date of this prospectus, our memorandum and articles of association authorize the issuance of up to a maximum of 251,000,000 shares, which are designated as (i) 250,000,000 of ordinary shares of which 200,317,558 ordinary shares are issued and outstanding, and (ii) 1,000,000 preferred shares of which 1,000,000 preferred shares are issued and outstanding, in each case with the rights, preferences and privileges as set out in the memorandum and articles of association of the Company.

 

The following is a summary of the material provisions of our ordinary shares and our memorandum and articles of association.

  

Ordinary Shares

  

All of our issued and outstanding ordinary shares are fully paid and non-assessable. Holders of our ordinary shares who are non-residents of the British Virgin Islands may freely hold and vote their shares. 

 

Subject to the memorandum and articles of association (and, for greater clarity, without prejudice to any special rights conferred thereby on the holders of any other shares), an ordinary share of the Company confers on the holder: 

 

  (a) the right to one vote at a meeting of the members or on any resolution of members;

 

  (b) the right to an equal share in any distribution paid by the Company; and

 

  (c) the right to an equal share in the distribution of the surplus assets of the Company on a winding up.

  

Subject to the memorandum and articles of association (and, for greater clarity, without prejudice to any special rights conferred thereby on the holders of any other shares), a preferred share of the Company confers on the holder: 

 

  (a) the right to 399 votes at a meeting of the members or on any resolution of members;

 

  (b) the right to an equal share in any distribution paid by the Company;

 

  (c) the right to an equal share in the distribution of the surplus assets of the Company on a winding up;

 

  (d) be freely transferable, in whole or in part, by Mr. Xuesong Song to any third party through one or more private transactions, subject to applicable law; and

 

  (e) be freely transferable, in whole or in part, by Mr. Xuesong Song to any third party through one or more public transactions, subject to applicable law and automatic conversion of such preferred share(s) into ordinary share(s).

 

Each Preferred Share shall be automatically converted at any time after issue and without the payment of any additional sum into an equal number of fully paid Ordinary Shares upon the conclusion of any transfer by Mr. Xuesong Song to any third party through one or more Public Transactions.

 

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DESCRIPTION OF SECURITIES TO BE REGISTERED

 

General

 

The following includes a description of securities we may offer pursuant to the registration statement of which this prospectus, as the same may be supplemented, forms a part, does not purport to be complete and is subject to and qualified in its entirety by our memorandum of association and articles of association and by the applicable provisions of British Virgin Islands law.

 

We, directly or through agents, dealers or underwriters designated from time to time, may offer, issue and sell, together or separately, up to $290,000,000 in the aggregate of:

 

  ordinary shares;

 

  preferred shares;

 

  secured or unsecured debt securities consisting of notes, debentures or other evidences of indebtedness which may be senior debt securities, senior subordinated debt securities or subordinated debt securities, each of which may be convertible into equity securities;

 

  warrants to purchase our securities;

 

  rights to purchase our securities; or

 

  units comprised of, or other combinations of, the foregoing securities.

 

We may issue the debt securities as exchangeable for or convertible into ordinary shares, preferred shares or other securities. The preferred shares may also be exchangeable for and/or convertible into ordinary shares of, another series of preferred shares or other securities. The debt securities, the preferred shares, the ordinary shares and the warrants are collectively referred to in this prospectus as the “Securities.” When a particular series of securities is offered, a supplement to this prospectus will be delivered with this prospectus, which will set forth the terms of the offering and sale of the offered securities.

 

Ordinary Shares

 

As of the date of this prospectus, our memorandum and articles of association authorize the issuance of up to a maximum of 251,000,000 shares, which are designated as (i) 250,000,000 of ordinary shares of which 200,317,558 ordinary shares are issued and outstanding, and (ii) 1,000,000 preferred shares of which 1,000,000 preferred shares are issued and outstanding, in each case with the rights, preferences and privileges as set out in the memorandum and articles of association of the Company.

 

The following is a summary of the material provisions of our ordinary shares and our memorandum and articles of association.

 

All of our issued and outstanding ordinary shares are fully paid and non-assessable. Holders of our ordinary shares who are non-residents of the British Virgin Islands may freely hold and vote their shares. 

 

Subject to the memorandum and articles of association (and, for greater clarity, without prejudice to any special rights conferred thereby on the holders of any other shares), an ordinary share of the Company confers on the holder: 

 

  (a) the right to one vote at a meeting of the members or on any resolution of members;

 

  (b) the right to an equal share in any distribution paid by the Company; and

 

  (c) the right to an equal share in the distribution of the surplus assets of the Company on a winding up.

