1. Due Diligence & Disclosure

a) Key areas requiring enhanced due diligence:

(i) Founder and Control Structure Analysis

The founder's divorce proceedings demand extensive investigation given their critical control position holding 60% shareholding. Due diligence must comprehensively examine all matrimonial court documents across relevant jurisdictions (both Hong Kong and PRC if applicable), with particular focus on any interim orders or injunctions that could affect share transfers or create encumbrances. The investigation should cover the current status of settlement negotiations and their potential impact on shareholding structure. Given the founder's role as CEO, the stability of management and potential succession issues require careful examination. Any historical involvement of the spouse in business operations or decision-making must be thoroughly documented.

The relationship and arrangements with venture capital firms holding the remaining 40% requires detailed review, particularly given their intention to exit during IPO. All shareholders' agreements, side letters, and special rights agreements must be examined to understand pre-emptive rights, board nomination rights, veto rights, and any special exit provisions. The impact of VC exit on public float calculations and any staged exit arrangements need thorough analysis.

(ii) Customer and Revenue Verification

The termination of a major customer contributing 15% of revenue represents a significant risk requiring enhanced due diligence. A comprehensive review must cover the complete contractual relationship, including the specific grounds for termination, notice periods, and any potential remedial actions. The investigation should analyze the historical revenue contribution over the track record period, including detailed profit margin analysis and impact on working capital. Given the customer's SOE status, potential political and relationship implications for other SOE clients require careful examination.

The broader customer base, particularly other SOE relationships, demands thorough investigation. This includes analyzing customer concentration risk, reviewing all major customer contracts for similar termination provisions, examining payment histories, and assessing the stability of relationships. The company's ability to maintain its track record period performance without this major customer requires detailed financial analysis and forecasting.

(iii) Technology and Intellectual Property Assessment

The patent infringement claim necessitates comprehensive technical and legal due diligence. This involves detailed analysis of the claim's merits through independent legal opinions, assessment of the potentially infringing technology's importance to the business model, and examination of possible technical workarounds. The investigation must cover potential settlement costs, litigation timelines, and impact on business operations.

Beyond the specific claim, the company's entire IP portfolio requires thorough review given its core business in software development. This includes verification of all IP registrations across jurisdictions, examination of R&D processes and documentation, review of employee invention agreements, and assessment of source code ownership and protection measures. Given the cross-border nature of operations, territorial IP protection and enforcement capabilities need careful examination.

(iv) VIE Structure Compliance

The use of VIE structures for China operations demands particularly rigorous due diligence given recent regulatory developments. The investigation must cover the complete legal framework of the VIE structure, including all control documents, economic interest flow mechanisms, and regulatory compliance aspects. Special attention must be paid to whether CSRC approval is required and the potential need for cybersecurity review given the technology focus.

The practical operation of the VIE structure requires verification through detailed examination of actual control exercise, fund flow evidence, and operational integration. This includes reviewing all inter-company agreements, banking arrangements, and tax implications. Given the company's presence in Singapore, the interaction between different jurisdictional requirements and corporate structure efficiency needs careful analysis.

(v) Financial and Operational Due Diligence

Comprehensive financial due diligence must focus on track record period performance, with particular attention to revenue recognition, profit margins, and customer concentration impact. The investigation should cover working capital adequacy, cash flow patterns, and financial projection reliability. Given the recent customer loss, adjusted financial scenarios need careful analysis to ensure meeting listing requirements.

Operational due diligence should examine the company's technical capabilities, development processes, quality control systems, and scalability of operations across jurisdictions. Internal control systems, particularly regarding technology development and data protection, require thorough review. The company's ability to maintain competitive advantage and market position needs detailed assessment.

b) Prospectus disclosure approach:
b) Prospectus Disclosure Approach

Business Section Disclosure

The business section must carefully balance transparency with market confidence. The company's 5-year operating history should be presented with emphasis on growth trajectory and technology capabilities, while addressing recent challenges transparently:

Major Customer Termination:
The disclosure should specifically address the 15% revenue customer termination through a carefully crafted narrative that:

