{"url_path":"/sec/chnr/10-k/2026/item-10","section_key":"item-10","section_title":"Item 10 **","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/793628/0001553350-26-000083-index.html","accession_number":"0001553350-26-000083","cik":"0000793628","ticker":"CHNR","issuer_name":"CHINA NATURAL RESOURCES INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/793628/0001553350-26-000083-index.html","primary_entity_key":"0000793628","primary_entity_name":"CHINA NATURAL RESOURCES INC"},"word_count":6850,"has_tables":true,"body_markdown":"**ITEM 10.**\n**ADDITIONAL INFORMATION**\n\n \n\n \n**A.**\n**Share Capital**\n\n \n\nNot applicable.\n\n \n\n \n**B.**\n**Memorandum and Articles of Association**\n\n \n\nThe information contained\nin our Registration Statement on Form F-3 (File No. 333-268454), declared effective by the SEC on February 10, 2023, under the heading\n“Our Charter and Certain Provisions of BVI Law” is hereby incorporated by reference.\n\n \n\n \n\n \n\n67 \n\n \n\n \n\n \n**C.**\n**Material Contracts**\n\n \n\n \n\n \n\nOn February 27, 2023, the\nCompany entered into the Zimbabwe SPA with Feishang Group, Top Pacific, Li Feilie and Yao Yuguang, to acquire the entire share capital\nof Williams Minerals. See “Item 4.A. – INFORMATION OF THE COMPANY – History and Development of the Company – Acquisition\nof Williams Minerals” for additional information.\n\n \n\nThe Company is a beneficiary\nof letters from Feishang Group and Feishang Enterprise regarding their provision of financial support to the Company, executed on May\n15, 2023, copies of which are incorporated by reference as Exhibit 4.6 and 4.7 to this annual report.\n\n \n\nOn July 28, 2023, the Company\nentered into a sale and purchase agreement with Feishang Group. Pursuant to the agreement, the Company agreed to sell 100% equity interest\nof PST Technology to Feishang Group, together with PST Technology’s outstanding payable owed to the Company, for consideration of\napproximately CNY95,761,119 comprising: (i) CNY-34,197,300, the fair value of 100% equity interest of PST Technology as determined by\nthe independent valuation report dated July 28, 2023; (ii) CNY129,958,419, the book value of PST Technology’s outstanding payable\nowed to the Company. See “Item 4.A. – INFORMATION OF THE COMPANY – History and Development of the Company – Acquisition\nand Sale of PST Technology” for additional information.\n\n \n\nOn August 3, 2023, the Company\nentered into a set-off letter with Feishang Group, the Company’s controlling shareholder, pursuant to which the Company and Feishang\nGroup agreed to set off the amount of CNY95,761,119 payable from the Company to Feishang Group under the PST Technology sale and purchase\nagreement against the promissory note in the amount of US$245,000,000 the Company issued to Feishang Group on April 23, 2023 at an exchange\nrate of US$1.00 = CNY7.1427 such that a sum of US$13,406,852 shall be deducted from the principal amount due under the promissory note.\n\n \n\nOn December 22, 2023, the\nCompany entered into an amendment agreement (the “Amendment Agreement”) to the Zimbabwe SPA with the parties thereto. As the\nSellers are still in the process of satisfying conditions precedent to the closing of the Acquisition in accordance with the Zimbabwe\nSPA, including but not limited to obtaining requisite governmental approvals, the parties entered into the Amendment Agreement to extend\nthe long stop date for closing the acquisition from December 31, 2023 to December 31, 2024. On December 31, 2024, the Company entered\ninto the Amendment Agreement II to extend the long stop date for closing the acquisition from December 31, 2024 to December 31, 2025.\nOn December 31, 2025, the Company entered into the Amendment Agreement III to further extend the long stop date for closing the acquisition\nfrom December 31, 2025 to December 31, 2026. See “Item 4.A. – INFORMATION OF THE COMPANY – History and Development of\nthe Company – Acquisition of Williams Minerals” for additional information.\n\n \n\nOn February 16, 2024, the\nCompany entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the\n“Investors”), pursuant to which the Company agreed to issue and sell, (i) in a registered direct offering, up to an aggregate\nof 1,487,870 of common shares, no par value (the “Shares”) of the Company at a per Share purchase price of $2.20 (the “Registered\nOffering”), and (ii) in a concurrent private placement, warrants initially exercisable for the purchase of an aggregate of 1,115,903\ncommon shares of the Company (the “Investors Warrants”), for gross proceeds of approximately $3.01 million, before deducting\nfees to the placement agent and other estimated offering expenses payable by the Company.