 

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Preferred Shares

 

As of the date of this prospectus, our memorandum and articles of association authorize the issuance of up to a maximum of 1,000,000 preferred shares of which 1,000,000 preferred shares are issued and outstanding, in each case with the rights, preferences and privileges as set out in the memorandum and articles of association of the Company. As of the date of this prospectus, no preferred shares were authorized and not issued and outstanding.

 

Subject to the memorandum and articles of association (and, for greater clarity, without prejudice to any special rights conferred thereby on the holders of any other shares), a preferred share which is currently issued and outstanding confers on the holder: 

 

  (a) the right to 399 votes at a meeting of the members or on any resolution of members;

 

  (b) the right to an equal share in any distribution paid by the Company;

 

  (c) the right to an equal share in the distribution of the surplus assets of the Company on a winding up;

 

  (d) be freely transferable, in whole or in part, by Mr. Xuesong Song to any third party through one or more private transactions, subject to applicable law; and

 

  (e) be freely transferable, in whole or in part, by Mr. Xuesong Song to any third party through one or more public transactions, subject to applicable law and automatic conversion of such preferred share(s) into Ordinary Share(s).

 

Each Preferred Share shall be automatically converted at any time after issue and without the payment of any additional sum into an equal number of fully paid Ordinary Shares upon the conclusion of any transfer by Mr. Xuesong Song to any third party through one or more Public Transactions.

 

Our board may fix the rights, preferences, privileges and restrictions of authorized but undesignated preferred shares, including:

 

  dividend rights and preferences over dividends on our ordinary shares or any series of preferred shares;

 

  the dividend rate (and whether dividends are cumulative);

 

  conversion rights, if any;

 

  voting rights;

 

  rights and terms of redemption (including sinking fund provisions, if any);

 

  redemption price and liquidation preferences of any wholly unissued series of any preferred shares and the designation thereof of any of them; and

 

  to increase or decrease the number of shares of any series subsequent to the issue of shares of that series but not below the number of shares then outstanding.

 

You should refer to the prospectus supplement relating to the series of preferred shares being offered for the specific terms of that series, including:

 

  title of the series and the number of shares in the series;

 

  the price at which the preferred  shares will be offered;

 

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  the dividend rate or rates or method of calculating the rates, the dates on which the dividends will be payable, whether or not dividends will be cumulative or noncumulative and, if cumulative, the dates from which dividends on the preferred  shares being offered will cumulate;

 

  the voting rights, if any, of the holders of the preferred shares being offered;

 

  the provisions for a sinking fund, if any, and the provisions for redemption, if applicable, of the preferred  shares being offered, including any restrictions on the foregoing as a result of arrearage in the payment of dividends or sinking fund installments;

 

  the liquidation preferred per share;

 

  the terms and conditions, if applicable, upon which the preferred shares being offered will be convertible into our common stock, including the conversion price, or the manner of calculating the conversion price, and the conversion period;

 

  any listing of preferred shares being offered on any securities exchange;

 

  a discussion of any material federal income tax considerations applicable to the preferred shares being offered;

 

  any preemptive rights;

 

  the relative ranking and preferences of the preferred shares being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs;

 

  any limitations on the issuance of any class or series of preferred shares ranking senior or equal to the series of preferred shares being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs; and

 

  any additional rights, preferences, qualifications, limitations and restrictions of the series.  

 

Upon issuance, the preferred shares will be fully paid and nonassessable, which means that its holders will have paid their purchase price in full and we may not require them to pay additional funds.  

 

Any preferred shares terms selected by our board of directors could decrease the amount of earnings and assets available for distribution to holders of our ordinary shares or adversely affect the rights and power, including voting rights, of the holders of our ordinary shares without any further vote or action by the shareholders. The rights of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred shares that may be issued by us in the future. The issuance of preferred shares could also have the effect of delaying or preventing a change in control of our company or make removal of management more difficult.

 

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DESCRIPTION OF WARRANTS

 

We may issue and offer warrants under the material terms and conditions described in this prospectus and any accompanying prospectus supplement. The accompanying prospectus supplement may add, update or change the terms and conditions of the warrants as described in this prospectus.

 

We may issue warrants to purchase our ordinary shares, preferred shares and/or debt securities. Warrants may be issued independently or together with any securities and may be attached to or separate from those securities. The warrants may be issued under warrant or subscription agreements to be entered into between us and a bank or trust company, as warrant agent, all of which will be described in the prospectus supplement relating to the warrants we are offering. The warrant agent will act solely as our agent in connection with the warrants and will not have any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants.

