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TABLE OF CONTENTS
As filed with the Securities and Exchange Commission on December 21, 2022
Registration No. 333-267864​
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​
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 3
to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TH International Limited
(Exact name of registrant as specified in its charter)
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Cayman Islands
(State or other jurisdiction of
incorporation or organization)
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5812
(Primary Standard Industrial
Classification Code Number)
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Not Applicable
(I.R.S. Employer
Identification Number)
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2501 Central Plaza
227 Huangpi North Road
Shanghai, People’s Republic of China, 200003
+86-021-6136-6616
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
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Cogency Global Inc.
122 East 42nd Street, 18th Floor,
New York, NY 10168
+1(800) 221-0102
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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With copies to:
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Jesse Sheley
Joseph Raymond Casey
Ram Narayan
Min Lu
Kirkland & Ellis International LLP
26th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong
Tel: +852-3761-3300
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Steve Lin
Kirkland & Ellis International LLP
29th Floor, China World Office 2
No.1 Jian Guo Men Wai Avenue
Beijing 100004, P.R. China
Tel: +86 10-5737-9300
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Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is emerging growth company as defined in Rule 405 of Securities Act.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
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†
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), shall determine.
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The information contained in this prospectus is not complete and may be changed. No securities may be sold pursuant to this prospectus until the registration statement filed with the Securities and Exchange Commission with respect to such securities has been declared effective. This prospectus is not an offer to sell these securities and no offers to buy these securities are being solicited in any jurisdiction where their offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 12, 2022
PRELIMINARY PROSPECTUS
Up to 22,900,000 Ordinary Shares issuable upon the exercise of warrants
Up to 62,151,365 Ordinary Shares and 5,650,000 Warrants to purchase Ordinary Shares offered by Selling Securityholders
OF​
TH International Limited​
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This prospectus relates to the issuance by TH International Limited (“we,” “us,” the “Company” or “THIL”) of up to 22,900,000 ordinary shares, par value $0.00000939586994067732 per share, of the Company (“Ordinary Shares”), including (i) 17,250,000 Ordinary Shares issuable upon the exercise of warrants to purchase Ordinary Shares at an exercise price of $11.50 per share, which were issued on September 28, 2022 (the “Closing Date”) in exchange for the public warrants of Silver Crest Acquisition Corporation (“Silver Crest”) that were issued in the initial public offering of Silver Crest (the “Public Warrants”); (ii) 4,450,000 Ordinary Shares issuable upon the exercise of warrants to purchase Ordinary Shares at an exercise price of $11.50 per share, which were issued to Silver Crest Management LLC (the “Sponsor”) on the Closing Date (the “Sponsor Warrants”) in exchange for the private placement warrants purchased by the Sponsor for a total consideration of $8,900,000 in a private placement concurrent with the initial public offering of Silver Crest (at a price of $1.00 per warrant at the time of purchase and an effective purchase price of $2.00 per warrant after the the Sponsor, in connection with the Business Combination (as defined below), forfeited half of the private placement warrants originally issued); and (iii) 1,200,000 Ordinary Shares issuable upon the exercise of warrants to purchase Ordinary Shares at an exercise price of $11.50 per share, which were issued on the Closing Date to certain investors (the “PIPE Investors”) who invested $10 million or more pursuant to separate subscription agreements dated March 9, 2022 (the “PIPE Subscription Agreements”) for no consideration (the “PIPE Warrants,” and collectively with the Public Warrants and the Sponsor Warrants, the “Warrants”).
This prospectus also relates to the potential offer and sale from time to time by the selling securityholders named in this prospectus or their pledgees, donees, transferees, assignees or other successors in interest (that receive any of the securities as a gift, distribution, or other non-sale related transfer) (collectively, the “Selling Securityholders”) of up to (A) 62,151,365 Ordinary Shares, which include (i) an aggregate of 35,186,824 Ordinary Shares beneficially owned by Pangaea Two Acquisition Holdings XXIIA Limited (“XXIIA”), Tencent Mobility Limited, SCC Growth VI Holdco D, Ltd., Eastern Bell International XXVI Limited and Pangaea Two Acquisition Holdings XXIII, Ltd. (the “Legacy Shares”), which were acquired by XXIIA, Tencent Mobility Limited, SCC Growth VI Holdco D, Ltd. and Eastern Bell International XXVI Limited at a price of approximately $0.50, $2.10, $2.82 and $2.82 per share, respectively, and acquired by Pangaea Two Acquisition Holdings XXIII, Ltd. from Tim Hortons Restaurants International GmbH (“THRI”) as in-kind consideration for THRI’s investment in Pangaea Two Acquisition Holdings XXIII, Ltd.; (ii) 4,312,500 Ordinary Shares issued to the Sponsor (the “Sponsor Shares”) on the Closing Date in exchange for the Class B ordinary shares of Silver Crest, which were purchased by the Sponsor at a price of approximately $0.006 per share; (iii) 4,450,000 Ordinary Shares issuable upon the exercise of the Sponsor Warrants; (iv) 5,050,000 Ordinary Shares issued to the PIPE Investors pursuant to the PIPE Subscription Agreements on the Closing Date (the “PIPE Shares”), including 500,000 PIPE Shares purchased by Silver Crest Investment Limited (an entity at which Leon Meng, a member and the sole manager of the Sponsor, is the controlling shareholder and the sole director), at a price of $10.00 per share for investors who invested less than $10 million and an effective price of $8.33 per share for investors who invested $10 million or more; (v) 1,200,000 Ordinary Shares issuable upon the exercise of the PIPE Warrants, which were issued for no consideration to PIPE Investors who invested $10 million or more; (vi) 5,000,000 Ordinary Shares issued to Shaolin Capital Partners Master Fund Ltd, DS Liquid DIV RVA SCM LLC, MAP 214 Segregated Portfolio, a segregated portfolio of LMA SPC, and Shaolin Capital Partners SP, a segregated portfolio of PC MAP SPC (the “ESA Investors”) on the Closing Date pursuant to an Equity Support Agreement (the “ESA Shares”); (vii) 6,752,041 Ordinary Shares issuable upon conversion of convertible notes (the “Notes”) at a conversion price of $11.50 per share, which were issued to Sona Credit Master Fund Limited (“Sona”) and Sunrise Partners Limited Partnership (“Sunrise”) pursuant to the Convertible Note Purchase Agreement that Sona and Sunrise each entered into with THIL and XXIIA (the “Conversion Shares”), whereby Sona and Sunrise purchased an aggregate principal amount of $50 million Notes for a purchase price of 98% of the principal amount thereof (or approximately $7.26 per Note); and (viii) 200,000 Ordinary Shares held by XXIIA that may be acquired by Sona through its exercise of the option to purchase such shares at its discretion at a purchase price of $11.50 per share, subject to adjustment (the “Option Shares”) pursuant to an Option Agreement, dated September 28, 2022, by and between, on the one hand, THIL, Pangaea Two Acquisition Holdings XXIIB Limited (“XXIIB”) and XXIIA and, on the other hand, Sona; and (B) 5,650,000 Warrants, which include (i) 4,450,000 Sponsor Warrants and (ii) 1,200,000 PIPE Warrants. We are registering these securities to satisfy certain registration rights we have granted to permit the Selling Securityholders to sell securities from time to time, in amounts, at prices and on terms determined at the time of offering.
The Selling Securityholders may offer, sell or distribute all or a portion of these securities from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. See the section titled “Plan of Distribution” for details. In connection with any sales of securities offered hereunder, the Selling Securityholders, any underwriters, agents, brokers or dealers participating in such sales may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, or the “Securities Act.”
The securities registered herein are identified in this prospectus as the Registered Securities. Subject to the lock-up restrictions described in this prospectus under the section titled “Plan of Distribution,” the Selling Securityholders can sell, under this prospectus, up to 62,151,365 Ordinary Shares constituting (on a post-exercise basis) approximately 38.5% of our
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issued and outstanding Ordinary Shares as of September 28, 2022 (assuming the exercise of all of our outstanding Warrants and the conversion of the Notes). The sales of a substantial number of Registered Securities could result in a significant decline in the public trading price of our securities and could impair our ability to raise capital through the sale or issuance of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our securities. Despite such a decline in the public trading price, certain Selling Securityholders may still experience a positive rate of return on the Registered Securities due to the lower price that they purchased the Registered Securities compared to other public investors and may be incentivized to sell our Ordinary Shares or Warrants when others are not. For example, based on the closing price of our Ordinary Shares on December 6, 2022, the Sponsor may experience a potential profit of up to $3.81 per share; holders of the Legacy Shares may experience a potential profit of up to $3.31 per share; the PIPE Investors who invested $10 million or more may experience a potential profit on their PIPE Shares if the price of our Ordinary Shares exceeds $8.33 per share; the PIPE Investors who invested less than $10 million may experience a potential profit if the price of our Ordinary Shares exceeds $10.00 per share; the extent to which the ESA Investors may be able to profit on the ESA Shares depends on the trading price of our Ordinary Shares during each reference period under the ESA (for example, assuming that the Reference Price (as defined below) for each reference period is $3.81, which was the closing price of our Ordinary Shares on December 6, 2022, the effective subscription price of the ESA Shares will be $3.71 per share, and the ESA investors may be able to profit on their ESA Shares if the trading price of our Ordinary Shares is above $3.71); and the Sponsor and the PIPE Investors may experience a potential profit on their Warrants if the price of our Ordinary Shares exceeds $11.50 per share.
Under the ESA, there are three reference periods, subject to acceleration. On or prior to 5 p.m., U.S. Eastern Time on the business day immediately following the final VWAP Trading Day (as defined below) of each of the three reference periods, we are required to pay to the ESA Investors from the Collateral Account (as defined below) a Reference Period Payment (as defined below) and, following such payment, have the right to receive from the Collateral Account an Issuer Release Amount (as defined below), as shown in the table below. Upon the occurrence of certain acceleration events under the ESA (for example, the Daily VWAP (as defined below) of our Ordinary Shares is less than $5.00 for any 10 VWAP Trading Days (whether or not consecutive) during any consecutive 15 VWAP Trading Day period, which is currently the case), each ESA Investor has the right, but not the obligation, to accelerate any and all the remaining reference periods, at its election and only with a prompt notice within five business days of such condition being or continuing to be met to us, provided that in no event will any accelerated reference period consist of less than 15 VWAP Trading Days. As of the date of this prospectus, THIL has not received any indication that any ESA Investor intends to exercise such acceleration rights. Following the conclusion of, as applicable, the third reference period or the final accelerated reference period and the payment or release of the applicable Reference Period Payment, the outstanding balance of the Collateral Account will be returned to us.
We will not receive any proceeds from any sale of the Registered Securities by the Selling Securityholders. We will receive proceeds from the exercise of Warrants if the Warrants are exercised for cash. The likelihood that warrant holders will exercise the Warrants and any cash proceeds that we would receive are dependent upon the market price of our Ordinary Shares, among other things. If the market price for our Ordinary Shares is less than $11.50 per share, we believe warrant holders will be unlikely to exercise their Warrants. We will pay the expenses associated with registering the sales by the Selling Securityholders, as described in more details in the section titled “Use of Proceeds” appearing elsewhere in this prospectus.
Our Ordinary Shares and Public Warrants are currently traded on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “THCH” and “THCHW,” respectively. Our Ordinary Shares and Public Warrants began trading on Nasdaq on September 29, 2022. On December 6, 2022, the closing price of our Ordinary Shares on Nasdaq was $3.81 per share, and the closing price of our Public Warrants on Nasdaq was $0.14 per warrant.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and are therefore eligible to take advantage of certain reduced reporting requirements otherwise applicable to other public companies.