\n\n \n\nThe Investors Warrants are\nexercisable immediately as of the date of issuance until 42 months after the date of issuance at an initial exercise price of $3.00 per\nshare. The exercise price of the Investors Warrants is subject to full-ratchet anti-dilution adjustment in the case of future issuances\nof common shares of the Company below the Investors Warrants’ exercise price then in effect, as well as customary adjustment in\ncase of stock splits, stock dividends, stock combinations and similar recapitalization transactions. A holder of the Investors Warrants\nalso will have the right to exercise such warrants on a cashless basis if the registration statement or prospectus contained therein is\nnot available for the issuance of all common shares issuable upon exercise thereof. The exercisability of the Investors Warrants may also\nbe limited if, upon exercise, the holder and its affiliates would in aggregate beneficially own more than 4.99% or 9.99% of the Company’s\ncommon shares, which percentage shall be elected by the holder on or prior to the issuance date.\n\n \n\n \n\n68 \n\n \n\n \n\nPursuant to the provisions\nof the Purchase Agreement, the Company and the Investors have agreed that: (i) subject to certain exceptions, the Company will not, within\nthe 60 calendar days following the closing of this offering enter into any agreement to issue or announce the issuance or disposition\nor proposed issuance or disposition of any securities (each, a “Subsequent Placement”); (ii) within one year following the\nexecution of the Purchase Agreement, the Company will not enter into an agreement to effect a “Variable Rate Transaction,”\nas that term is defined in the Purchase Agreement; and (iii) within one year following the closing of this offering, the Company shall\nnot effect any Subsequent Placement unless the Investors are offered a participation right, subject to certain terms and conditions as\nset forth in the Purchase Agreement, to subscribe, on a pro rata basis, up to 35% of the securities offered in the Subsequent Placement.\n\n \n\nFT Global Capital, Inc. (the\n“Placement Agent”) acted as the exclusive placement agent in connection with the Registered Offering and the Private Placement\npursuant to the terms of a placement agency agreement, dated February 16, 2024, between the Company and Placement Agent (the “Placement\nAgency Agreement”). Pursuant to the Placement Agency Agreement, the Company agreed to pay Placement Agent a cash fee equal to eight\npercent (8%) of the aggregate proceeds received by the Company from the sale of its securities to investors introduced to the Company\nby the Placement Agent. Placement Agent is also entitled to additional tail compensation for any financings consummated within the 12-month\nperiod following the termination of the Placement Agent Agreement to the extent that such financing is provided to the Company by investors\nthat the Placement Agent had introduced to the Company. In addition to the cash fee, the Company agreed to issue to the Placement Agent\nwarrants to purchase an aggregate of up to five percent (5%) of the aggregate number of Shares sold in the Registered Offering (the “Placement\nAgent Warrants”). The Placement Agent Warrants shall generally be on the same terms and conditions as the Investors Warrants except\nthat they will be exercisable at a price of $2.20 per share.\n\n \n\n \n**D.**\n**Exchange Controls**\n\n \n\nThere is no exchange control\nlegislation under British Virgin Islands law and accordingly there are no exchange control regulations imposed under British Virgin Islands\nlaw. Our company and all dividends, interest, rents, royalties, compensation and other amounts paid by our company to persons who are\nnot resident in the BVI and any capital gains realised with respect to any shares, debt obligations, or other securities of our company\nby persons who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI. BVI law and our Memorandum\nand Articles impose no limitations on the right of nonresident or foreign owners to hold or vote our common shares. However, we operate\nthrough subsidiaries located in the PRC, and the payment of dividends by PRC companies is subject to certain restrictions imposed under\nPRC law. See “Item 3.D. – KEY INFORMATION – Transfers of Cash and Assets Between Our Company and Our Subsidiaries”\nfor further information.\n\n \n\nThe principal regulations\ngoverning foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008.\nUnder the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related\nforeign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural\nrequirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted\ninto foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.\n\n \n\nIn November 2012, SAFE promulgated\nthe Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially\namends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign\nexchange accounts, the reinvestment of lawful income derived by foreign investors in the PRC (e.g. profits, the proceeds of a sale of\nequity, a capital reduction, liquidation or the early repatriation of an investment), and purchase and remittance of foreign exchange\nas a result of such lawful income in a foreign-invested enterprise no longer requires SAFE approval, and multiple capital accounts for\nthe same entity may be opened in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing\nand Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting\nDocuments in May 2013, specifying that the administration by SAFE or its local branches over direct investment by foreign investors in\nthe PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to direct investment in the\nPRC based on the registration information provided by SAFE and its branches.