Hunter Maritime Acquisition (HUNTF) Risk Analysis

Under PRC law, legal documents for corporate transactions, including agreements and contracts such as the leases and sales contracts that its business relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the State Administration of Taxation, or the SAIC. We generally execute legal documents by affixing chops or seals, rather than having the designated legal representatives sign the documents. We have six major types of chops (similar to a corporate seal in the United States)-corporate chops, contract chops and finance chops, invoice chops, human resources chops and legal person chops. We us corporate chops generally for documents to be submitted to government agencies, such as applications for changing business scope, directors or company name, and for legal letters. We use contract chops for executing leases and commercial contracts. We use finance chops generally for making and collecting payments, including issuing invoices. Use of corporate chops and contract chops must be approved by our legal department and administrative department, and use of finance chops must be approved by our finance department. The chops of our subsidiaries and consolidated VIEs are generally held by the relevant entities so that documents can be executed locally. Although we usually utilize chops to execute contracts, the registered legal representatives of our subsidiaries and consolidated VIEs have the apparent authority to enter into contracts on behalf of such entities without chops, unless such contracts set forth otherwise. In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to the designated key employees of our legal, administrative or finance departments. Our designated legal representatives generally do not have access to the chops. Although we have approval procedures in place and mechanisms to monitor our key employees, including the designated legal representatives of our subsidiaries and consolidated VIEs, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our key employees or designated legal representatives could abuse their authority, for example, by binding our subsidiaries and consolidated VIEs with contracts against our interests, as we would be obligated to honor these contracts if the other contracting party acts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designated legal representative obtains misappropriates the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or board resolution to designate a new legal representative and to take legal actions to seek the return of the chop, apply for a new chop with the relevant authorities, or otherwise seek legal remedies for the legal representative's misconduct. If any of the designated legal representatives obtain, misuses or misappropriates its chops and seals or other controlling intangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources expenses while distracting management from our operations, and our business and operations may be materially and adversely affected.

Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. In addition, any gain realized on the transfer of shares by such investors is also subject to PRC tax at a rate of 10%, if such gain is regarded as income derived from sources within the PRC. If the combined company is deemed a PRC resident enterprise, dividends paid on its common shares, and any gain realized from the transfer of its common shares, may be treated as income derived from sources within the PRC and may as a result be subject to PRC taxation. Furthermore, if the combined company is deemed a PRC resident enterprise, dividends paid to individual investors who are non-PRC residents and any gain realized on the transfer of common shares by such investors may be subject to PRC tax at a current rate of 20% (which in the case of dividends may be withheld at source). Any PRC tax liability may be reduced under applicable tax treaties or tax arrangements between China and other jurisdictions. If the combined company or any of its subsidiaries established outside China are considered a PRC resident enterprise, it is unclear whether holders of its common shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends paid to its non-PRC investors, or gains from the transfer of its common shares by such investors, are deemed as income derived from sources within the PRC and thus are subject to PRC tax, the value of your investment in its common shares may decline significantly.

We may call the Warrants for redemption at any time after the redemption criteria described elsewhere in this annual report have been satisfied. If we call the Warrants for redemption, Warrant holders may be forced to accept a nominal redemption price or sell or exercise the Warrants when they may not wish to do so.

We have granted the former stockholders of NCF and our pre-IPO security holders the right to demand that we register their unregistered Class A common shares and Warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of the Class A common shares.

An active trading market for our securities may never fully develop or, if developed, it may not be sustained. In addition, the price of the securities after the offering can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the Over the Counter Bulletin Board, a FINRA-sponsored and operated inter-dealer automated quotation system for equity securities not included in a securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national exchange. You may be unable to sell your securities unless a market can be established or sustained.

To provide a fund to secure the indemnification obligations of the former NCF Stockholders to us against losses that we may sustain as a result of or in connection with any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties and covenants of NCF contained in the Merger Agreement or any certificate or other writing delivered to us pursuant to the Merger Agreement, a portion of the Closing Payment Shares, in the aggregate of 15,000,000 Class A common shares, were placed in escrow, valued at $10.00 per share, which will be returned for cancellation to the extent that we have damages for which we are entitled to indemnification.

The vast majority of our publicly trading Class A common shares were redeemed in connection with the Business Combination and our Class A common shares have limited liquidity. As a result, there was significant volatility in our trading price immediately after the closing of the Business Combination and our Nasdaq halted trading in our shares on March 27, 2019 due to such trading volatility. In addition, on April 24, 2019, we received notification from the Nasdaq Hearings Panel (the "Panel") that the Panel determined to suspend trading in our securities effective at the open of business on Friday, April 26, 2019 and to formally delist the securities on May 9, 2019 unless we appeal the decision. Although we intend to appeal the decision and take all action that we can to remain listed, we cannot assure you that we will be able to remain listed. In the event that we fail to remain listed, our stock will experience reduced liquidity than if we were able to remain on Nasdaq.