We are also a “foreign private issuer,” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
In addition, as of the date of this prospectus, Peter Yu, our Chairman and the Managing Partner of Cartesian Capital Group, LLC (“Cartesian”), indirectly owns approximately 53.1% of our outstanding Ordinary Shares through XXIIA, Pangaea Two Acquisition Holdings XXIII, Ltd. and TH China Partners Limited, which are entities controlled by him. As a result, we qualify as a “controlled company” within the meaning of Nasdaq’s corporate governance standards and have the option not to comply with certain requirements to which companies that are not controlled companies are subject, including the requirement that a majority of our board of directors shall consist of independent directors and the requirement that our nominating and corporate governance committee and compensation committee shall be composed entirely of independent directors. We currently do not and do not intend to take advantage of these exemptions. However, we cannot guarantee that this may not change going forward. In addition, four out of the nine members of our board of directors, including Peter Yu, are executives of Cartesian.
THIL is a Cayman Islands holding company that conducts its operations in mainland China through wholly owned subsidiaries. THIL is not a Chinese operating company and does not directly own any substantive business operations in mainland China. The securities registered hereby are securities of THIL, not those of its operating companies. Therefore, investors in THIL will not directly hold any equity interests in its operating companies. This holding company structure involves unique risks to investors. For example, PRC regulatory authorities could disallow this operating structure and limit or hinder THIL’s ability to conduct its business through, receive dividends from or transfer funds to the operating companies or maintain listing on a U.S. or other foreign exchange, which could cause the value of THIL’s securities to significantly decline or become worthless. In addition, THIL and its subsidiaries incorporated under the laws of the PRC (the “PRC Subsidiaries”) face various legal and operational risks associated with doing business in China. For a detailed description of the risks related to THIL’s holding company structure and doing business in China, see “Risk Factors — Risks Related to Doing Business in China.” These risks arise from, among other things, PRC governmental authorities’ significant oversight and discretion over the
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business and financing activities of its PRC Subsidiaries, the complex and evolving PRC legal system, frequent changes in laws, regulations and government policies, uncertainties and inconsistencies regarding the interpretation and enforcement of laws and regulations, difficulties or delays in obtaining regulatory approvals for listing on a foreign stock exchange or conducting certain business activities and increasing oversight on cybersecurity and data privacy and potential anti-monopoly actions related to the PRC government’s recently issued statements and instituted regulatory actions. These risks could result in a material change in the operations of THIL’s PRC Subsidiaries and significantly limit or completely hinder THIL’s ability to maintain listing on a U.S. or other foreign stock exchange, to accept foreign investments and to offer or continue to offer securities to foreign investors. THIL and its PRC Subsidiaries are also subject to various restrictions on intercompany fund transfers and foreign exchange control under current PRC laws and regulations and could be subject to additional, more onerous restrictions under new PRC laws and regulations that may come into effect in the future. For example, THIL’s PRC Subsidiaries may pay dividends only out of their accumulated after-tax profits upon satisfaction of relevant statutory conditions and procedures, if any, determined in accordance with PRC accounting standards and regulations; each of the PRC Subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital; the PRC Subsidiaries are required to complete certain procedural requirements related to foreign exchange control in order to make dividend payments in foreign currencies; a withholding tax, at the rate of 10% or lower, is payable by the PRC Subsidiaries upon dividend remittance; approval from or registration with competent PRC government authorities is required where Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses, such as the repayment of loans denominated in foreign currencies; loans by THIL to its PRC Subsidiaries to finance their operations shall not exceed certain statutory limits and must be registered with the local counterpart of the State Administration of Foreign Exchange (the “SAFE”); and any capital contribution from THIL to its PRC Subsidiaries is required to be registered with the competent PRC government authorities. Due to the existing and/or potential interventions in or the imposition of restrictions and limitations by the PRC government on the ability of THIL or its PRC Subsidiaries to transfer cash and/or non-cash assets based on existing or new PRC laws and regulations, cash and/or non-cash assets located in mainland China or held by THIL’s PRC Subsidiaries, such as Tim Hortons (China) Holdings Co., Ltd. (“Tim Hortons China”) and Tim Hortons (Shanghai) Food and Beverage Management Co., Ltd., may not be available to fund THIL’s foreign currency needs or any foreign operations that THIL may have in the future or for other uses outside of mainland China, and THIL may not be able to effectively utilize the proceeds from the offerings of its listed securities to fund the operations or liquidity needs of its PRC Subsidiaries. For a detailed description of the restrictions and related risks, see “Summary — Corporate Structure,” “Risk Factors — Risks Related to Doing Business in China — Restrictions on our subsidiaries on paying dividends or making other payments to us under existing or new laws and regulations of the PRC and the HKSAR may restrict our ability to satisfy our liquidity requirements” and “Risk Factors — Risks Related to Doing Business in China — Foreign exchange controls may limit our ability to effectively utilize our revenues and the proceeds from the offerings of our listed securities and adversely affect the value of your investment.” Based on the experience of its management team, THIL does not believe that remittance of cash and/or non-cash assets from Hong Kong, including cash and/or non-cash assets held by TH Hong Kong International Limited (“THHK”), a wholly-owned subsidiary of THIL incorporated under the laws of the Hong Kong Special Administrative Region (the “HKSAR”), is subject to the aforementioned interventions, restrictions and limitations by the PRC government or similar interventions, restrictions or limitations from the government of the HKSAR, nor does THIL believe such interventions, restrictions and limitations will be imposed on THHK or any future Hong Kong subsidiary that THIL may have in the foreseeable future. To the extent that THIL’s cash and/or non-cash assets in Hong Kong or any cash and/or non-cash assets held by its Hong Kong Subsidiaries are subject to the aforementioned interventions, restrictions and limitations by the PRC government or the government of the HKSAR, then, as a result of such interventions, restrictions and limitations, such cash/assets may not be available to pay dividends to THIL, to fund the operations of THIL’s subsidiaries outside Hong Kong or to be used outside of Hong Kong for other purposes. As of the date of this prospectus, neither THIL nor any of its subsidiaries has made any dividends or distributions to its parent company or any investor, and there has been no transfer of capital expenses among THIL and its subsidiaries. As of the date of this prospectus, THIL has transferred an aggregate of US$207.4 million in cash to THHK as capital injections and shareholder loans, and THHK has transferred an aggregate of US$163.1 million in cash to Tim Hortons China, a wholly-owned PRC subsidiary of THHK, and US$25.0 million in cash to Tim Hortons (Shanghai) Food and Beverage Management Co., Ltd., a wholly-owned PRC subsidiary of Tim Hortons China, as capital injections and shareholder loans. THIL currently does not have a specific timetable on when to settle the amounts owed within the Company and plans to distribute cash dividends after it becomes profitable. See pages F-11 and F-47 of this prospectus for additional information on the amount of cash balances held at financial institutions in mainland China, Hong Kong and the Cayman Islands as of December 31, 2020 and 2021 and June 30, 2022, respectively. Any determination to pay dividends in the future will be at the discretion of the Board. THIL does not currently have any cash management policy that dictates how funds shall be transferred between THIL and its subsidiaries, including its PRC Subsidiaries, THHK and any other non-PRC subsidiaries that it may have in the future, or among its subsidiaries.
In addition, on December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements under the Holding Foreign Companies Accountable Act (the “HFCAA”), pursuant to which the SEC will (i) identify an issuer as a “Commission-Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely because of the position taken by the authority in the foreign jurisdiction and (ii) impose a trading prohibition on the issuer after it is identified as a Commission-Identified Issuer for three consecutive years. The Accelerating Holding Foreign Companies Accountable Act, which was passed by the U.S. Senate in June 2021, (the “AHFCAA”), if enacted, would shorten the three-consecutive-year compliance period under the HFCAA to two consecutive years and, as a result, reduce the time before the potential trading prohibition against or delisting of THIL’s securities. On December 16, 2021, the Public Company Accounting Oversight Board (the “PCAOB”) issued a report on its determination that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by local authorities. THIL’s auditors, who are headquartered in mainland China, are subject to the determinations announced by the PCAOB. As a result, the PCAOB has been and currently is unable to inspect THIL’s auditors. On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance of China. The terms of the Protocol would grant the PCAOB complete access to audit work papers and other information so that it may inspect and investigate PCAOB-registered accounting firms headquartered in mainland China and Hong Kong. However, it is uncertain whether and how the Protocol will be implemented and whether THIL’s auditors will be able to fully cooperate with the PCAOB’s request for audit workpapers without the approval of the Chinese authorities. The fact that the PCAOB has been and currently is unable to inspect THIL’s auditors could deprive investors of the benefits of such inspections and cause THIL’s securities to be delisted under the HFCAA
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and the AHFCAA. The delisting of THIL’s securities, or the threat of such securities being delisted, may materially and adversely affect the value of your investment. For a detailed description of the related risks, see “Risk Factors — Risks Related to Doing Business in China — The PCAOB has been and currently is unable to inspect our auditor. Our securities may be delisted under the HFCAA if the PCAOB is unable to inspect our auditors for three consecutive years after we are identified by the SEC as a Commission-Identified Issuer, or two consecutive years if the AHFCAA is enacted. The delisting of our securities, or the threat of our securities being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives investors of the benefits of such inspections.”
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Registered Securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Investing in our securities involves a high degree of risk. Before buying any of our securities, you should carefully read the discussion of material risks of investing in such securities under “Risk Factors” beginning on page 39 of this prospectus.
The date of this prospectus is            , 2022.
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ABOUT THIS PROSPECTUS
You should rely only on the information contained or incorporated by reference in this prospectus or any supplement. Neither we nor any of the Selling Securityholders has authorized anyone to provide you with different or additional information, other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you, and neither we nor nor any of the Selling Securityholders takes any responsibility for, or provide any assurance as to the reliability of, any other information that others may give you. We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on the front of each document. Our business, financial condition, results of operations and prospects may have changed since that date. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”
The securities offered by this prospectus are being offered only in jurisdictions where the offer is permitted. Neither we nor any of the Selling Securityholders is making an offer to sell the Registered Securities in any jurisdiction where the offer or sale thereof is not permitted, nor have we or the Selling Securityholders taken any action to permit the possession or distribution of this prospectus in any jurisdiction other than the United States where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the Registered Securities and the distribution of this prospectus outside the United States.
 