\n\n \n\nIn February 2015, SAFE promulgated\nthe Circular on Further Simplifying and Improving Policies for Foreign Exchange Administration for Direct Investment (“SAFE Circular\n13”), which took effect on June 1, 2015. Under SAFE Circular 13, the foreign exchange procedures are further simplified, and\nforeign exchange registrations of direct investment will be handled by the banks designated by the foreign exchange authority instead\nof SAFE and its branches. However, the foreign invested enterprises were still prohibited by SAFE Circular 13 to use the RMB converted\nfrom foreign currency-registered capital to extend entrustment loans, repay bank loans or inter-company loans.\n\n \n\nIn October 2019, SAFE issued\nthe Circular on Further Promoting the Facilitation of Cross Border Trade and Investment, which allows noninvestment foreign-invested enterprises\nto use their capital funds to make equity investments in China, provided that such investments do not violate the negative list and the\ntarget investment projects are genuine and in compliance with laws.\n\n \n\nIn addition, our wholly owned\nsubsidiaries are required to distribute their after-tax profits for the current financial year. They shall reserve 10% of their profits\nas the company's statutory common reserve, provided that a company with an aggregate common reserve of more than 50% of the company's\nregistered capital may elect not to make additional statutory common reserves. Where any company has made a statutory common reserve from\nits after-tax profits, it may, subject to a resolution of the shareholders' meeting or the general meeting of shareholders, draw a discretionary\ncommon reserve from its after-tax profits. A company's common reserves shall be used to cover losses made in past years, to enhance the\ncompany's productivity and expand its business or to increase its registered capital; however a company's capital reserve shall not be\nused to cover the company's losses.\n\n \n\n69 \n\n \n\n \n\n \n**E.**\n**Taxation**\n\n \n\nThe following is a general\nsummary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below), BVI tax consequences\nof an investment in our common shares, and PRC tax considerations.\n\n \n\n**United States Federal Income Taxation**\n\n \n\n*General*\n\n \n\nThe\nfollowing is a general discussion of certain material U.S. federal income tax considerations applicable to U.S. Holders (as defined below)\nwith respect to their ownership and disposition of Common shares. This summary is limited to U.S. federal income tax considerations relevant\nto U.S. Holders that hold Common shares as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code\nof 1986, as amended (the “Code”) (generally, property held for investment). For purposes of this discussion, the term “U.S.\nHolder” means a beneficial owner of Common shares that is for U.S. federal income tax purposes:\n\n \n\n \n·\nAn individual who is a U.S. citizen or resident;\n\n \n\n \n·\nA corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia;\n\n \n\n \n·\nAn estate the income of which is subject to U.S. federal income taxation regardless of its source; or\n\n \n\n \n·\nA trust that (a) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.\n\n \n\nThis\ndiscussion is based on current provisions of the Code, existing, temporary and proposed Treasury Regulations promulgated thereunder, published\nadministrative pronouncements of the Internal Revenue Service (the “IRS”), and other applicable authorities, all of which\nare subject to change or to differing interpretation, possibly with retroactive effect. Any such change or differing interpretation could\nalter the tax consequences described in this discussion. There can be no assurance that the IRS will not challenge one or more of the\ntax consequences described herein, and we have not obtained, nor do we intend to obtain, a ruling with respect to the U.S. federal income\ntax consequences to a U.S. Holder of the ownership or disposition of Common shares.