No Warrants will be exercisable on a cash basis and we will not be obligated to issue registered Class A common shares unless the Class A common shares issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the Warrants. Because the exemptions from qualification in certain states for re-sales of Warrants and for issuances of Class A common shares by the issuer upon exercise of a Warrant may be different, a Warrant may be held by a holder in a state where an exemption is not available for issuance of Class A common shares upon exercise of the Warrants and the holder will be precluded from exercising the Warrant. As a result, the Warrants may be deprived of any value, the market for the Warrants may be limited and the holders of Warrants may not be able to exercise their Warrants if the Common Stock issuable upon such exercise is not qualified or exempt from qualification in the jurisdictions in which the holders of the Warrants reside.

We are a corporation incorporated under the laws of the Marshall Islands, and certain of our assets may in the future be located outside the United States. In addition, all of our directors and officers, and their assets, are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws. You may also have difficulty bringing an original action in the appropriate court of the Marshall Islands to enforce liabilities against us or any person based upon the U.S. federal securities laws.

Our securities are listed on the Nasdaq Capital Market, although they are currently suspended from trading. On July 23, 2018, we received a written notice from the Listing Qualifications Department of Nasdaq indicating that we are not in compliance with Listing Rule 5550(a)(3), which requires us to have at least of 300 shareholders for continued listing on the exchange (the "Minimum Shareholders Rule"). On September 13, 2018, we submitted to Nasdaq a plan to maintain our Nasdaq listing. Nasdaq accepted our plan and granted us an extension of 180 calendar days from the date of the notice, or until January 22, 2019, to evidence compliance with this rule. On January 24, 2019, we received a letter from Nasdaq stating that the Company had failed to demonstrate compliance with the Minimum Shareholders Rule within the required time period and that, accordingly, the Nasdaq staff had initiated procedures to delist our Class A common shares, units and warrants from Nasdaq. We subsequently appealed the delisting determination, and, subsequent to a February 28, 2019 hearing and subject to certain conditions, we were granted until June 15, 2019 to meet the Minimum Shareholders Rule. In addition, on March 27, 2019, Nasdaq suspended trading in our securities due to the significant volatility in our common stock subsequent to the Business Combination. Subsequently, on April 24, 2019, we received notification from the Nasdaq Hearings Panel (the "Panel") that the Panel determined to suspend trading in our securities effective at the open of business on Friday, April 26, 2019 and to formally delist the securities on May 9, 2019 unless we appeal the decision. Although we intend to appeal the decision and take all action that we can to remain listed, we cannot assure you that we will be able to remain listed. In the event that we fail to remain listed, our stock will experience reduced liquidity than if we were able to remain on Nasdaq. As a result of Nasdaq's suspension or delisting of our securities, we could face significant material adverse consequences, including: - a limited availability of market quotations for our securities;- reduced liquidity for our securities;- a determination that our Class A common shares are a "penny stock" which will require brokers trading in our Class A common shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;- a limited amount of news and analyst coverage; and - a decreased ability to issue additional securities or obtain additional financing in the future.

If at any time we have net tangible assets of $5,000,001 or less and our common shares have a market price per share of less than $5.00, transactions in our common shares may be subject to the "penny stock" rules promulgated under the Exchange Act. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must: - make a special written suitability determination for the purchaser;- receive the purchaser's written agreement to the transaction prior to sale;- provide the purchaser with risk disclosure documents which identify certain risks associated with investing in "penny stocks" and which describe the market for these "penny stocks" as well as a purchaser's legal remedies; and - obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a "penny stock" can be completed. If our common shares become subject to these rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. As a result, the market price of our securities may be depressed, and you may find it more difficult to sell our securities.