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MARKET, INDUSTRY AND OTHER DATA
This prospectus contains estimates, projections and other information concerning the industry in which THIL’s subsidiaries operate, including market size and growth of the markets in which it participates, that are based on industry publications and reports and forecasts prepared by its management. In some cases, THIL does not expressly refer to the sources from which these estimates and information are derived. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. THIL has not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which THIL’s subsidiaries operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications and reports.
The sources of certain statistical data, estimates, and forecasts contained in this prospectus include independent industry reports from Global Market Trajectory & Analytics and the Department of Agriculture Foreign Agricultural Service.
Certain estimates of market opportunity, including internal estimates of the addressable market for THIL’s subsidiaries and forecasts of market growth, included in this prospectus, may prove inaccurate. Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. The estimates and forecasts in this prospectus relating to the size of THIL’s target market, market demand and adoption, capacity to address this demand, and pricing may prove to be inaccurate. The addressable market THIL estimates may not materialize for many years, if ever, and even if the markets in which it competes meet the size estimates in this prospectus, THIL could fail to successfully address or compete in such markets, if at all.
Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Certain other amounts that appear in this prospectus may not sum due to rounding.
 
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STATEMENT REGARDING TIM HORTONS
TIM HORTONS® is a registered trademark of THRI, a subsidiary of Restaurant Brands International Inc. (“RBI”). The offering of the Registered Securities has not been endorsed by RBI or any its subsidiaries, affiliates, officers, directors, agents, employees or advisors; other than in their capacity, as applicable, as a director of THIL. The grant of a “Tim Hortons” franchise to THIL in mainland China, Hong Kong and Macau by THRI should not be construed as an express or implied approval or endorsement of any statement regarding performance of THIL and/or its subsidiaries (financial or otherwise) in this prospectus. In making an investment decision, an investor must rely on its own examination of THIL.
The enforcement or waiver of any obligation of THIL under the applicable franchise agreements is generally a matter of the franchisor’s sole discretion. No investor should rely on any representation, assumption or belief that THRI will enforce or waive particular obligations of THIL under those agreements.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
THIL has proprietary rights to trademarks used in this prospectus that are important to its business, many of which are registered under applicable intellectual property laws. This prospectus also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that THIL will not assert, to the fullest extent permitted under applicable law, its rights or the right of the applicable licensor to these trademarks, trade names and service marks. THIL does not intend its use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of THIL by, any other parties.
IMPORTANT INFORMATION ABOUT EXCHANGE RATES
Certain information presented in this prospectus has been converted from Renminbi to U.S. dollars. Except for information related to THIL’s financial data as of and for the three or nine months ended September 30, 2022, for which the the conversion from Renminbi to U.S. dollars was made at a rate of RMB7.1135 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on September 30, 2022, the conversion from Renminbi to U.S. dollars elsewhere in this prospectus was made at a rate of RMB6.6981 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on June 30, 2022. Exchange rates fluctuate, and such fluctuation can be significant.
 
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SELECTED DEFINITIONS
“Board” means the board of directors of THIL.
“Cayman Companies Law” means the Companies Act (as amended) of the Cayman Islands.
“DataCo” means Pangaea Data Tech (Shanghai) Co., Ltd.
“ESA” means the Equity Support Agreement, dated March 8, 2022, between THIL and Shaolin Capital Management LLC, which assigned all of its rights and obligations under the agreement to Shaolin Capital Partners Master Fund Ltd, DS Liquid DIV RVA SCM LLC, MAP 214 Segregated Portfolio, a segregated portfolio of LMA SPC, and Shaolin Capital Partners SP, a segregated portfolio of PC MAP SPC on May 25, 2022, as amended by Amendment No. 1 to the Equity Support Agreement, dated July 28, 2022.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Hong Kong Subsidiaries” means TH Hong Kong International Limited and any other Hong Kong-incorporated subsidiary that THIL may have in the future.
“Issuer Release Amount” means payments that THIL is entitled to receive from a collateral account pursuant to the terms of the ESA.
“PCAOB” means the Public Company Accounting Oversight Board.
“Plan of Merger” means the plan of merger for the First Merger pursuant to which Merger Sub will be merged with and into Silver Crest, following which the separate corporate existence of Merger Sub shall cease and Silver Crest shall continue as the surviving entity.
“PRC” means the People’s Republic of China.
“PRC Subsidiaries” means Tim Hortons (China) Holdings Co., Ltd., Shanghai Donuts Enterprise Management Co., Ltd., Tim Hortons (Shanghai) Food and Beverage Management Co., Ltd., Tim Hortons (Beijing) Food and Beverage Services Co., Ltd., Tim Coffee (Shenzhen) Co., Ltd., Tim Hortons (Shenzhen) Food and Beverage Co., Ltd. and/or any other PRC-incorporated subsidiary that THIL may have in the future.
“Reference Period Payment” means payments that THIL is required to pay to the ESA Investors from a collateral account pursuant to the terms of the ESA.
“Same-store sales growth” means the percentage change in the sales of stores that have been operating for 12 months or longer during a certain period compared to the same period from the prior year. The same-store sales growth for any period of more than a month equals to the arithmetic average of the same-store sales growth of each month covered in the period. If a store was closed for seven days or more during any given month, its sales during that month and the same month in the comparison period are excluded for purposes of measuring same-store sales growth.
“Securities Act” means the Securities Act of 1933, as amended.
“Sponsor” means Silver Crest Management LLC.
“system-wide stores” means stores owned and operated by THIL and franchise stores.
“THIL” means TH International Limited and/or its subsidiaries. All references to “THIL” with respect to business operations shall mean THIL’s PRC Subsidiaries, unless otherwise indicated.
“THIL Articles” means the second amended and restated memorandum and articles of association of THIL.
“U.S. dollars,” “U.S.$” or “$” means the legal currency of the United States.
“U.S. GAAP” means accounting principles generally accepted in the United States of America.
 