\n\n \n\nThis\nsummary does not address the U.S. federal income tax considerations of ownership or disposition of Common shares by particular U.S. Holders\nin light of their individual circumstances or by U.S. Holders that are subject to special provisions under the Code, including, but not\nlimited to, the following: (a) tax-exempt organizations (including private foundations), qualified retirement plans, individual retirement\naccounts, or other tax-deferred accounts; (b) banks, financial institutions, underwriters, insurance companies, pension plans, cooperatives,\nreal estate investment trusts, or regulated investment companies; (c) broker-dealers, dealers, or traders in securities or currencies\nthat elect to apply a “mark-to-market” accounting method; (d) U.S. Holders that have a “functional currency”\nother than the U.S. dollar; (e) U.S. Holders that own Common shares as part of a straddle, hedging transaction, conversion transaction,\nconstructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquire Common shares in connection with\nthe exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold Common shares other than\nas a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) U.S. Holders\nthat own directly, indirectly, or by attribution, 10% or more, by voting power or value, of the outstanding stock of the Company; (i)\nU.S. Holders subject to Section 451(b) of the Code; (j) U.S. expatriates or former long-term residents of the U.S; (k) governments or\nagencies or instrumentalities thereof; (l) qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;\n(m) U.S. Holders liable for alternative minimum tax; and (m) beneficiaries of a trust holding Common shares or U.S. Holders holding Common\nshares through a trust. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately\nabove, should consult their own tax advisors regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including\nthe potential application and operation of any income tax treaties) relating to the acquisition, ownership, or disposition of Common shares.\nExcept to the extent described below, this summary also does not address the U.S. federal income tax considerations of ownership or disposition\nof the Warrants by U.S. Holders.\n\n \n\nIf\nan entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax\npurposes holds Common shares, the U.S. federal income tax considerations to such partnership and the partners (or other owners) of such\npartnership of the ownership, or disposition of the Common shares generally will depend on the activities of the partnership and the status\nof such partners (or other owners). This summary does not address the U.S. federal income tax considerations for any such partner or partnership\n(or other “pass-through” entity or its owners). Owners of entities and arrangements that are classified as partnerships (or\nother “pass-through” entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S.\nfederal income tax considerations of the ownership or disposition of Common shares.\n\n \n\n70 \n\n \n\nEach\nU.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal income taxation to its particular circumstances,\nand the state, local, non-U.S. and other tax considerations of the ownership and disposition of our Common shares.\n\n \n\nTHIS\nSUMMARY DOES NOT PURPORT TO BE A COMPREHENSIVE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF ACQUIRING,\nOWNING AND DISPOSING OF COMMON SHARES. HOLDERS OF COMMON SHARES SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSIDERATIONS\nTO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECTS OF U.S. FEDERAL, STATE,\nLOCAL, AND OTHER TAX LAWS.\n\n \n\n*Taxation of Distributions*\n\n \n\nSubject\nto the possible applicability of the PFIC rules discussed below, a U.S. Holder generally will be required to include in gross income as\na dividend the amount of any distribution paid on Common shares (including the amount of any taxes withheld therefrom) to the extent the\ndistribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles).\nSuch dividends paid by us will be taxable to a corporate U.S. Holder at regular rates and will not be eligible for the dividends-received\ndeduction generally allowed to domestic corporations in respect of dividends received from other domestic corporations. Subject to the\nPFIC rules described below, distributions in excess of such earnings and profits generally will be applied against and reduce the U.S.\nHolder’s basis in Common shares (but not below zero) and, to the extent in excess of such basis, will be treated as gain from the\nsale or exchange of such Common shares. We do not expect to maintain calculations of our earnings and profits in accordance with U.S.\nfederal income tax principles. You therefore should expect that distributions generally will be treated as dividends for U.S. federal\nincome tax purposes.\n\n \n\nWith\nrespect to non-corporate U.S. Holders, including individual U.S. Holders, under tax laws currently in effect and subject to certain\nexceptions (including, but not limited to, dividends treated as “investment income” for purposes of investment interest deduction\nlimitations), dividends generally will be taxed at the lower applicable long-term capital gains rate applicable to “qualified dividend\nincome” provided that (1) Common shares are readily tradable on an established securities market in the United States, (2) we are\nnot treated as a PFIC in the year the dividend is paid or in the preceding year and (3) certain holding period and other requirements\nare met. Under U.S. Treasury Department guidance, Common shares are considered for purposes of clause (1) above to be readily tradable\non an established securities market in the United States if they are listed on certain exchanges, which presently include the Nasdaq (on\nwhich Common shares are listed). Even if the Common shares are listed on the Nasdaq, there can be no assurance that the Common shares\nwill be considered readily tradable on an established securities market in future years. U.S. Holders should consult their tax advisors\nregarding the availability of such lower rate for any dividends paid with respect to Common shares.