NCF was a private company and its internal controls and procedures, especially over financial reporting, may not be able to sufficiently identify any material weaknesses and control deficiencies that could lead to inaccuracies in our financial statements. NCF's independent registered public accounting firm has not conducted an attestation of its internal control over financial reporting. However, in connection with the audits of its consolidated financial statements as of and for the fiscal years ended December 31, 2018, NCF and its independent registered public accounting firm identified three "material weaknesses," and other control deficiencies including significant deficiencies in its internal control over financial reporting. As defined in the standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB, a "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified related to (i) a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements; (ii) a lack of sufficient documented financial closing policies and procedures; and (iii) a lack of written policy to identify related party and related party transactions. Subsequent testing by us or our independent registered public accounting firm may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Upon completion of this annual report, NCF has merged with a wholly owned subsidiary of Hunter Maritime, a public company in the United States and the combined company will be subject to the Sarbanes-Oxley Act of 2002. Section 404 of this Act will require that the combined company include a report of management on its internal control over financial reporting in its annual report on Form 20-F. However, as an "emerging growth company" as defined in the JOBS Act, the combined company may choose to not comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 as to the effectiveness of its internal controls over financial reporting until such time that it ceases to be an "emerging growth company," although it will still be required to implement and maintain internal control over financial reporting and include the management assessment in its annual reports under Section 404. To comply with Section 404, the combined company may incur substantial costs, expend significant management time on compliance-related issues and hire additional accounting, financial and internal audit staff with appropriate public company experience and technical accounting knowledge. Moreover, if the combined company is not able to comply with the requirements of Section 404 in a timely manner or if it or its independent registered public accounting firm identifies deficiencies in its internal control over financial reporting that are deemed to be material weaknesses, the combined company could be subject to sanctions or investigations by the U.S. Securities and Exchange Commission or other regulatory authorities, which would require additional financial and management resources. Any failure to maintain effective disclosure controls and procedures or internal control over financial reporting could have a material adverse effect on the combined company's business and operating results.

We commenced our online fintech marketplace business in July 2013 and thus have a limited operating history. We have limited experience in most aspects of our business operations, such as loan product offerings, data-driven credit assessment, and the development of long-term relationships with borrowers, investors and institutional funding partners. We seek to expand the base of prospective borrowers that we serves, which may result in higher delinquency rates of transactions we facilitate. As our business develops or in response to competition, we may continue to introduce new products and services, make adjustments to our existing products and our business model. Any significant change to our business model not achieving expected results may have a material adverse impact on our financial condition and results of operations. You should consider our business and prospects in light of the risks and challenges we encounter or may encounter given the rapidly evolving market in which we operate and our limited operating history. These risks and challenges include, among other things, our ability to: - offer personalized and competitive products and services;- increase the utilization of its products and services by existing borrowers and investors as well as new borrowers and investors;- offer attractive service fee rates while driving growth in size and profitability of its business; maintain low delinquency rates of loans facilitated by it;- develop sufficient, diversified, cost-efficient and reputable funding sources;- maintain and enhance its relationships with its other business partners;- broaden its prospective borrower and investor base;- navigate a complex and evolving regulatory environment;- improve its operational efficiency;- attract, retain and motivate talented employees to support its business growth;- enhance its technology infrastructure to support the growth of its business and maintain the security of its system and the confidentiality of the information provided and utilized across its system;- navigate economic condition and fluctuation;- compete profitably within our industry; and - defend itself against legal and regulatory actions, such as actions involving intellectual property or privacy claims.

Our business relies mainly on asset cooperative institutions (the companies who introduce us to qualified borrowers) and funding cooperative institutions (the companies who introduce us to funding sources or investors) to bring assets and funds. As of December 31, 2018, we worked with 28 asset cooperative institutions and 74 funding cooperative institutions, among which 11 asset cooperative institutions and 14 funding cooperative institutions are related parties. Because a large part of our business and capital comes from our related parties, we are dependent on these important associated asset cooperative institutions and funding cooperative institutions. There were three (one from a related party), four (two from related parties), and two (one from a related party) asset cooperative institutions that accounted for 55% (17% from a related party), 57% (26% from a related party), and 43% (20% from a related party) of the total loan facilitated as of December 31, 2018, 2017 and 2016, respectively. There were two (two from related parties), two (two from related parties), and one (one from a related party) funding cooperative institutions that accounted for 64% (64% from related parties), 39% (39% from related parties) and 39% (39% from related parties), of the total loan facilitated as of December 31, 2018, 2017 and 2016, respectively. The loss of support from related parties will adversely affect our core business.

The amount of loans facilitated through NCF's platform was approximately RMB 77 billion (USD 11 billion) in 2016, approximately RMB 95 billion (USD 15 billion) in 2017 and approximately RMB 71 billion (USD 10 billion) in 2018. To maintain and increase the amount of loans we facilitate, we must continue to engage our existing borrowers and attract new borrowers. If we are unable to attract borrowers or if borrowers do not continue to use our products and services, we may be unable to increase the amount of loans we facilitate and corresponding revenues, and our business and results of operations may be materially and adversely affected.