 

The particular terms of the warrants, the warrant or subscription agreements relating to the warrants and the warrant certificates representing the warrants will be described in the applicable prospectus supplement, including, as applicable:

 

  the title of such warrants;

 

  the aggregate number of such warrants;

 

  the price or prices at which such warrants will be issued and exercised;

 

  the currency or currencies in which the price of such warrants will be payable;

 

  the securities purchasable upon exercise of such warrants;

 

  the date on which the right to exercise such warrants shall commence and the date on which such right shall expire;

 

  if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;

 

  if applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants issued with each such security;

 

  if applicable, the date on and after which such warrants and the related securities will be separately transferable;

 

  if applicable, any provisions for cashless exercise of the warrants;

 

  if applicable; any exercise limitations with respect to the ownership limitations by the holder exercising the warrant;

 

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

 

  any material United States federal income tax consequences;

 

  the anti-dilution provisions of the warrants, if any; and

 

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

 

Holders of warrants will not be entitled, solely by virtue of being holders, to vote, to consent, to receive dividends, to receive notice as shareholders with respect to any meeting of shareholders for the election of directors or any other matters, or to exercise any rights whatsoever as a holder of the equity securities purchasable upon exercise of the warrants.

 

The description in the applicable prospectus supplement of any warrants we offer will not necessarily be complete and will be qualified in its entirety by reference to the applicable warrant agreement and warrant certificate, which will be filed with the SEC if we offer warrants. For more information on how you can obtain copies of the applicable warrant agreement if we offer warrants, see “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.” We urge you to read any applicable prospectus supplement and the applicable warrant agreement and form of warrant certificate in their entirety.

 

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DESCRIPTION OF SUBSCRIPTION RIGHTS

 

We may issue subscription rights to purchase our ordinary shares and/or preferred shares. These subscription rights may be issued independently or together with any other security offered hereby and may or may not be transferable by the shareholder receiving the subscription rights in such offering. In connection with any offering of subscription rights, we may enter into a standby arrangement with one or more underwriters or other purchasers pursuant to which the underwriters or other purchasers may be required to purchase any securities remaining unsubscribed for after such offering.

 

The prospectus supplement relating to any subscription rights we offer, if any, will, to the extent applicable, include specific terms relating to the offering, including some or all of the following:

 

  the price, if any, for the subscription rights;

 

  the exercise price payable for each ordinary share and/or preferred share upon the exercise of the subscription rights;

 

  the number of subscription rights to be issued to each shareholder;

 

  the number and terms of the ordinary shares and/or preferred shares which may be purchased per each subscription right;

 

  the extent to which the subscription rights are transferable;

 

  any other terms of the subscription rights, including the terms, procedures and limitations relating to the exchange and exercise of the subscription rights;

 

  the date on which the right to exercise the subscription rights shall commence, and the date on which the subscription rights shall expire;

 

  the extent to which the subscription rights may include an over-subscription privilege with respect to unsubscribed securities; and

 

  if applicable, the material terms of any standby underwriting or purchase arrangement which may be entered into by us in connection with the offering of subscription rights.

 

The description in the applicable prospectus supplement of any subscription rights we offer will not necessarily be complete and will be qualified in its entirety by reference to the applicable subscription right agreement, which will be filed with the SEC if we offer subscription rights. For more information on how you can obtain copies of the applicable subscription right agreement if we offer subscription rights, see “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.” We urge you to read the applicable subscription right agreement and any applicable prospectus supplement in their entirety.

 

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DESCRIPTION OF DEBT SECURITIES

 

We may issue debt securities from time to time, in one or more series, as senior, subordinated debt and/or convertible debt. While the terms we have summarized below will apply generally to any debt securities that we may offer under this prospectus, we will describe the particular terms of any debt securities that we may offer in more detail in the applicable prospectus supplement. The terms of any debt securities offered under a prospectus supplement may differ from the terms described below. Unless the context requires otherwise, whenever we refer to the indenture, we also are referring to any supplemental indentures that specify the terms of a particular series of debt securities.

 

We will issue the debt securities under the indenture that we will enter into with the trustee named in the indenture. The indenture will be qualified under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”). We have filed the form of indenture as an exhibit to the registration statement of which this prospectus is a part, and supplemental indentures and forms of debt securities containing the terms of the debt securities being offered will be filed as exhibits to the registration statement of which this prospectus is a part or will be incorporated by reference from reports that we file with the SEC.