\n\n \n\nDividends\npaid on our Common shares, if any, will generally be treated as income from foreign sources and will generally constitute passive category\nincome for U.S. foreign tax credit purposes. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may\nbe eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any nonrefundable foreign withholding\ntaxes imposed on dividends received on our Common shares. The rules governing the foreign tax credit are complex and their outcome depends\nin large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders are urged to consult their tax\nadvisors regarding the availability of the foreign tax credit under their particular circumstances.\n\n \n\n*Sale or Other Taxable Disposition of Common\nshares*\n\n \n\nSubject to the PFIC rules discussed below, upon\nthe sale or other taxable disposition of Common shares, a U.S. Holder generally will recognize a capital gain or loss in an amount equal\nto the difference between the amount realized and such U.S. Holder’s adjusted tax basis in such Common shares. Any such capital\ngain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period in such Common shares exceeds\none year. Long-term capital gain realized by a non-corporate U.S. Holder is currently eligible to be taxed at reduced rates. The deduction\nof capital losses is subject to certain limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences\nif a foreign tax is imposed on a disposition of our Common shares, including the availability of the foreign tax credit or deduction under\ntheir particular circumstances.\n\n \n\n**Exercise or Lapse of a Warrant**\n\n \n\nSubject\nto the PFIC rules discussed below, and except as discussed below with respect to the cashless exercise of a warrant, a U.S. Holder generally\nwill not recognize gain or loss upon the acquisition of Common shares on the exercise of a Warrant. A U.S. Holder’s tax basis in\nCommon shares received upon exercise of the Warrant generally will be an amount equal to the sum of the U.S. Holder’s tax basis\nin the Warrant exchanged therefor and the exercise price. The U.S. Holder’s holding period for Common shares received upon exercise\nof the Warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the Warrant and will not include\nthe period during which the U.S. Holder held the Warrant. If a Warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize\na capital loss equal to such holder’s tax basis in the Warrant.\n\n \n\n71 \n\n \n\nThe\ntax consequences of a cashless exercise of a warrant are not clear under current law. Subject to the PFIC rules discussed below, a cashless\nexercise may not be taxable, either because the exercise is not a realization event or because the exercise is treated as a “recapitalization”\nfor U.S. federal income tax purposes. Although we expect a U.S. Holder’s cashless exercise of our warrants (including after we provide\nnotice of our intent to redeem Warrants for cash) to be treated as a recapitalization, a cashless exercise could alternatively be treated\nas a taxable exchange in which gain or loss would be recognized.\n\n \n\nBecause\nof the absence of authority on the U.S. federal income tax treatment of a cashless exercise, a U.S. Holder should consult its tax advisor\nregarding the tax consequences of a cashless exercise.\n\n \n\n*PFIC Status of the Company*\n\n \n\nThe\nCompany has not performed an analysis of whether or not it will be deemed a “passive foreign investment company” within the\nmeaning of Section 1297 of the Code (“PFIC”) for its current taxable year. If the Company is or becomes a PFIC, the foregoing\ndescription of the U.S. federal income tax considerations to U.S. Holders of the acquisition, ownership and disposition of Common shares\ncould be materially different. The U.S. federal income tax consequences of owning and disposing of Common shares if the Company is or\nbecomes a PFIC are described below under the heading “Tax Consequences if the Company is a PFIC.”\n\n \n\nA\nnon-U.S. corporation is a PFIC for each tax year in which (i) 75% or more of its gross income is passive income (as defined for U.S. federal\nincome tax purposes) (the “income test”) or (ii) 50% or more (by value) of its assets (based on an average of the quarterly\nvalues of the assets during such tax year) either produce or are held for the production of passive income (the “asset test”).