• Explains the termination in the context of overall business evolution

• Provides historical context of the relationship without breaching confidentiality

• Details concrete steps taken to diversify customer base

• Demonstrates pipeline of new opportunities and customer acquisition strategy

• Shows adjusted financial metrics both with and without this customer

• Presents clear mitigation strategy including new customer wins or expanding existing relationships

Technology and IP Position:
Given the patent infringement claim, the business section must:

• Present a comprehensive overview of the company's IP portfolio

• Explain the disputed technology in context of overall product offering

• Detail the company's R&D capabilities and innovation track record

• Demonstrate robust IP protection measures

• Address the specific claim without prejudicing legal position

• Show technical alternatives and workarounds if available

• Highlight independent technology streams unaffected by the dispute

Management and Ownership Structure

The founder's divorce requires careful disclosure treatment:

• Clear presentation of current and post-IPO shareholding structure

• Explanation of control mechanisms and stability

• Description of management continuity measures

• Discussion of succession planning and key person risk mitigation

• Transparent disclosure of any share encumbrances or court orders

• Explanation of safeguards for company interests

VC Exit Arrangements:

• Detail post-IPO shareholding changes

• Explain lock-up arrangements

• Address potential market overhang

• Present staged exit strategy if applicable

• Discuss impact on governance and board composition

Financial Information and Future Prospects

The financial discussion must address:

• Clear trend analysis of historical performance

• Impact of customer loss on future projections

• Detailed segment analysis showing revenue diversity

• Working capital sufficiency analysis

• Cost structure and margin analysis

• Growth strategy and expansion plans

• Investment requirements and capital allocation

c) Risk Factors Section

Risk factors require comprehensive but measured disclosure:

Business and Operational Risks:

• Customer concentration and relationship risks

• Technology dependence and innovation risks

• Competition and market position risks

• Operational scalability risks

• Cross-border operation risks

Legal and Regulatory Risks:

• Patent infringement claim implications

• VIE structure regulatory risks

• Data protection and cybersecurity risks

• Foreign investment restrictions

• Cross-border compliance risks

Control and Management Risks:

• Founder divorce impact on stability

• Key person dependencies

• Management continuity risks

• VC exit implications

• Corporate governance transition risks

Market and Industry Risks:

• Technology change and obsolescence risks

• Customer relationship stability

• Market competition dynamics

• Pricing pressure risks

• Industry regulatory changes

Corporate Structure and VIE Arrangements

The prospectus must clearly present:

• Detailed corporate structure diagram

• VIE arrangement mechanics

• Control mechanisms and safeguards

• Economic interest flow

• Regulatory approval status

• Cross-border operational integration

• Group shareholding changes pre/post IPO

Use of Proceeds

Clear allocation of IPO proceeds showing:

• Technology development investment

• Market expansion plans

• Working capital requirements

• Potential acquisition strategy

• R&D investment plans

• Infrastructure development

2. Legal Documentation

a) Material contracts requiring special review:
Priority documents include:

• Major customer agreements, especially termination provisions

• Founder's employment and shareholding agreements

• IP licenses and technology agreements

• VIE structure documentation

• VC investment agreements

b) Additional regulatory comfort needed:
Key requirements include:

• Legal opinions on VIE structure validity

• PRC regulatory compliance confirmations

• Special auditor comfort letters

• Internal control system assessments

• Independent expert reports where necessary

3. Timing Considerations

a) Impact analysis on listing timeline:
Key timing factors:

• Divorce proceedings resolution (3-6 months)

• Patent matter handling (6-12 months)

• Customer issue mitigation (3-4 months)

• Regulatory approvals (4-6 months)

b) Critical path priorities:
Immediate actions required:

• Divorce proceedings resolution strategy

  • This is the most pressing issue as it affects 60% of shareholding control. The divorce proceedings must be sufficiently resolved or have clear parameters before IPO filing can proceed. The immediate focus should be on obtaining comprehensive legal assessment of the proceedings status across both Hong Kong and PRC jurisdictions, and developing a workable settlement framework with definitive timelines.