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“VWAP” means, for the Ordinary Shares for a specified period, the dollar volume-weighted average price for the Ordinary Shares on the Nasdaq Stock Market, for such period, as reported by Bloomberg through its “AQR” function. All such determinations shall be appropriately adjusted for any share dividend, share split, share combination, recapitalization or other similar transaction during such period.
“VWAP Trading Day” means any day on which Nasdaq is scheduled to be open for reading for its regular trading session and (A) there is no failure by Nasdaq to open for trading during its regular trading session on such date (such an event, a “VWAP Market Disruption Event”) or an event that any ESA Investor concludes, upon consultation with external counsel, that it is reasonably appropriate with respect to any legal, regulatory or self-regulatory requirements or related policies and procedures (in the case of any self-regulatory requirements or related policies and procedures, solely to the extent such self-regulatory requirements or related policies and procedures are consistently applied in good faith to all similarly situated counterparties in all similar contexts) for it to refrain from effecting transactions with respect to THIL’s Ordinary Shares (such an event, a “Regulatory Disruption”) and (B) trading in THIL’s Ordinary Shares generally occurs on Nasdaq. If a VWAP Market Disruption Event or Regulatory Disruption occurs, the Calculation Agent (as defined in the ESA) shall determine if such VWAP Trading Day is (i) a disrupted day in full, in which case such day shall not be a VWAP Trading Day, or (ii) a disrupted day in part, in which case the Calculation Agent (as defined in the ESA) shall determine the VWAP for such VWAP Trading Day based on the volume-weighted average price of trades in THIL’s Ordinary Shares on such VWAP Trading Day effected before the applicable Regulatory Disruption based on the <VAP> screen on Bloomberg or similar, as determined by the Calculation Agent (as defined in the ESA) if THIL’s Ordinary Shares are not so listed or traded on Nasdaq, then “VWAP Trading Day” means a business day.
 
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SUMMARY
This summary highlights selected information from this prospectus. It may not contain all of the information that is important to you. You should carefully read the entire prospectus and the other documents referred to in this prospectus. For additional information, see “Where You Can Find More Information” on page 161. Each item in this summary refers to the page of this prospectus on which that subject is discussed in more detail.
Overview
THIL is an emerging coffee champion in China. THIL’s vision is as simple as it is ambitious: to build the premier coffee and bake shop in mainland China. Founded by affiliates of Cartesian Capital Group, LLC (“Cartesian”) and Tim Hortons Restaurants International GmbH, the owner of the Tim Hortons brand, THIL is the parent company of the master franchisee of, and holds the right to operate, Tim Hortons coffee shops in mainland China, Hong Kong and Macau. Tim Hortons, one of the largest coffee, donut, and tea restaurant chains in the world, is deeply rooted in core values of inclusivity and community. THIL opened its first coffee shop in China in February 2019 and has grown dramatically since then, selling high-quality coffee and freshly prepared food items at attractive price points through both company owned and operated stores and franchised stores. As of September 30, 2022, THIL had 486 system-wide stores across 27 cities in mainland China. As of the date of this prospectus, THIL does not have any stores outside of mainland China. In addition to its physical store network, THIL has built a rapidly expanding base of loyal customers and a robust technology infrastructure that facilitates digital ordering and supports the efficient growth of its business. In 2021, digital orders, including both delivery and mobile ordering for self pick-up, accounted for approximately 73.0% of THIL’s revenues from company owned and operated stores, representing an increase of 8.8 percentage points from approximately 64.2% in 2020. During the six months ended June 30, 2022, 77.0% of THIL’s revenues were generated from digital orders, and this number further increased to 79.8% for the three months ended September 30, 2022. THIL also has a popular loyalty program, which has experienced tremendous growth since its establishment in 2019, reaching 2.3 million, 6.0 million, 7.5 million and 8.9 million as of December 31, 2020, December 31, 2021, June 30, 2022 and September 30, 2022, respectively. As of the date of this prospectus, the number of its loyalty program members has further grown to over 10.0 million. In February 2022, Tim Hortons China transferred control and possession of the personal data of THIL’s customers to Pangaea Data Tech (Shanghai) Co., Ltd. (the “DataCo”), a PRC-incorporated company, pursuant to a Business Cooperation Agreement. For a more detailed description, see the section of this prospectus titled “Business — Digital Technology and Information Systems.”
THIL provides customers with a distinctive value proposition, combining freshly prepared, high-quality and locally relevant food and beverages, priced attractively and served to its guests with an inviting customer experience. THIL’s business philosophy is anchored by four fundamental cornerstones: true local relevance, continuous innovation, genuine community, and absolute convenience, and THIL seeks to deliver these through world-class execution and data-driven decision making.
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True local relevance:   As a global brand, THIL strives to understand and embrace what its guests like, want and need. True localization is evident in its menu, store designs and digital identity, allowing it to create familiarity and grow rapidly in the Chinese market.
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Continuous innovation:   In China’s dynamic and demanding consumer market, THIL bolsters its strong core menu offering by continually updating its product offerings and innovating on its digital systems from customer facing elements like ordering to back-of-the-house systems like training and supply chain.
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Genuine community:   THIL is not just about caffeine but also connections. THIL’s physical and digital spaces allow its community to interact around its products, and its loyalty club offers incentives and discounts to build the community and drive sales.
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Absolute convenience:   THIL strives to make buying its products as simple and convenient as possible for guests. Towards this goal, THIL (i) strategically deploys three complementary store formats, namely flagship stores, classic stores and “Tims Go” stores, (ii) leverages mobile ordering to streamline the customer experience, and (iii) utilizes delivery to increase its reach and efficiency.
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Building on these four cornerstones, THIL’s revenue has grown rapidly since its inception, and THIL has maintained positive adjusted store EBITDA for its company owned and operated stores for 2020 and 2021. The fully-burdened gross profit of THIL’s company owned and operated stores, the most comparable GAAP measure to adjusted store EBITDA, for 2020, 2021 and the six months ended June 30, 2022 was negative RMB46.3 million, negative RMB157.4 million (US$23.5 million) and negative RMB148.5 million (US$22.2 million) , respectively. During the same periods, THIL’s adjusted store EBITDA was RMB13.5 million, RMB27.5 million (US$4.1 million) and negative RMB61.3 million (US$9.2 million), respectively. For more details regarding adjusted store EBITDA, a non-GAAP financial measure, which is a key measure used by THIL’s management and board of directors in evaluating THIL’s operating performance and making strategic decisions regarding capital allocation, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.” THIL’s revenues grew significantly from RMB57.3 million in 2019 to RMB212.1 million in 2020, and further grew to RMB643.4 million (US$96.1 million) in 2021, and maintained a year-over-year revenue growth of over 70% in the six months ended June 30, 2022 from RMB237.3 million for the six months ended June 30, 2021 to RMB403.9 million (US$60.3 million) for the same period in 2022. Its total costs and expenses increased from RMB148.5 million in 2019 to RMB353.3 million in 2020, and further increased to RMB1,017.8 million (US$152.0 million) in 2021. Its total costs and expenses increased from RMB369.4 million for the six months ended June 30, 2021 to RMB703.2 million (US$105.0 million) for the same period in 2022. Its net loss increased from RMB87.8 million in 2019 to RMB143.1 million in 2020, and further increased to RMB382.9 million (US$57.2 million) in 2021. Its net loss increased from RMB132.8 million for the six months ended June 30, 2021 to RMB326.9 million (US$48.8 million) for the same period in 2022.
Impact of COVID-19
THIL has demonstrated resilience and agility throughout the COVID-19 pandemic, but serious challenges endure. The COVID-19 pandemic has adversely affected THIL’s store operations and the sales of affected stores since 2020, primarily as a result of temporary store closures, reduced operating hours and decreased customer traffic. In late January and February 2020, its total sales dropped by approximately 20%-30% compared to pre-COVID levels. Its total sales began to gradually recover in March 2020, almost reaching pre-COVID levels by the end of June 2020. During the first half of 2020, home delivery of its products was very strong, which partially offset the impact from COVID-19. In late 2020, THIL’s dine-in business was again negatively affected for a brief period due to a moderate resurgence of COVID-19 cases. Beginning in March 2022, the outbreak of the Omicron variant of COVID-19 and the zero-COVID measures, such as lengthy city-wide lock-downs, undertaken in certain cities in which THIL’s PRC Subsidiaries operate (including Shanghai, where THIL has the highest number of stores), have caused significant disruptions to the operations of THIL’s PRC Subsidiaries in these cities, such as temporary closure of certain stores as a result of the lock-downs imposed in these cities, restrictions on delivery services in locked-down areas, shortage of production, service and delivery staff, slower pace of store network expansion, and volatility in the supply and price of raw materials and intermediary products. For example, THIL experienced approximately 36 daily temporary store closures on average in October 2022. During this period, THIL continued to offer home-delivery services through group buying and e-commerce sales to the extent permitted, which mitigated the impact of the disruptions to some extent and enabled us to further expand our customer base. In the third quarter of 2022, the number of home-delivery orders fulfilled increased by 111.1% from the third quarter of 2021. In addition, the COVID-19 pandemic has had an adverse impact on the global and local supply chain. For a more detailed discussion, see “— Inflation and Supply Chain Impacts.” Despite the challenges posed by COVID-19, its disruptive impact on other retail groups also provided an opportunity to access many attractive sites and expand rapidly. Overall, THIL believes that the impact of COVID-19 on its business is manageable. The revenues of THIL’s company owned and operated stores have continued to grow on a year-over-year basis since 2020, and the same-store sales growth of its company owned and operated stores was 7.4%, 15.7%, 0.7% and 7.5% in 2020, 2021, the six months ended June 30, 2022 and the three months ended September 30, 2022, respectively. As the pandemic continues to rapidly evolve in China and around the world, with several new COVID-19 variants continuing to be discovered, THIL is continuously assessing the impact of COVID-19 on its business operations and financial condition. While the rate of THIL’s same-store sales growth may continue to be adversely impacted by the COVID-19 pandemic and related public health measures, such as lock-downs, until such measures are largely
 