\nFor purposes of the PFIC provisions of the Code, “passive income” generally includes dividends, interest, certain rents and\nroyalties, certain gains from commodities or securities transactions and the excess of gains over losses from the disposition of certain\nassets which produce passive income. If a non-U.S. corporation owns at least 25% (by value) of the stock of another corporation, the non-U.S.\ncorporation is treated, for purposes of the income test and asset test, as owning its proportionate share of the assets of the other corporation\nand as receiving directly its proportionate share of the other corporation’s income. \n\n \n\nUnder\ncertain attribution and indirect ownership rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate\nshare of the Company’s direct or indirect equity interest in any company that is also a PFIC (a “Subsidiary PFIC”),\nand will be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described\nbelow, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company\nor another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders\nmay be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition\nof Common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax even if no distributions are received and\nno redemptions or other dispositions of Common shares are made.\n\n \n\nThe\ndetermination of PFIC status is inherently factual, is subject to a number of uncertainties, and can be determined only annually at the\nclose of the tax year in question. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax\nrules, which are subject to differing interpretations. There can be no assurance that the Company will or will not be determined to be\na PFIC for the current tax year or any prior or future tax year, and no opinion of legal counsel or ruling from the IRS concerning the\nstatus of the Company as a PFIC has been obtained or will be requested. U.S. Holders should consult their own U.S. tax advisors regarding\nthe PFIC status of the Company.\n\n \n\n72 \n\n \n\n*Tax Consequences if the Company is a PFIC*\n\n \n\nIf we are determined to be\na PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of Common shares and, in the\ncase of Common shares, the U.S. Holder did not make a qualified electing fund (“QEF”) election or a “mark-to-market”\nelection (within the meaning of Section 1296 of the Code) as discussed below, such U.S. Holder generally would be subject to special and\nadverse rules with respect to (i) any gain recognized by the U.S. Holder on the sale or other disposition of its Common shares and (ii)\nany “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year\nof the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the Common\nshares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the Common\nshares).\n\n \n\nUnder the default PFIC rules:\n\n \n\n·\n \nthe U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the Common shares;\n\n·\n \nthe amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before the first day of the first taxable year in which we were a PFIC, will be taxed as ordinary income;\n\n·\n \nthe amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and\n\n·\n \nan additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the U.S. Holder with respect to the tax attributable to each such other taxable year of the U.S. Holder.\n\n \n\nIn\ngeneral, a U.S. Holder may avoid the adverse PFIC tax consequences described above in respect of the Common shares by making and maintaining\na timely and valid QEF election (if eligible to do so) to include in income its pro rata share of our net capital gains (as long-term\ncapital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the\ntaxable year of the U.S. Holder in which or with which our taxable year ends. A U.S. Holder must make a QEF election for the Company\nand each Subsidiary PFIC if it wishes to have this treatment. To make a QEF election, a U.S. Holder will need to have an annual information\nstatement from the Company setting forth the ordinary earnings and net capital gains for the year. We do not currently intend to prepare\nor provide the information that would enable you to make a qualified electing fund election. Therefore, U.S. Holders should assume that\na qualified electing fund election will not be available.\n\n \n\nIn\ngeneral, a U.S. Holder must make a QEF election on or before the due date for filing its income tax return for the first year to which\nthe QEF election will apply. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF elections must be made for\nthe PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs. U.S. Holders\nshould be aware that there can be no assurance that the Company has satisfied or will satisfy the recordkeeping requirements that apply\nto a QEF or that the Company has supplied or will supply U.S. Holders with information such U.S. Holders require to report under the QEF\nrules in the event that the Company is a PFIC for any tax year.