We offer our products and services based on the risk assessment conducted by our proprietary credit analysis and risk management system. Our system uses machine learning and modeling techniques to analyze transaction and repayment data from loans that we facilitated and data from applicants and other third-party sources. Even though we have accumulated a large amount of applicant data and extensive credit analysis experience to perform risk management analysis in our system, our credit analysis and risk management system may not provide an accurate risk assessment for borrowers. If our credit analysis model contains inaccurate assumptions or inefficiencies through model updates, or if the credit data and analysis we obtain is inaccurate or outdated, our credit analysis could result in us making loans we should not be making. If we are unable to effectively and accurately assess the credit profiles of applicants based on their credit profiles, we may be unable to offer attractive service fee rates and products and services to borrowers, be unable to maintain low delinquency rates for loans we facilitate, or be unable to maintain satisfactory annualized investment returns for investors. If our proprietary credit analysis and risk management system fails to perform effectively, our business, liquidity and results of operations may be materially and adversely affected.

Investments in our Wangxin platform and Wangxin Puhui platform involve inherent risks as the return of the principal on an investment made through our platforms is guaranteed by guarantors. If widespread defaults were to occur, regardless of whether such defaults resulted from a failure of our risk management system, our investors may lose confidence in our platforms and our business and results of operations may be materially and adversely affected.

Wangxin Puhui platform's business of connecting investors and individual borrowers constitutes an intermediary service, and its contracts with investors and borrowers are intermediation contracts under the PRC Contract Law. Under the PRC Contract Law, an intermediary that intentionally conceals any material information or provides false information in connection with the conclusion of an intermediation contract, which results in harm to the client's interests may not claim for any service fee for its intermediary services, and is liable for any damage incurred by the client. Therefore, if Wangxin Puhui platform fails to provide material information to investors and are found to be at fault for failure or deemed the failure to exercise proper care, or to conduct adequate information verification or supervision, Wangxin Puhui platform could be subject to liabilities as an intermediary under the PRC Contract Law. In addition, the Interim Measures and the Inspection Notice have imposed on online lending information intermediaries, including us, additional obligations to verify the truthfulness of the information provided by or in relation to loan applicants and to actively detect fraud, conduct risk evaluation of lenders, categorize lenders and disclose the risk information on borrowers to the lenders. Wangxin Puhui platform leverages a large database of past fraud accounts information and sophisticated rule-based detection technology in detecting fraudulent behaviors. Based on new data collected and fraudulent behaviors detected during its daily business operations, Wangxin Puhui platform updates its database on a monthly basis. As the Interim Measures are relatively new, it is still unclear to what extent online lending information intermediaries should exercise care in detecting fraud. Although Wangxin Puhui platform believe that as an information intermediary, Wangxin Puhui platform should not bear the credit risk for investors as long as Wangxin Puhui platform takes reasonable measures to detect fraudulent behaviors, Wangxin Puhui platform cannot assure you that Wangxin Puhui platform would not be subject to any liabilities under the Interim Measures if Wangxin Puhui platform fails to detect any fraudulent behavior. If that were to occur, its results of operations and financial condition could be materially and adversely affected

Historically, NCF has issued equity shares to support the growth of its business. As we intend to continue to make investments to support the growth of our business, the combined company may require additional capital to accomplish our business objectives and pursue business opportunities, and respond to challenges or unforeseen circumstances, including developing new products and services, further enhancing our risk management capabilities, increasing our marketing expenditures to improve brand awareness and enhancing our operating infrastructure. Accordingly, the combined company may need to engage in equity or debt financings to secure additional funds. However, additional funds may not be available when the combined company needs them, on terms acceptable to it, or at all. In the event that the combined company obtains debt financing, repayment of debt may divert a substantial portion of cash flow, which would reduce funds available for expenses and payment pursuant to other general corporate purposes. Volatility in the credit markets may also have an adverse effect on its ability to obtain debt financing. If the combined company raises additional funds through further issuances of equity or convertible debt securities, its existing stockholders could suffer significant dilution, and any new equity securities the combined company issues could have rights, preferences, and privileges superior to those of holders its common shares. If the combined company is unable to obtain adequate financing or financing on terms satisfactory to it when it is needed, its ability to continue to accomplish its business objectives and pursue business opportunities, and respond to challenges or unforeseen circumstances could be significantly limited, and its business, operating results, financial condition and prospects could be adversely affected.

The exercise price for our Public Warrants is $11.50 per share. There is no guarantee that the Public Warrants will ever be in the money when they are exercisable, and as such, the Public Warrants may expire worthless.