 

The following summary of material provisions of the debt securities and the indenture is subject to, and qualified in its entirety by reference to, all of the provisions of the indenture applicable to a particular series of debt securities. We urge you to read the applicable prospectus supplements and any related free writing prospectuses related to the debt securities that we may offer under this prospectus, as well as the complete indenture that contains the terms of the debt securities.

 

General

 

The indenture does not limit the amount of debt securities that we may issue. It provides that we may issue debt securities up to the principal amount that we may authorize and may be in any currency or currency unit that we may designate. Except for the limitations on consolidation, merger and sale of all or substantially all of our assets contained in the indenture, the terms of the indenture do not contain any covenants or other provisions designed to give holders of any debt securities protection against changes in our operations, financial condition or transactions involving us.

 

We may issue the debt securities issued under the indenture as “discount securities,” which means they may be sold at a discount below their stated principal amount. These debt securities, as well as other debt securities that are not issued at a discount, may be issued with “original issue discount,” or OID, for U.S. federal income tax purposes because of interest payment and other characteristics or terms of the debt securities. Material U.S. federal income tax considerations applicable to debt securities issued with OID will be described in more detail in any applicable prospectus supplement.

 

We will describe in the applicable prospectus supplement the terms of the series of debt securities being offered, including:

 

  the title of the series of debt securities;

 

  any limit upon the aggregate principal amount that may be issued;

 

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  the maturity date or dates;

 

  the form of the debt securities of the series;

 

  whether or not the debt securities will be secured or unsecured, and the terms of any secured debt;

 

  whether the debt securities rank as senior debt, senior subordinated debt, subordinated debt or any combination thereof, and the terms of any subordination;

 

  if the price (expressed as a percentage of the aggregate principal amount thereof) at which such debt securities will be issued is a price other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof, or if applicable, the portion of the principal amount of such debt securities that is convertible into another security or the method by which any such portion shall be determined;

 

  the interest rate or rates, which may be fixed or variable, or the method for determining the rate and the date interest will begin to accrue, the dates interest will be payable and the regular record dates for interest payment dates or the method for determining such dates;

 

  our right, if any, to defer payment of interest and the maximum length of any such deferral period;

 

  if applicable, the date or dates after which, or the period or periods during which, and the price or prices at which, we may, at our option, redeem the series of debt securities pursuant to any optional or provisional redemption provisions and the terms of those redemption provisions;

 

  the date or dates, if any, on which, and the price or prices at which we are obligated, pursuant to any mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the holder’s option to purchase, the series of debt securities and the currency or currency unit in which the debt securities are payable;

 

  the denominations in which we will issue the series of debt securities, if other than denominations of $1,000 and any integral multiple thereof;

 

  any and all terms, if applicable, relating to any auction or remarketing of the debt securities of that series and any security for our obligations with respect to such debt securities and any other terms which may be advisable in connection with the marketing of debt securities of that series;

 

  whether the debt securities of the series shall be issued in whole or in part in the form of a global security or securities;

 

  the terms and conditions, if any, upon which such global security or securities may be exchanged in whole or in part for other individual securities, and the depositary for such global security or securities;

 

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  if applicable, the provisions relating to conversion or exchange of any debt securities of the series and the terms and conditions upon which such debt securities will be so convertible or exchangeable, including the conversion or exchange price, as applicable, or how it will be calculated and may be adjusted, any mandatory or optional (at our option or the holders’ option) conversion or exchange features, the applicable conversion or exchange period and the manner of settlement for any conversion or exchange;

 

  if other than the full principal amount thereof, the portion of the principal amount of debt securities of the series which shall be payable upon declaration of acceleration of the maturity thereof;

 

  additions to or changes in the covenants applicable to the particular debt securities being issued, including, among others, the consolidation, merger or sale covenant;

 

  additions to or changes in the events of default with respect to the securities and any change in the right of the trustee or the holders to declare the principal, premium, if any, and interest, if any, with respect to such securities to be due and payable;

 

  additions to or changes in or deletions of the provisions relating to covenant defeasance and legal defeasance;

 

  additions to or changes in the provisions relating to satisfaction and discharge of the indenture;

 

  additions to or changes in the provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued under the indenture;

 

  the currency of payment of debt securities if other than U.S. dollars and the manner of determining the equivalent amount in U.S. dollars;

 

  whether interest will be payable in cash or additional debt securities at our or the holders’ option and the terms and conditions upon which the election may be made;

 

  the terms and conditions, if any, upon which we will pay amounts in addition to the stated interest, premium, if any and principal amounts of the debt securities of the series to any holder that is not a “United States person” for federal tax purposes;

 

  any restrictions on transfer, sale or assignment of the debt securities of the series; and

 

  any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities, any other additions or changes in the provisions of the indenture, and any terms that may be required by us or advisable under applicable laws or regulations.