\n\n \n\nAlternatively,\nif we are a PFIC and the Common shares constitute “marketable stock,” a U.S. Holder may avoid the adverse PFIC tax consequences\ndiscussed above if such U.S. Holder, at the close of the first taxable year in which it holds (or is deemed to hold) Common shares and\nfor which we are determined to be a PFIC, makes a mark-to-market election with respect to such shares for such taxable year. Such U.S.\nHolder generally will include for each of its taxable years as ordinary income the excess, if any, of the fair market value of its Common\nshares at the end of such year over its adjusted basis in its Common shares. The U.S. Holder also will recognize an ordinary loss in\nrespect of the excess, if any, of its adjusted basis of its Common shares over the fair market value of its Common shares at the end\nof its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election).\nThe U.S. Holder’s basis in its Common shares will be adjusted to reflect any such income or loss amounts, and any further gain\nrecognized on a sale or other taxable disposition of its Common shares will be treated as ordinary income. Currently, a mark-to-market\nelection may not be made with respect to Warrants.\n\n \n\nThe mark-to-market election\nis available only for “marketable stock,” generally, stock that is regularly traded on a national securities exchange that\nis registered with the SEC, including the Nasdaq (on which Common Shares are listed), or on a foreign exchange or market that the IRS\ndetermines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. However, there is\nno assurance that the Common Shares will remain “regularly traded” for this purpose. Moreover, a mark-to-market election made\nwith respect to Common Shares would not apply to a U.S. Holder’s indirect interest in any Subsidiary PFIC in which we own an equity\ninterest. U.S. Holders should consult their tax advisors regarding the availability and tax consequences of a mark-to-market election\nwith respect to Common Shares under their particular circumstances.\n\n \n\n73 \n\n \n\nEach\nU.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely and\neffective QEF election (including a “pedigreed” QEF election where necessary) for the Company and any Subsidiary PFIC.\n\n \n\n*Receipt of Foreign Currency*\n\n \n\nThe\namount of any distribution or proceeds paid in any currency other than U.S. dollars to a U.S. Holder in connection with the ownership\nof Common Shares, or on the sale or other taxable disposition of Common Shares will be included in the gross income of a U.S. Holder as\ntranslated into U.S. dollars calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of\nthe payment, regardless of whether the currency is converted into U.S. dollars at that time. If the currency received is not converted\ninto U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the currency equal to its U.S. dollar value on the date of\nreceipt. Any U.S. Holder who receives payment in non-U.S. currency and engages in a subsequent conversion or other disposition of the\ncurrency may have a foreign currency exchange gain or loss that would generally be treated as ordinary income or loss, and generally will\nbe U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect\nto foreign currency.\n\n \n\nEach\nU.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing\nof non-U.S. currency.\n\n \n\n*Information Reporting; Backup Withholding*\n\n \n\nUnder\nU.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or\ninvolvement in, a non-U.S. corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals\nwho are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of “specified\nforeign financial assets” includes not only financial accounts maintained in non-U.S. financial institutions, but also, if held\nfor investment and not in an account maintained by certain financial institutions, any stock or security issued by a non-U.S. person,\nany financial instrument or contract that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity.\nA U.S. Holder may be subject to these reporting requirements unless such U.S. Holder’s Common Shares are held in an account at certain\nfinancial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult\nwith their own tax advisors regarding the requirements of filing information returns on IRS Form 8938, and, if applicable, filing obligations\nrelating to the PFIC rules, including possible reporting on an IRS Form 8621. Failure to do so, if required, will extend the statute of\nlimitations until such required information is furnished to the IRS.\n\n \n\nA\nU.S. Holder of Common Shares may be subject to information reporting and “backup withholding,” currently at the rate of 24%,\nwith respect to (a) distributions paid on Common Shares and (b) proceeds arising from the sale or other taxable disposition of Common\nShares, in each case if the distribution or proceeds are paid by a paying agent, broker or other intermediary in the United States or\nby a U.S. broker or certain United States-related brokers to the holder outside the United States. Backup withholding may be avoided by\nthe holder of Common Shares if such holder:\n\n \n\n·\n \nis a corporation or comes within other exempt categories; or\n\n·\n \nprovides a correct taxpayer identification number, certifies that such holder is not subject to backup withholding and otherwise complies with the backup withholding rules.