  • A contingency plan for share transfer restrictions and possible escrow arrangements needs development, particularly if full resolution before listing proves challenging. The prospectus disclosure implications need careful consideration, balancing transparency with commercial sensitivity.

• Patent claim assessment and response

  • The patent infringement claim requires immediate technical and legal analysis to determine its merit and potential impact on business operations. Given this could affect core business viability, the company needs both a legal defense strategy and technical contingency plan. This includes assessing potential damages, exploring settlement options, and developing technical workarounds if necessary.

  • The timeline for resolution or clear path forward must align with the IPO schedule. This workstream needs to demonstrate to investors that the company has a robust plan to address the claim without material impact on future operations.

• Customer diversification plan

  • The loss of a 15% revenue contributor demands immediate implementation of a customer diversification strategy. The company needs to demonstrate it can bridge this revenue gap through a combination of new customer acquisition and expansion of existing relationships. The plan should show clear pipeline acceleration and concrete steps for revenue replacement.

  • Financial impact analysis must cover revised profit forecasts, working capital implications, and cost management initiatives. Banking relationships may need review to ensure adequate facilities during the transition period.

• Board restructuring initiation

  • Board restructuring needs to commence immediately to address both the VC exit implications and HKEX governance requirements. This includes identifying suitable independent directors, planning committee structures, and developing a comprehensive governance framework that meets listing requirements.

  • The timing needs to allow for proper integration of new directors before listing and ensure all regulatory approvals can be obtained. Documentation preparation and director training programs should be initiated early in the process.

• VIE structure regulatory consultation

  • The VIE structure requires immediate regulatory consultation given recent changes in the regulatory environment. This includes obtaining updated legal opinions, verifying control mechanisms, and ensuring compliance with current CSRC and cybersecurity requirements.

  • The consultation process needs to address data security considerations, economic interest flow, and foreign exchange implications. Clear timeline for regulatory approvals must be established and integrated into the overall IPO schedule.

c) Contingency planning:
Key backup strategies:

• Alternative ownership structures

  • The primary focus should be developing alternative structures to address the founder's divorce complications. This could include creating a holding company structure to ring-fence disputed shares, or establishing a trust mechanism to maintain stable control during proceedings. Pre-IPO restructuring options should be explored to potentially separate contested assets from core business operations.

  • The backup plan should also address VC exit scenarios, potentially including staged exit arrangements or extended lock-up periods to maintain market confidence. Alternative board compositions and control mechanisms need development as fallback options.

• IP litigation/settlement options

  • Multiple parallel strategies need development for the patent infringement situation. This includes preparing a technical workaround solution that could be rapidly implemented if required. A comprehensive settlement framework should be developed with various scenarios including cross-licensing arrangements, royalty structures, or technology purchase options.

  • The contingency plan should include potential business model modifications if core technology access becomes restricted. This requires identification of alternative technologies or development pathways that could maintain business viability.

• Customer acquisition acceleration

  • The backup plan for customer loss should include multiple revenue recovery scenarios. This involves accelerated sales pipeline development with both existing and new customers, potentially including pricing incentives or enhanced service offerings to secure commitments quickly.

  • Alternative business lines or market segments should be identified for rapid expansion if needed. The plan should include potential strategic partnerships or M&A opportunities that could quickly fill revenue gaps.

• Modified VIE arrangements

  • Alternative legal structures need development in case current VIE arrangements face regulatory challenges. This includes exploring different control mechanisms, modified economic interest flows, or potential corporate restructuring options that achieve similar business objectives while meeting evolving regulatory requirements.

  • The backup plan should consider geographical reorganization options, including potential relocation of certain operations or legal entities to more favorable jurisdictions if required.

• Timeline adjustment scenarios

  • Multiple timeline scenarios need development considering various delay combinations. This includes identifying critical path dependencies and potential acceleration opportunities in other workstreams to compensate for delays in problematic areas.

  • The plan should include trigger points for activating different timeline scenarios and associated cost implications. Market window analysis should inform the optimal timing ranges for each scenario.