 

Conversion or Exchange Rights

 

We will set forth in the applicable prospectus supplement the terms on which a series of debt securities may be convertible into or exchangeable for our common stock or our other securities. We will include provisions as to settlement upon conversion or exchange and whether conversion or exchange is mandatory, at the option of the holder or at our option. We may include provisions pursuant to which the number of shares of our common stock or our other securities that the holders of the series of debt securities receive would be subject to adjustment.

 

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Consolidation, Merger or Sale

 

Unless we provide otherwise in the prospectus supplement applicable to a particular series of debt securities, the indenture will not contain any covenant that restricts our ability to merge or consolidate, or sell, convey, transfer or otherwise dispose of our assets as an entirety or substantially as an entirety. However, any successor to or acquirer of such assets (other than a subsidiary of ours) must assume all of our obligations under the indenture or the debt securities, as appropriate.

 

Events of Default under the Indenture

 

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

 

  if we fail to pay any installment of interest on any series of debt securities, as and when the same shall become due and payable, and such default continues for a period of 90 days; provided, however, that a valid extension of an interest payment period by us in accordance with the terms of any indenture supplemental thereto shall not constitute a default in the payment of interest for this purpose;

 

  if we fail to pay the principal of, or premium, if any, on any series of debt securities as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to such series; provided, however, that a valid extension of the maturity of such debt securities in accordance with the terms of any indenture supplemental thereto shall not constitute a default in the payment of principal or premium, if any;

 

  if we fail to observe or perform any other covenant or agreement contained in the debt securities or the indenture, other than a covenant specifically relating to another series of debt securities, and our failure continues for 90 days after we receive written notice of such failure, requiring the same to be remedied and stating that such is a notice of default thereunder, from the trustee or holders of at least 25% in aggregate principal amount of the outstanding debt securities of the applicable series; and

 

  if specified events of bankruptcy, insolvency or reorganization occur.

 

If an event of default with respect to debt securities of any series occurs and is continuing, other than an event of default specified in the last bullet point above, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series, by notice to us in writing, and to the trustee if notice is given by such holders, may declare the unpaid principal of, premium, if any, and accrued interest, if any, due and payable immediately. If an event of default specified in the last bullet point above occurs with respect to us, the principal amount of and accrued interest, if any, of each issue of debt securities then outstanding shall be due and payable without any notice or other action on the part of the trustee or any holder.

 

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The holders of a majority in principal amount of the outstanding debt securities of an affected series may waive any default or event of default with respect to the series and its consequences, except defaults or events of default regarding payment of principal, premium, if any, or interest, unless we have cured the default or event of default in accordance with the indenture. Any waiver shall cure the default or event of default.

 

Subject to the terms of the indenture, if an event of default under an indenture shall occur and be continuing, the trustee will be under no obligation to exercise any of its rights or powers under such indenture at the request or direction of any of the holders of the applicable series of debt securities, unless such holders have offered the trustee reasonable indemnity. The holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect to the debt securities of that series, provided that:

 

  the direction so given by the holder is not in conflict with any law or the applicable indenture; and

 

  subject to its duties under the Trust Indenture Act, the trustee need not take any action that might involve it in personal liability or might be unduly prejudicial to the holders not involved in the proceeding.

 

A holder of the debt securities of any series will have the right to institute a proceeding under the indenture or to appoint a receiver or trustee, or to seek other remedies only if:

 

  the holder has given written notice to the trustee of a continuing event of default with respect to that series;

 

  the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made written request,

 

  such holders have offered to the trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred by the trustee in compliance with the request; and

 

  the trustee does not institute the proceeding, and does not receive from the holders of a majority in aggregate principal amount of the outstanding debt securities of that series other conflicting directions within 90 days after the notice, request and offer.

 

These limitations do not apply to a suit instituted by a holder of debt securities if we default in the payment of the principal, premium, if any, or interest on, the debt securities.

 

We will periodically file statements with the trustee regarding our compliance with specified covenants in the indenture.