\n\n \n\nBackup withholding is not\nan additional tax. Rather, any amounts withheld under the backup withholding rules from a payment to a holder will be refunded or credited\nagainst the U.S. Holder’s U.S. federal income tax liability, if any, provided that amount withheld is claimed as federal taxes withheld\non the U.S. Holder’s U.S. federal income tax return relating to the year in which the backup withholding occurred and the requisite\ninformation is timely furnished to the IRS. A U.S. Holder who is not otherwise required to file a U.S. income tax return must generally\nfile a claim for refund.\n\n \n\nThe discussion of reporting\nrequirements set forth above is not intended to constitute an exhaustive description of all reporting requirements that may apply to a\nU.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period in which the IRS can assess\na tax, and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting\nrequirement. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.\n\n \n\nTHE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE\nA COMPLETE ANALYSIS OF ALL U.S. TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP, EXERCISE OR DISPOSITION OF\nCOMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR\nCIRCUMSTANCES.\n\n \n\n \n\n74 \n\n \n\n \n\n**BVI Taxation**\n\n \n\nThis summary has been prepared\nbased upon management’s understanding of applicable tax consequences, but has not been reviewed by counsel or other experts in U.S.\nor BVI taxation. This summary does not address all possible tax consequences relating to an investment in our common shares and does not\npurport to deal with the tax consequences applicable to all categories of investors, some of which, such as dealers in securities, insurance\ncompanies and tax-exempt entities, may be subject to special rules. In particular, the discussion does not address the tax of non-BVI\ntax laws, except to the extent described above under “Taxation – United States Federal Income Taxation.” Accordingly,\neach prospective investor should consult its own tax advisor regarding the particular tax consequences to it of an investment in the common\nshares. The discussion below is based upon laws and relevant interpretations in effect as of the date of this annual report, all of which\nare subject to change. Under the BVI Business Companies Act (as amended) as currently in effect, companies incorporated or registered\nunder the BVI Business Companies Act are currently exempt from income and corporate tax. In addition, the BVI currently does not levy\ncapital gains tax on companies incorporated or registered under the BVI Business Companies Act.\n\n \n\nA holder of our common shares\nwho is not a resident of BVI is exempt from BVI income tax on dividends paid with respect to the common shares and any capital gains realized\nwith respect to any common shares. In addition, the common shares are not subject to transfer taxes, stamp duties or similar charges for\nso long as we do not hold an interest in real estate in the BVI.\n\n \n\nThere are no estate, gift or inheritance taxes\nlevied by the BVI on companies incorporated or registered under the BVI Business Companies Act.\n\n \n\nThere is no income tax treaty\nor convention currently in effect between the United States and the BVI that is applicable to any payments made by or to a company incorporated\nor registered under the BVI Business Companies Act.\n\n \n\n**PRC Taxation**\n\n \n\nIf the PRC tax authorities\ndetermine that we are a “resident enterprise” for PRC enterprise income tax purposes, a withholding tax of 10% may be imposed\non any dividends that non-PRC resident holders of our common shares receive from us and on gains realized on their sale or other\ndisposition of common shares, if such income is considered as income derived from within the PRC.\n\n \n\n**F.       Dividends and Paying\nAgents**\n\n \n\nNot applicable.\n\n \n\n**G.       Statement by Experts**\n\n \n\nNot applicable.\n\n \n\n**H.       Documents on Display**\n\n \n\nThe documents concerning the\nCompany that are referred to in this annual report may be inspected at the Company’s principal executive offices at Room M07, 7/F,\nValiant Industrial Building, 2-12 Au Pui Wan Street, Fo Tan, Hong Kong. The Company does not currently maintain an agent in the United\nStates. Certain documents described in response to Item 19. of this annual report are filed with this annual report and others are incorporated\nby reference to documents previously filed by the Company with the SEC. The documents that are filed herewith or incorporated by reference\ncan be viewed on the SEC’s website at www.sec.gov.\n\n \n\n**I.       Subsidiary Information**\n\n \n\nNot applicable.\n\n \n\n75"}