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relaxed or lifted, it cannot anticipate with certainty the length or severity of such impact. As of the date of this prospectus, the lock-downs in Shanghai and certain other cities in mainland China have eased to a substantial degree.
Inflation and Supply Chain Impacts
In addition to the COVID-19 pandemic and related control measures, rising inflation, geopolitical conflicts, including the recent war in Ukraine, and the related supply chain disruptions have also had a direct or indirect impact on THIL’s business, customer base, results of operations, profit margins and outlook.
Increases in the inflation rate of prices of commodities that are inputs to THIL’s products and services, such as agricultural and energy commodities, have led to higher raw material, fuel, freight, warehousing and labor costs and operating expenses. The unit purchase prices of THIL’s regionally sourced raw materials and other products, such as dairy, bakery and food ingredients and packing materials, have remained relatively stable, while the unit price of THIL’s coffee beans has continued to increase since its inception and was approximately 16.6% higher in January 2022 than January 2021. THIL has also enjoyed favorable discounts as its store network and procurement volume continue to grow. THIL anticipates that the average unit price of imported coffee beans will continue to increase in the foreseeable future and that continued inflationary pressure will continue to pressure its margins. Increased inflation rates could also cause discretionary purchases to decline and adversely affect THIL’s ability to attract and retain customers and encourage customer spending. In addition, if the disposable income of THIL’s customers does not increase at a similar rate as inflation does, its sales could suffer, which could materially and adversely affect its business and financial condition and cause it to have additional working capital needs. However, THIL cannot predict whether or how long these higher inflation rates will persist. For a more detailed disclosure on the related risks, see “Risk Factors — Risks Related to THIL’s Business and Industry — We face risks related to the fluctuations in the cost, availability and quality of our raw materials and pre-made products, as well as third-party data maintenance and management services, technical support and consulting services, which could adversely affect our results of operations” and “Risk Factors — Risks Related to Doing Business in China — Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.”
In addition, although THIL does not have any operations outside of mainland China or any business relationships, connections to, or assets in, Russia, Belarus, or Ukraine, its business, financial condition and results of operations have been, and could continue to be, indirectly and adversely affected by the ongoing military conflict between Russia and Ukraine. Such impact arises from: (i) volatility in the global supply of wheat, corn, barley, sunflower oil and other agricultural commodities; (ii) higher food prices due to supply constraints and the general inflationary impact of the war; (iii) increases in energy prices globally, in particular for electricity and fossil fuels such as crude oil and natural gas, and related transportation, freight and warehousing costs; and (iv) disruptions to logistics and supply chains. See “Risk Factors — Risks Related to THIL’s Business and Industry — We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.”
The impact on THIL’s supply chains from rising inflation and geopolitical tensions primarily consists of: (i) higher purchase prices and fuel, freight and warehousing costs for both imported and regionally sourced raw materials and other products, (ii) delays in the manufacturing, processing and transportation of raw materials and other products; and (iii) logistics and operational disruptions. In addition, the COVID-19 pandemic has had an adverse impact on the global and local supply chain. Specifically, (i) the COVID-19 pandemic has resulted in disruptions to the operations of the supplier of THIL’s coffee beans, all of which are imported from the United States, and delays in the transportation of coffee beans from the United States to China; and (ii) measures taken by the PRC government to contain the spread of COVID-19, such as lock-downs and travel restrictions, have caused temporary supply shortages or unstable supplies of certain raw materials and other products, longer lead times, and increased transportation, freight and warehousing costs during the implementation of these measures. As many of THIL’s coffee condiments and pre-made
 
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products have a relatively short shelf life, the lack of availability of these products that meet THIL’s or THRI’s quality standards or timing requirements could have a material adverse impact on its business, financial condition and results of operations. The magnitude of such impact is difficult to predict, in part because it closely hinges on the outbreaks of COVID-19 and related measures, which are highly unpredictable. Future interruptions or friction in THIL’s supply chains, as well as anticipation of interruptions or friction, may cause it to be unable to meet customer demand, retain extra inventory and make operational plans with less precision. Each of these impacts, if THIL is affected more than its competitors, could materially and adversely affect its business, adversely impact its prices and/or margins, and cause it to have additional working capital needs.
The increases in THIL’s costs and expenses described above have been mitigated to some extent by its growing economies of scale and operating efficiency as it continues to expand its store network and grow its business. As a result of favorable discounts granted in connection with bulk purchases of regionally sourced food ingredients and pre-made products, the profit margins for THIL’s food products have remained relatively stable.
Towards the goal of further mitigating the pressure on THIL’s overall cost structure as a result of price inflation, geopolitical tensions and additional costs and expenses associated with supply chain disruptions, since January 2022, THIL has raised the list price of its beverage products, including coffees, by RMB1 to RMB2 per cup (or approximately 5-8% of the list price) and reduced the rate of its promotional discounts by 3-5%. As a result of these mitigation efforts, THIL’s profit margins for these beverage products also have remained relatively stable. However, if the costs and expenses described above continue to increase, there can be no assurance that THIL can continue to increase prices to maintain its margins. Lower margins could adversely impact the profitability of THIL’s business and adversely impact its share price and prospects. If the amounts THIL charges its customers increase at a rate that is either unaffordable to its customers or insufficient to compensate for the rise in its material costs and operational expenses, its business may be materially and adversely affected, its product margin may deteriorate and it may have additional working capital needs. THIL does not believe that such mitigation efforts have introduced any other new material risks, including, but not limited to, those related to product quality or reliability or regulatory approval. For a more detailed discussion of the related risks, see “Risk Factors — Risks Related to THIL’s Business and Industry — If we are unable to maintain or increase prices, we may fail to maintain a positive margin.” In order to mitigate the potential adverse impact of price increases on its financial condition and results of operations, THIL plans to continue to improve its operating efficiency and further strengthen its bargaining power with its suppliers through the continued expansion of its store network.
Corporate Structure
THIL is a Cayman Islands holding company that was incorporated in April 2018 and conducts its operations in mainland China through wholly owned subsidiaries and does not directly own any substantive business operations in mainland China. Therefore, investors in THIL will not directly hold any equity interests in its operating companies. This holding company structure involves unique risks to investors. For example, PRC regulatory authorities could disallow this operating structure and limit or hinder THIL’s ability to conduct its business through, receive dividends from or transfer funds to its operating subsidiaries or list on a U.S. or other foreign exchange, which could cause the value of THIL’s securities to significantly decline or become worthless. See “Risk Factors — Risks Related to Doing Business in China” for more details.
 