 

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Modification of Indenture; Waiver

 

We and the trustee may change an indenture without the consent of any holders with respect to specific matters:

 

  to cure any ambiguity, defect or inconsistency in the indenture or in the debt securities of any series;

 

  to comply with the provisions described above under “Description of Debt Securities—Consolidation, Merger or Sale;”

 

  to provide for uncertificated debt securities in addition to or in place of certificated debt securities;

 

  to add to our covenants, restrictions, conditions or provisions such new covenants, restrictions, conditions or provisions for the benefit of the holders of all or any series of debt securities, to make the occurrence, or the occurrence and the continuance, of a default in any such additional covenants, restrictions, conditions or provisions an event of default or to surrender any right or power conferred upon us in the indenture;

 

  to add to, delete from or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication and delivery of debt securities, as set forth in the indenture;

 

  to make any change that does not adversely affect the interests of any holder of debt securities of any series in any material respect;

 

  to provide for the issuance of and establish the form and terms and conditions of the debt securities of any series as provided above under “Description of Debt Securities—General” to establish the form of any certifications required to be furnished pursuant to the terms of the indenture or any series of debt securities, or to add to the rights of the holders of any series of debt securities;

 

  to evidence and provide for the acceptance of appointment under any indenture by a successor trustee; or

 

  to comply with any requirements of the SEC in connection with the qualification of any indenture under the Trust Indenture Act.

 

In addition, under the indenture, the rights of holders of a series of debt securities may be changed by us and the trustee with the written consent of the holders of at least a majority in aggregate principal amount of the outstanding debt securities of each series that is affected. However, unless we provide otherwise in the prospectus supplement applicable to a particular series of debt securities, we and the trustee may make the following changes only with the consent of each holder of any outstanding debt securities affected:

 

  extending the fixed maturity of any debt securities of any series;

 

  reducing the principal amount, reducing the rate of or extending the time of payment of interest, or reducing any premium payable upon the redemption of any series of any debt securities; or

 

  reducing the percentage of debt securities, the holders of which are required to consent to any amendment, supplement, modification or waiver.

 

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Discharge

 

The indenture provides that we can elect to be discharged from our obligations with respect to one or more series of debt securities, except for specified obligations, including obligations to:

 

  provide for payment;

 

  register the transfer or exchange of debt securities of the series;

 

  replace stolen, lost or mutilated debt securities of the series;

 

  pay principal of and premium and interest on any debt securities of the series;

 

  maintain paying agencies;

 

  hold monies for payment in trust;

 

  recover excess money held by the trustee;

 

  compensate and indemnify the trustee; and

 

  appoint any successor trustee.

 

In order to exercise our rights to be discharged, we must deposit with the trustee money or government obligations sufficient to pay all the principal of, any premium, if any, and interest on, the debt securities of the series on the dates payments are due.

 

Form, Exchange and Transfer

 

We will issue the debt securities of each series only in fully registered form without coupons and, unless we provide otherwise in the applicable prospectus supplement, in denominations of $1,000 and any integral multiple thereof. The indenture provides that we may issue debt securities of a series in temporary or permanent global form and as book-entry securities that will be deposited with, or on behalf of, a depositary named by us and identified in the applicable prospectus supplement with respect to that series. To the extent the debt securities of a series are issued in global form and as book-entry, a description of terms relating to any book entry securities will be set forth in the applicable prospectus supplement.

 

At the option of the holder, subject to the terms of the indenture and the limitations applicable to global securities described in the applicable prospectus supplement, the holder of the debt securities of any series can exchange the debt securities for other debt securities of the same series, in any authorized denomination and of like tenor and aggregate principal amount.

 

Subject to the terms of the indenture and the limitations applicable to global securities set forth in the applicable prospectus supplement, holders of the debt securities may present the debt securities for exchange or for registration of transfer, duly endorsed or with the form of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the security registrar or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt securities that the holder presents for transfer or exchange, we will impose no service charge for any registration of transfer or exchange, but we may require payment of any taxes or other governmental charges.

 

We will name in the applicable prospectus supplement the security registrar, and any transfer agent in addition to the security registrar, that we initially designate for any debt securities. We may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts, except that we will be required to maintain a transfer agent in each place of payment for the debt securities of each series.

 

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If we elect to redeem the debt securities of any series, we will not be required to:

 

  issue, register the transfer of, or exchange any debt securities of that series during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of any debt securities that may be selected for redemption and ending at the close of business on the day of the mailing; or

 

  register the transfer of or exchange any debt securities so selected for redemption, in whole or in part, except the unredeemed portion of any debt securities we are redeeming in part.