NCF is a holding company and relies to a significant extent on dividends and other distributions on equity paid by its principal operating subsidiaries, including its wholly-owned PRC subsidiaries and the subsidiaries of each VIE and on remittances from the consolidated VIEs, for its offshore cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders, fund intercompany loans, service any debt NCF may incur outside of China and pay its expenses. When its principal operating subsidiaries or the consolidated VIEs incur additional debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions or remittances to us. Furthermore, the laws, rules and regulations applicable to its PRC subsidiary and certain other subsidiaries permit payments of dividends only from part of their retained earnings, if any, determined in accordance with applicable PRC accounting standards and regulations. Under PRC laws, rules and regulations, each of its subsidiaries incorporated in China is required to set aside at least 10% of its net income each year to fund certain statutory reserves until the cumulative amount of such reserves reaches 50% of its registered capital. These reserves, together with the registered capital, are not included in the retained earnings distributable as cash dividends. Furthermore, under PRC law, its wholly-owned PRC subsidiary, which is a wholly foreign-owned enterprise under PRC law, cannot distribute any profits until all of its losses from prior fiscal years have been offset. In accordance with the articles of association of its wholly-owned PRC subsidiary, profit distributions also need to be approved by its executive directors and shareholders before any distribution plan becomes effective. As a result, its subsidiaries incorporated in China are restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends, loans or advances. In addition, registered share capital and statutory reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. Limitations on the ability of its consolidated VIEs to make remittance to the wholly-foreign owned enterprise and on the ability of its subsidiaries to pay dividends to us could limit its ability to access cash generated by the operations of those entities, including to make investments or acquisitions that could be beneficial to its businesses, pay dividends to its shareholders or otherwise fund and conduct its business.

In October 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the State Administration of Taxation, on December 10, 2009, and partially replaced and supplemented rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises or Bulletin 7, issued by the State Administration of Taxation, on February 3, 2015. Pursuant to Bulletin 7, an "indirect transfer" of PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of the underlying PRC assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, "PRC taxable assets" include assets attributed to an establishment in China, immovable properties located in China, and equity investments in PRC resident enterprises and any gains from the transfer of such asset by a direct holder, who is a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a "reasonable commercial purpose" of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In the case of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and may consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to immovable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Pursuant to Bulletin 37, the withholding agent shall declare and pay the withheld tax to the competent tax authority in the place where such withholding agent is located within 7 days from the date of occurrence of the withholding obligation, while the transferor is required to declare and pay such tax to the competent tax authority within the statutory time limit according to Bulletin 7. Late payment of applicable tax will subject the transferor to default interest. Both Bulletin 37 and Bulletin 7 do not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange. There is uncertainty as to the application of Bulletin 37 or previous rules under Bulletin 7. We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in its offshore subsidiaries or investments. We may be subject to filing obligations or taxes if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under Bulletin 37 and Bulletin 7. For transfer of shares in our company by investors that are non-PRC resident enterprises, its PRC subsidiary may be requested to assist in the filing under Bulletin 37 and Bulletin 7. As a result, we may be required to expend valuable resources to comply with Bulletin 37 and Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

NCF Cloud Services holds the Certification of High-tech Enterprise (No. GR201711004462) issued by Beijing Municipal Science and Technology Commission, Beijing Local Taxation Bureau, Beijing Municipal Finance Bureau, Beijing Municipal State Taxation Bureau and Beijing Local Taxation Bureau on October 25, 2017, and the term of validity of the certificate is three years. According to the Corporate Income Tax Law of the People's Republic of China, corporate income tax for key advanced and new technology enterprises supported by the State shall be at a reduced tax rate of 15%. NCF Cloud Services holds the Certification of Software Company (Jing RQ-2018-1107) issued by Beijing Software and Information Service Industry Association on November 30, 2018, and the term of validity of the certificate is one year. According to Promulgation of Several Policies for Further Encouraging the Development of Software and Integrated Circuit Industries, any eligible software enterprise that has been determined is entitled to the preferential CIT policy of "exemption for two years and 50% reduction for three years" from the year when it starts to make profits. In the case of co-existence of the preferential CIT policy for eligible software and IC enterprises and other preferential CIT policies, the enterprise concerned may choose the most preferential policy only and shall not enjoy all preferential CIT policies concurrently. If the above-mentioned policies would change or NCF Cloud Services would not be granted High-tech Enterprise or Eligible Software Enterprise status as defined in Administration of Taxation on Revising and Issuing the Measures for the Administration of the Certification of High-tech Enterprises and Promulgation of Several Policies for Further Encouraging the Development of Software and Integrated Circuit Industries, NCF Cloud Services would not enjoy the benefits of enterprise income tax reduction and exemption, and our financial condition may be materially and adversely affected.