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The following diagram illustrates THIL’s corporate structure as of the date of this prospectus.
[MISSING IMAGE: tm2221796d4-fc_corporate4c.jpg]
On December 2, 2021, Tim Hortons China entered into a Business Cooperation Agreement with DataCo, the terms of which are set forth below:
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Tim Hortons China will assign, convey and transfer, and shall cause its affiliates to assign, convey and transfer, to DataCo all rights, title and interests in and to (a) all personal data of customers in mainland China that is used, or held for use, in the operation of the loyalty program, (b) all intellectual property in and to such data, (c) all tangible embodiments of such data in any form and in any media and all records and documentation relating thereto, (d) copies of any of the foregoing, and (e) all other aggregated, processed or other data arising from DataCo’s performance of the services under the Agreement and all intellectual property therein (collectively, “TH China Data”), which was completed in February 2022;
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DataCo will provide Tim Hortons China with various data maintenance and management services, technical support and consulting services (collectively, the “Services”) in support of the operation of the loyalty program;
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In consideration for the Services, Tim Hortons China shall pay a service fee to DataCo on an annual basis (or at any time agreed by the parties), which shall be reasonably determined by DataCo based on (i) the complexity and difficulty of the Services, (ii) the seniority of and time consumed by the employees of DataCo providing the Services; (iii) the specific contents, scope and value of the Services; and (iv) the market price for services similar to the Services; and
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DataCo will grant to Tim Hortons China a non-exclusive, non-assignable, generally non- sublicensable, fully paid-up and royalty-free license to access, use, reproduce, modify and prepare derivative works based upon TH China Data, solely on an aggregated or de-identified basis and solely for purposes of the operation of the loyalty program in mainland China.
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Based on the opinion of THIL’s PRC counsel, Han Kun Law Offices, according to its interpretation of the currently in-effect PRC laws and regulations, THIL believes that neither THIL nor any of its PRC Subsidiaries is subject to cybersecurity review, reporting or other permission requirements by the Cyberspace Administration of China (the “CAC”) under the applicable PRC cybersecurity laws and regulations with respect to this offering or the business operations of its PRC Subsidiaries, because neither THIL nor any of its PRC Subsidiaries qualifies as a critical information infrastructure operator or has conducted any data processing activities that affect or may affect national security or holds personal information of more than one million users. However, as PRC governmental authorities have significant discretion in interpreting and implementing statutory provisions and there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, there is no assurance that THIL or any of its PRC Subsidiaries will not be deemed to be subject to PRC cybersecurity review or that THIL or any of its PRC Subsidiaries will be able to pass such review. In addition, THIL and its PRC Subsidiaries could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future pursuant to new laws, regulations or policies. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with applicable laws and regulations may result in fines, suspension of business, website closure, revocation of business licenses or other penalties, as well as reputational damage or legal proceedings or actions against THIL or its PRC Subsidiaries, which may have a material adverse effect on their business, financial condition or results of operations.
In addition, because THIL and its PRC Subsidiaries rely, and expect to continue to rely, significantly on DataCo to provide data maintenance and management services, technical support and consulting services in support of the operation of its loyalty program, any failure by DataCo to provide these services to THIL’s satisfaction, whether in terms of quality or timeliness, could have a material adverse effect on the business, financial condition and results of operations of THIL and its PRC Subsidiaries. Should DataCo fail to meet THIL’s expectations or unreasonably charge THIL for the services, THIL may be unable to find an alternative service provider in a timely manner, or at all, and the failure to do so could have a material adverse effect on its business, financial condition and results of operations.
THIL and its PRC Subsidiaries are subject to various restrictions on intercompany fund transfers and foreign exchange control under current PRC laws and regulations and could be subject to additional, more onerous restrictions under new PRC laws and regulations that may come into effect in the future. Due to the existing and/or potential interventions in or the imposition of restrictions and limitations detailed below by the PRC government on the ability of THIL or its PRC Subsidiaries to transfer cash and/or non-cash assets based on existing or new PRC laws and regulations, cash and/or non-cash assets located in mainland China or held by its PRC Subsidiaries, such as Tim Hortons China and Tim Hortons (Shanghai) Food and Beverage Management Co., Ltd., may not be available to fund THIL’s foreign currency needs or any foreign operations that THIL may have in the future or for other uses outside of mainland China, and THIL may not be able to effectively utilize the proceeds from the offerings of its listed securities to fund the operations or liquidity needs of its PRC Subsidiaries. Based on the experience of its management team, THIL does not believe that remittance of cash and/or non-cash assets from Hong Kong, including cash and/or non-cash assets held by THHK, an intermediary holding company with no current business operations, is subject to the aforementioned interventions, restrictions and limitations by the PRC government or similar interventions, restrictions or limitations from the government of the HKSAR, nor does THIL believe such interventions, restrictions and limitations will be imposed on THHK or any future Hong Kong subsidiary that THIL may have in the foreseeable future. To the extent that THIL’s cash and/or non-cash assets in Hong Kong or any cash and/or non-cash assets held by its Hong Kong Subsidiaries are subject to the aforementioned interventions, restrictions and limitations by the PRC government or the government of the HKSAR, then, as a result of such interventions, restrictions and limitations, such cash/assets may not be available to pay dividends to THIL, to fund the operations of THIL’s subsidiaries outside Hong Kong or to be used outside of Hong Kong for other purposes. THIL does not currently have any cash management policy that dictates show funds shall be transferred between THIL and its subsidiaries, including its PRC Subsidiaries, THHK and any other non-PRC subsidiaries that it may have in the future, or among its subsidiaries.
Dividends.   Dividends from its subsidiaries is an important source of financing for THIL. Restrictions on THIL’s PRC Subsidiaries’ ability to pay dividends to an offshore entity primarily include: (i) the PRC Subsidiaries may pay dividends only out of their accumulated after-tax profits upon satisfaction of relevant
 
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statutory conditions and procedures, if any, determined in accordance with PRC accounting standards and regulations; (ii) each of the PRC Subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital; (iii) the PRC Subsidiaries are required to complete certain procedural requirements related to foreign exchange control in order to make dividend payments in foreign currencies; and (iv) a withholding tax, at the rate of 10% or lower, is payable by the PRC subsidiary upon dividend remittance. Such restrictions under current PRC laws and regulations, or any new restrictions that could be imposed by new PRC laws and regulations that may come into effect in the future, could have a material and adverse effect on THIL’s ability to distribute profits to its shareholders. As of the date of this prospectus, neither THIL nor any of its subsidiaries has made any dividends or distributions to its parent company or any U.S. investor. THIL is not subject to any restrictions under Cayman Islands law on dividend distribution to its shareholders and currently intends to distribute cash dividends after it becomes profitable. Any determination to pay dividends in the future will be at the discretion of the Board.
Capital expenses.   Approval from or registration with competent government authorities is required where Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses, such as the repayment of loans denominated in foreign currencies. As a result, THIL’s PRC Subsidiaries are required to obtain approval from the State Administration of Foreign Exchange (the “SAFE”) or complete certain registration process in order to use cash generated from their operations to pay off their respective debt in a currency other than Renminbi owed to entities outside mainland China, or to make other capital expenditure payments outside mainland China in a currency other than Renminbi. As of the date of this prospectus, there has been no transfer of capital expenses among THIL and its subsidiaries.
Shareholder loans and capital contributions.   THIL’s subsidiaries may only access THIL’s proceeds from the offerings of its listed securities through loans or capital contributions from THIL. Loans by THIL to its PRC Subsidiaries to finance their operations shall not exceed certain statutory limits and must be registered with the local counterpart of the SAFE, and any capital contribution from THIL to its PRC Subsidiaries is required to be registered with the competent PRC governmental authorities. As of the date of this prospectus, THIL has transferred an aggregate of US$207.4 million in cash to TH Hong Kong International Limited (“THHK”) as capital injections and shareholder loans, and THHK has transferred an aggregate of US$163.1 million in cash to Tim Hortons China and US$25.0 million in cash to Tim Hortons (Shanghai) Food and Beverage Management Co., Ltd. as capital injections and shareholder loans. See pages F-11 and F-47 of this prospectus for additional information on the amount of cash balances held at financial institutions in mainland China, Hong Kong and the Cayman Islands as of December 31, 2020 and 2021 and June 30, 2022, respectively.
THIL’s registered address is at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The mailing address of THIL’s principal executive office is 2501 Central Plaza, 227 Huangpi North Road, Shanghai, People’s Republic of China and its telephone number is +86-021-6136-6616.
Implications of Being an Emerging Growth Company and a Foreign Private Issuer
Emerging Growth Company
THIL is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, THIL is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find THIL’s securities less attractive as a result, there may be a less active trading market for its securities and the prices of its securities may be more volatile.
 
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Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. THIL does not intend to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, THIL, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of THIL’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
THIL will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year in which it has a total annual gross revenue of at least $1.07 billion or is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which it has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Foreign Private Issuer
THIL is a foreign private issuer within the meaning of the rules under the Exchange Act and, as such, THIL is permitted to follow the corporate governance practices of its home country, the Cayman Islands, in lieu of the corporate governance standards of Nasdaq applicable to U.S. domestic companies. For example, THIL is not required to have a majority of the Board consisting of independent directors nor have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors. THIL intends to continue to follow its home country’s corporate governance practices as long as it remains a foreign private issuer. As a result, THIL’s shareholders may not have the same protection afforded to shareholders of U.S. domestic companies that are subject to Nasdaq corporate governance requirements. As a foreign private issuer, THIL is also subject to reduced disclosure requirements and are exempt from certain provisions of the U.S. securities rules and regulations applicable to U.S. domestic issuers such as the rules regulating solicitation of proxies and certain insider reporting and short-swing profit rules.
Controlled Company
As of the date of this prospectus, Peter Yu, THIL’s Chairman and the Managing Partner of Cartesian, indirectly owns approximately 53.1% of THIL’s outstanding Ordinary Shares through XXIIA, Pangaea Two Acquisition Holdings XXIII, Ltd. and TH China Partners Limited, which are entities controlled by him. As a result of Peter Yu’s majority ownership and voting power, which gives him the ability to control the outcome of certain matters submitted to our shareholders for approval, including the appointment or removal of directors (subject to certain limitations described elsewhere in this registration statement), THIL qualifies as a “controlled company” within the meaning of Nasdaq’s corporate governance standards and has the option not to comply with certain requirements to which companies that are not controlled companies are subject, including the requirement that a majority of its board of directors shall consist of independent directors and the requirement that its nominating and corporate governance committee and compensation committee shall be composed entirely of independent directors. THIL currently does not intend to take advantage of these exemptions. However, THIL cannot guarantee that this may not change going forward. In addition, four out of the nine members of the Board, including Peter Yu, are executives of Cartesian. For more details on related risks, see “Risk Factors — Risks Related to THIL’s Securities and this Offering — We are a “controlled company” within the meaning of Nasdaq corporate governance rules, which could exempt us from certain corporate governance requirements that provide protection to shareholders of companies that are not controlled companies.”
Recent Developments
The Business Combination and Related Transactions
On September 28, 2022, THIL consummated the previously announced business combination (the “Business Combination”) with Silver Crest, pursuant to that certain the Agreement and Plan of Merger
 