 

Information Concerning the Trustee

 

The trustee, other than during the occurrence and continuance of an event of default under an indenture, undertakes to perform only those duties as are specifically set forth in the applicable indenture. Upon an event of default under an indenture, the trustee must use the same degree of care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the trustee is under no obligation to exercise any of the powers given it by the indenture at the request of any holder of debt securities, unless it is offered reasonable security and indemnity against the costs, expenses and liabilities that it might incur.

 

Payment and Paying Agents

 

Unless we otherwise indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest payment date to the person in whose name the debt securities, or one or more predecessor securities, are registered at the close of business on the regular record date for the interest.

 

We will pay principal of and any premium and interest on the debt securities of a particular series at the office of the paying agents designated by us, except that unless we otherwise indicate in the applicable prospectus supplement, we will make interest payments by check that we will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in the applicable prospectus supplement, we will designate the corporate trust office of the trustee as our sole paying agent for payments with respect to debt securities of each series. We will name in the applicable prospectus supplement any other paying agents that we initially designate for the debt securities of a particular series. We will maintain a paying agent in each place of payment for the debt securities of a particular series.

 

All money we pay to a paying agent or the trustee for the payment of the principal of or any premium or interest on any debt securities that remains unclaimed at the end of two years after such principal, premium or interest has become due and payable will be repaid to us, and the holder of the debt security thereafter may look only to us for payment thereof.

 

Governing Law

 

The indenture and the debt securities will be governed by and construed in accordance with the internal laws of the State of New York, except to the extent that the Trust Indenture Act is applicable.

 

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DESCRIPTION OF UNITS

 

We may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date.

 

The applicable prospectus supplement will describe:

 

  the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;

 

  any unit agreement under which the units will be issued;

 

  any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and

 

  whether the units will be issued in fully registered or global form.

 

The applicable prospectus supplement will describe the terms of any units. The preceding description and any description of units in the applicable prospectus supplement does not purport to be complete and is subject to and is qualified in its entirety by reference to the unit agreement and, if applicable, collateral arrangements and depositary arrangements relating to such units. For more information on how you can obtain copies of the applicable unit agreement if we offer units, see “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.” We urge you to read the applicable unit agreement and any applicable prospectus supplement in their entirety.

 

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TAXATION

 

The material U.S. federal income tax consequences relating to the purchase, ownership and disposition of any of the securities offered by this prospectus will be set forth in the prospectus supplement offering those securities.

 

EXPENSES

 

We are paying all of the expenses of the registration of our ordinary shares under the Securities Act, including, to the extent applicable, registration and filing fees, printing and duplication expenses, administrative expenses, accounting fees and the legal fees of our counsel. We estimate these expenses to be approximately $136,360 which at the present time include the following categories of expenses:

 

SEC registration fee   $ 35,148  
         
Legal fees and expenses   $ 50,000  
         
Accounting fees and expenses   $ 5,000  
         
Total   $ 90,148  

 

In addition, we anticipate incurring additional expenses in the future in connection with the offering of our ordinary shares pursuant to this prospectus. Any such additional expenses will be disclosed in a prospectus supplement.

 

LEGAL MATTERS

 

The validity of the ordinary shares offered by this prospectus will be passed upon for us by Conyers Dill & Pearman 29th Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong.

 

EXPERTS

 

The consolidated financial statements as of December 2018 and 2017 and for the fiscal years ended December 31, 2018, 2017 and 2016 incorporated by reference into this prospectus have been audited by Moore Stephens CPA Limited, an independent registered public accounting firm, to the extent and for the periods set forth in their report incorporated herein by reference, and are incorporated by reference in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

 

WHERE YOU CAN FIND MORE INFORMATION

 

Federal securities laws require us to file information with the SEC concerning our business and operations. Accordingly, we file annual, quarterly and current reports with the SEC. You may read and copy any document we file at the SEC’s public reference rooms, including those located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on public reference rooms. Our SEC filings are also available to the public from the SEC’s web site at http://www.sec.gov.

 

We have filed with the SEC a registration statement on Form F-3 under the Securities Act with respect to the ordinary shares being offering under this prospectus. This prospectus, which is a part of that registration statement, does not include all the information contained in the registration statement and its exhibits. For further information with respect to our Company and the ordinary shares, you should consult the registration statement and its exhibits. Statements contained in this prospectus concerning the provisions of any documents are summaries of those documents, and we refer you to the document filed with the SEC for more information. The registration statement and any of its amendments, including exhibits filed as a part of the registration statement or an amendment to the registration statement are available for inspection and copying as described above.