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(the “Merger Agreement”), dated as of August 13, 2021, by and among Silver Crest, THIL, and Miami Swan Ltd, a Cayman Islands exempted company and a wholly-owned subsidiary of THIL (“Merger Sub”), as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of January 30, 2022, Amendment No. 2 to the Agreement and Plan of Merger, dated March 9, 2022, Amendment No. 3 to the Agreement and Plan of Merger, dated as of June 27, 2022, and Amendment No. 4 to the Agreement and Plan of Merger, dated as of August 30, 2022, in each case by and among Silver Crest, THIL and Merger Sub.
Pursuant to the Merger Agreement, Merger Sub merged with and into Silver Crest (the “First Merger”), with Silver Crest surviving the First Merger as a wholly owned subsidiary of THIL (the “Surviving Entity”). Immediately following the consummation of the First Merger, the Surviving Entity merged with and into THIL (the “Second Merger”), with THIL surviving the Second Merger. As a result, the shareholders of Silver Crest became shareholders of THIL.
Immediately prior to the effective time of the First Merger (the “First Effective Time”), THIL effected a share split of each Ordinary Share in accordance with the terms of the Merger Agreement (the “Share Split”). Pursuant to the Merger Agreement, (i) immediately prior to the First Effective Time, each Class B ordinary share of Silver Crest, par value $0.0001 per share (“Silver Crest Class B Shares”), outstanding immediately prior to the First Effective Time was automatically converted into one Class A ordinary share of Silver Crest, par value $0.0001 per share (“Silver Crest Class A Shares”) and, after giving effect to such automatic conversion, at the First Effective Time and as a result of the First Merger, each Silver Crest Class A Share outstanding immediately prior to the First Effective Time was automatically converted into the right of the holder thereof to receive one Ordinary Share, after giving effect to the Share Split; (ii) each issued and outstanding warrant to purchase Silver Crest Class A Shares was assumed by THIL and converted into a corresponding warrant to purchase Ordinary Share; and (iii) at the effective time of the Second Merger (the “Second Effective Time”) and as a result of the Second Merger, each ordinary share of the Surviving Entity issued and outstanding immediately prior to the Second Effective Time (all such ordinary shares being held by THIL) was automatically cancelled and extinguished without any conversion thereof or payment therefor.
On the Closing Date and in connection with the closing of the Business Combination, THIL also issued an aggregate of 5,050,000 PIPE Shares, 1,200,000 PIPE Warrants and 5,000,000 ESA Shares. The PIPE Shares were issued at a price of $10.00 per share for PIPE Investors who invested less than $10 million and an effective price of $8.33 per share for PIPE Investors who invested $10 million or more. The PIPE Warrants were issued for no consideration to PIPE Investors who invested $10 million or more. The subscription price for the ESA Shares under the ESA is $10.00 per share. However, the effective subscription price of the ESA Shares is dependent on the trading price of THIL’s Ordinary Shares, as described in more details below.
In connection with the issuance of the ESA Shares, THIL paid $500,000 to the ESA Investors as an option premium and $3,166,667 into a collateral account in the name of THIL (the ‘‘Collateral Account’’) as deposit, and the ESA Investors deposited $50,000,000 into the Collateral Account. There are three reference periods under the ESA, subject to acceleration. On or prior to 5 p.m., U.S. Eastern Time on the business day immediately following the final VWAP Trading Day of each of the three reference periods, THIL is required to pay to the ESA Investors from the Collateral Account a Reference Period Payment and, following such payment, has the right to receive from the Collateral Account an Issuer Release Amount, as shown in the table below. The acceleration events under the ESA include, among other things, the per share volume-weighted average price for any trading day or VWAP Trading Day (as applicable) of our Ordinary Shares (the ‘‘Daily VWAP’’) being less than $5.00 for any 10 VWAP Trading Days (whether or not consecutive) during any consecutive 15 VWAP Trading Day period, which is currently the case. Upon the occurrence of any of the acceleration events under the ESA, each ESA Investor has the right, but not the obligation, to accelerate any and all the remaining reference periods, at its election and only with a prompt notice within five business days of such condition being or continuing to be met to THIL regarding the applicable acceleration event, the number of Ordinary Shares that such acceleration is being applied to, the applicable reference period commencement date and the length of the applicable reference period(s), provided that in no event will any accelerated reference period consist of less than 15 VWAP Trading Days. As of the date of this prospectus, THIL has not received any indication that any ESA Investor intends to exercise such acceleration rights. Following the conclusion of, as applicable, the third reference period or the final accelerated reference
 
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period and the payment or release of the applicable Reference Period Payment, the outstanding balance of the Collateral Account will be returned to THIL. Within five business days following the release of the outstanding balance of the Collateral Account, THIL is required to pay to the ESA Investors and/or Shaolin Capital Management LLC, at the direction of Shaolin Capital Management LLC, the aggregate amount of interest accrued on the funds held in the Collateral Account prior to the release less $100,000, up to a maximum of $300,000. “Reference Price” means, with respect to any reference period, the arithmetic averages of the Daily VWAPs for each VWAP Trading Day in such reference period, subject to adjustment. Capitalized terms used but not defined in this paragraph and below have the meanings ascribed to them under the ESA. Assuming that the Reference Price for each reference period is $3.81, which was the closing price of THIL’s Ordinary Shares on December 6, 2022, the effective subscription price of the ESA Shares will be $3.71 per share, and the ESA investors may be able to profit on their ESA Shares if the trading price of our Ordinary Shares is above $3.71.
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Reference Period
​ ​
Reference Period Payment
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Issuer Release Amount
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First Reference Period (the 25 consecutive VWAP Trading Days beginning on, and including, December 22, 2022, which is the 85th calendar day immediately following the Closing Date)
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If the Reference Price for the First Reference Period is less than $10.40:
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1,666,666 multiplied by an amount equal to $ 10.40 minus the Reference Price (including, if applicable, an Adjusted Reference Price or Delisted/​Insolvent Price) for the First Reference Period (e.g., $10,983,328.94 if the Reference Price for the First Reference Period is $3.81, the closing price of THIL’s Ordinary Shares on December 6, 2022)
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1,666,666 multiplied by the Reference Price for the First Reference Period (e.g., $6,349,997.46 if the Reference Price for the First Reference Period is $3.81, the closing price of THIL’s Ordinary Shares on December 6, 2022)
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​ If the Reference Price for the First Reference Period (including, if applicable, an Adjusted Reference Price) is greater than or equal to $10.40: ​ ​ Zero ​ ​ 1,666,666 multiplied by $10.40 (or $17,333,326.40) ​
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Second Reference Period (the 25 consecutive VWAP Trading Days beginning on, and including, February 20, 2023, which is the 145th calendar day immediately following the Closing Date)
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If the Reference Price for the Second Reference Period is less than $10.60:
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1,666,666 multiplied by an amount equal to $ 10.60 minus the Reference Price (including, if applicable, an Adjusted Reference Price or Delisted/​Insolvent Price) for the Second Reference Period (e.g., $11,316,662.14 if the Reference Price for the Second Reference Period is $3.81, the closing price of THIL’s Ordinary Shares on December 6, 2022)
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1,666,666 multiplied by the Reference Price for the Second Reference Period (e.g., $6,349,997.46 if the Reference Price for the Second Reference Period is $3.81, the closing price of THIL’s Ordinary Shares on December 6, 2022)
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​ If the Reference Price for the Second Reference Period (including, if applicable, an Adjusted Reference Price) is greater than or equal to $10.60: ​ ​ Zero ​ ​ 1,666,666 multiplied by $10.60 (or $17,666,659.60) ​
 
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​
Reference Period
​ ​
Reference Period Payment
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Issuer Release Amount
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Third Reference Period (the 25 consecutive VWAP Trading Days beginning on, and including, May 21, 2023, which is the 235th calendar day immediately following the Closing Date)
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If the Reference Price for the Third Reference Period is less than $10.90:
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1,666,668 multiplied by an amount equal to $ 10.90 minus the Reference Price (including, if applicable, an Adjusted Reference Price or Delisted/​Insolvent Price) for the Third Reference Period (e.g., $11,816,676.12 if the Reference Price for the Third Reference Period is $3.81, the closing price of THIL’s Ordinary Shares on December 6, 2022)
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1,666,668 multiplied by the Reference Price for the Third Reference Period (e.g., $6,350,005.08 if the Reference Price for the Third Reference Period is $3.81, the closing price of THIL’s Ordinary Shares on December 6, 2022)
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​ If the Reference Price for the Third Reference Period (including, if applicable, an Adjusted Reference Price) is greater than or equal to $10.90: ​ ​ Zero ​ ​ 1,666,668 multiplied by $10.90 (or $18,166,681.20) ​
The Reference Period Payments will be paid out of the $53,166,667.20 that already has been deposited by the ESA Investors and the Company to the Collateral Account, which is considered to be restricted cash. Nonetheless, the requirement to make the aforementioned Reference Period Payments, along with THIL’s obligation under the indenture between THIL and Wilmington Savings Fund Society, FSB, as trustee, dated December 30, 2021 (the “Indenture”) to repurchase, after June 10, 2025, all the convertible notes held by Sona or Sunrise at their election, for a repurchase price equal to the principal amount of such convertible notes plus accrued and unpaid interest thereon to, but excluding, the repurchase date, could adversely affect THIL’s liquidity position and the amount of cash that THIL has available to meet its liquidity requirements, execute its business strategy or for other purposes, which may in turn have a material adverse impact on the trading volatility and price of THIL’s securities. For more details on the related risks, see “Risk Factors — Risks Related to THIL’s Business and Industry — Uncertainties with respect to Reference Period Payments and Issuer Release Amounts under the ESA could materially and adversely affect our liquidity position, our ability to operate our business and execute our business strategy, and the trading volatility and price of our securities” and “Risk Factors — Risks Related to THIL’s Business and Industry — Our convertible notes may impact our financial results, result in the dilution of our shareholders, adversely affect our liquidity, create downward pressure on the price of our securities, and restrict our ability to raise additional capital or take advantage of future opportunities.”
In addition, on the Closing Date, THIL, XXIIB and XXIIA, on the one hand, and Sona, on the other hand, entered into an option agreement (the “Option Agreement”) as contemplated by the Convertible Note Purchase Agreement among THIL, XXIIA and Sona and a Side Agreement to the Convertible Note Purchase Agreement, dated as of March 9, 2022, among Sona, Sunrise and THIL, pursuant to which Sona agreed to replace Sunrise as the subscriber of Sunrise’s Option Shares. Pursuant to the Option Agreement, upon the terms and subject to the conditions set forth therein, commencing on the Closing Date and terminating at the earlier to occur of (i) 5:00 p.m., New York City time, on the date that is five years after the Closing Date and (ii) the liquidation of THIL in accordance with the THIL Articles (the “Option Expiration Date”), Sona shall have the option to acquire, at its discretion, 200,000 Option Shares from XXIIB at a purchase price of $11.50 per share, subject to adjustments set forth in the assignment, assumption and amended & restated warrant agreement among THIL, Silver Crest and Stock Transfer & Trust Company, dated September 28, 2022 (the “A&R Warrant Agreement”). The Option Expiration Date will automatically be adjusted on the same terms and subject to the same conditions if the expiration date of the Warrants issued pursuant to the A&R Warrant Agreement is adjusted, except with respect to such adjustments resulting from the redemption of the Warrants. Prior to the Option Expiration Date, Sona may exercise the options by paying the purchase price in cash or by forfeiting additional options for that number of Option Shares
 