 

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INFORMATION INCORPORATED BY REFERENCE

 

The SEC allows us to “incorporate by reference” certain information we file with them in this prospectus. This means that we can disclose important information to you by referring you to the other information we have filed with the SEC. The information that we incorporate by reference is considered to be part of this prospectus. Information that we file later with the SEC will automatically update and supersede this information. Further, all filings we make under the Exchange Act prior to the termination of the offering shall be deemed to be incorporated by reference into this prospectus. The following documents filed by us with the SEC and any future filings under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act made prior to the termination of this offering are incorporated by reference:

 

  our Annual Report on Form 20-F for the fiscal year ended December 31, 2018, filed on April 24, 2019;

 

  our Form 6-K filed on July 9, 2019;

 

  the description of the ordinary shares contained in our Registration Statement on Form 8-A, filed on May 7, 2010 (SEC File No. 001-34738), and any other amendment or report filed for the purpose of updating such description.

 

This prospectus may contain information that updates, modifies or is contrary to information in one or more of the documents incorporated by reference in this prospectus. Reports we file with the SEC after the date of this prospectus may also contain information that updates, modifies or is contrary to information in this prospectus or in documents incorporated by reference in this prospectus. Investors should review these reports as they may disclose a change in our business, prospectus, financial condition or other affairs after the date of this prospectus.

 

We will also provide paper copies of our filings free of charge upon written or oral request. You can request a free copy of the above filings or any filings subsequently incorporated by reference into this prospectus by writing or calling us at:

 

  Luokung Technology Corp.
  Attention: Investor Relations
  LAB 32, SOHO 3Q, No 9, Guanghua Road
  Chaoyang District, Beijing
  People’s Republic of China, 100020
(tel.) (86) 10-85866721

 

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ENFORCEMENT OF CIVIL LIABILITIES

 

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

 

  political and economic stability;

 

  an effective judicial system;

 

  a favorable tax system;

 

  the absence of exchange control or currency restrictions; and

 

  the availability of professional and support services

 

However, certain disadvantages accompany incorporation in the British Virgin Islands. These disadvantages include:

 

  the British Virgin Islands has a less developed body of securities laws as compared to the United States and provides significantly less protection to investors; and

 

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

 

Article 157 of our articles of association requires that differences arising between the Company and any member in respect of the true intent and construction or the incidence or consequences of articles of association or the BVI Business Companies Act, touching anything done or executed, omitted or suffered in pursuance of the BVI Business Companies Act or touching any breach or alleged breach or otherwise relating to the premises or to articles of association or to the BVI Business Companies Act or other BVI law affecting the Company or to any of the affairs of the Company, be referred to arbitration.  Other than with respect to disputes of the type set out in  Article 157, arbitration is not stated to be the means for resolving matters with our shareholders.  This provision does not apply to claims made under the federal securities laws of the United States.  

 

Substantially all of our current operations are conducted in China, and substantially all of our assets are located in China. The majority of our directors and officers are nationals or residents of jurisdictions other than the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon such persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

 

We have been informed by Conyers Dill & Pearman our counsel as to British Virgin Islands law, that the United States and the British Virgin Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that a final judgment for the payment of money rendered by any general or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically enforceable in the British Virgin Islands. We have also been advised by Conyers Dill & Pearman that a final and conclusive judgment obtained in U.S. federal or state courts under which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in the Supreme Court of the British Virgin Islands under the common law doctrine of obligation. This type of action should be successful upon proof that the sum of money is due and payable, without having to prove the facts supporting the underlying judgment, as long as:

 

  the foreign court issuing the judgment had jurisdiction in the matter and we either submitted to such jurisdiction or were resident or carrying on business within such jurisdiction and were duly served with process; and

 

  the judgment was not contrary to public policy in the British Virgin Islands, was not obtained by fraud or in proceedings contrary to the natural justice of the British Virgin Islands, and was not based on an in British Virgin Islands law.

 

A British Virgin Islands court may impose civil liability on us or our directors or officers in a suit brought in the Supreme Court of the British Virgin Islands against us or these persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding any violation constitute or give rise to a cause of action under British Virgin Islands law.

 

29

 

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR

SECURITIES ACT LIABILITIES

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the ordinary shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

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Luokung Technology Corp.

 

27,333,300 Ordinary Shares

 

Investor Warrants to Purchase up to 13,666,650 Ordinary Shares and

13,666,650 Ordinary Shares Underlying the Investor Warrants

 

Placement Agent Warrants to Purchase up to 1,093,332 Ordinary Shares and

1,093,332 Ordinary Shares Underlying the Placement Agent Warrants

 

Prospectus Supplement

 

FT Global Capital, Inc.

 

September 20, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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