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equal to the quotient obtained by dividing (i) the product of the number of Option Shares, multiplied by the excess of the average last reported sale price of THIL’s Ordinary Shares for the ten trading days ending on the third trading day prior to the date on which the exercise notice is sent to XXIIB and XXIIA (the “Investor Exercise Fair Market Value”) over the $11.50 per share purchase price, as adjusted, by (ii) the Investor Exercise Fair Market Value. Under the Option Agreement, if XXIIA directly holds the Option Shares after the Closing Date, at the option of XXIIA, XXIIB shall assign all of its rights and obligations thereunder to XXIIA upon the receipt of a written notice in respect of the assignment issued by XXIIA. In addition, XXIIA may cancel such options at a price of $0.01 per Option Share, at its discretion and upon no less than 30 days’ notice to Sona, if the last reported sales price of THIL’s Ordinary Shares has been at least $18.00 per share on each of 20 trading days within any 30 trading-day period commencing on the Closing Date and ending on the third trading day prior to the date on which the notice of cancellation is given.
On November 9, 2022, THIL and CF Principal Investments LLC (“Cantor”) entered into an amendment to the Ordinary Share Purchase Agreement between THIL and Cantor, dated March 11, 2022, relating to a committed equity facility under which Cantor committed to purchase, at THIL’s direction, Ordinary Shares up to a maximum aggregate purchase price of $100.0 million in accordance with the terms and conditions of the Ordinary Share Purchase Agreement. The amendment relates to, among other things, purchase conditions, third party beneficiaries and certain defined terms. As consideration for Cantor’s entry into the Purchase Agreement on March 11, 2022 and pursuant to the terms of the Ordinary Share Purchase Agreement, THIL issued 826,446 Ordinary Shares (the “Commitment Shares”) to Cantor on November 9, 2022. Cantor paid no cash consideration for the Commitment Shares. Accordingly, any proceeds received by Cantor upon its sale of the Commitment Shares would be profit. As of the date of this prospectus, no other Ordinary Shares have been issued to Cantor. For more details on the purchase agreement and the amendment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” For a description of the related risks, see “Risk Factors — Risks Related to THIL’s Securities and this Offering — Future issuance of our Ordinary Shares will result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.”
Results of Operations and Financial Condition — Third Quarter of 2022
On November 29, 2022, THIL released its results of operations and financial condition for the three and nine months ended September 30, 2022.
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System-wide stores reached 486 as of September 30, 2022, of which 454 were company owned and operated stores and 32 were franchised stores, compared to 440 as of June 30, 2022 and 280 as of September 30, 2021.
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Net new store openings, i.e., the gross number of new stores opened during the period minus the number of stores permanently closed during the period, totaled 46 for the three months ended September 30, 2022, of which 35 were company owned and operated stores and 11 were franchised stores.
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Same-store sales growth for system-wide stores was 8.1% for the three months ended September 30, 2022, compared to 6.5% in the same quarter of 2021.
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Same-store sales growth for company owned and operated stores was 7.5% for the three months ended September 30, 2022, compared to 6.6% in the same quarter of 2021.
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Registered loyalty program members totaled 8.9 million as of September 30, 2022, representing an 85.8% increase from 4.8 million as of September 30, 2021.
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Total revenues were RMB305.7 million (US$43.0 million) for the three months ended September 30, 2022, representing an increase of 67.9% from RMB182.1 million in the same quarter of 2021. Total revenues comprise the following:
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Revenues from company owned and operated stores were RMB290.0 million (US$40.8 million) for the three months ended September 30, 2022, representing an increase of 67.0% from RMB173.7 million in the same quarter of 2021. The growth was primarily driven by an increase in the number of company owned and operated stores from 268 as of September 30, 2021 to
 
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454 as of September 30, 2022 and a 7.5% same-store sales growth of company owned and operated stores for the three months ended September 30, 2022.
Other revenues were RMB15.7 million (US$2.2 million) for the three months ended September 30, 2022, representing an increase of 86.4% from RMB8.4 million in the same quarter of 2021. The growth was primarily attributable to the rapid expansion of THIL’s e-commerce business and an increase in franchise fees and revenues from other franchise support activities, which was attributable to an increase in the number of franchised stores from 12 as of September 30, 2021 to 32 as of September 30, 2022.
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Company operated store costs and expenses were RMB299.9 million (US$42.2 million) for the three months ended September 30, 2022, representing an increase of 36.3% from RMB219.9 million in the same quarter of 2021. Company operated store costs and expenses comprise the following:
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Food and packaging expenses were RMB96.6 million (US$13.6 million), representing an increase of 61.6% from RMB59.8 million, in line with THIL’s revenue growth and store network expansion. Food and packaging costs as a percentage of revenues from company owned and operated stores decreased by 1.1 percentage points from 34.4% in the third quarter of 2021 to 33.3% in the third quarter of 2022.
Rental expenses were RMB36.1 million (US$5.1 million), representing a decrease of 15.7% from RMB42.9 million, mainly due to rent concessions that THIL received during the third quarter of 2022. Rental expenses as a percentage of revenues from company owned and operated stores decreased by 12.2 percentage points from 24.7% in the third quarter of 2021 to 12.5% in the third quarter of 2022.
Payroll and employee benefits expenses were RMB66.0 million (US$9.3 million), representing an increase of 10.7% from RMB59.6 million, primarily due to increased headcount of THIL’s store operation and managerial personnel. Payroll and employee benefits as a percentage of revenues from company owned and operated stores decreased by 11.5 percentage points from 34.3% in the third quarter of 2021 to 22.8% in the third quarter of 2022.
Delivery costs were RMB23.6 million (US$3.3 million), representing an increase of 110.2% from RMB11.2 million, due to increased number of home-delivery orders fulfilled. Delivery costs as a percentage of revenues from company owned and operated stores increased by 1.6 percentage points from 6.5% in the third quarter of 2021 to 8.1% in the third quarter of 2022.
Other operating expenses were RMB77.5 million (US$10.9 million), representing an increase of 66.9% from RMB46.5 million, in line with THIL’s revenue growth and store network expansion. Other operating expenses as a percentage of revenues from company owned and operated stores remained flat at 26.7% during the third quarter of 2022.
•
Cost of other revenues was RMB9.5 million (US$1.3 million) for the three months ended September 30, 2022, representing an increase of 70.0% from RMB5.6 million in the same quarter of 2021, which was primarily driven by an increase in the number of franchised stores from 12 as of September 30, 2021 to 32 as of September 30, 2022 and the incurrence of cost of product sales related to THIL’s e-commerce business during the third quarter of 2022.
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Marketing expenses were RMB24.9 million (US$3.5 million) for the three months ended September 30, 2022, representing an increase of 70.5% from RMB14.6 million in the same quarter of 2021, which was primarily attributable to the increase in the number of THIL’s system-wide stores from 280 as of September 30, 2021 to 486 as of September 30, 2022. Marketing expenses as a percentage of total revenues remained flat at 8.1% during the third quarter of 2022.
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General and administrative expenses were RMB109.6 million (US$15.4 million) for the three months ended September 30, 2022, representing an increase of 122.0% from RMB49.4 million in the same quarter of 2021, which was primarily due to: (i) increased payroll and employee benefits as a result of growing headcount; (ii) increased share-based compensation expenses recognized; (iii) the incurrence of THIL’s obligation to issue the Commitment Shares to Cantor, for which the closing of the
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Business Combination was a condition precedent; (iv) offering costs related to the ESA (the “ESA Offering Costs”), which primarily consist of the $500,000 option premium and related legal expenses; and (v) the incurrence of expenses related to the grant of the Option Shares.
Adjusted general and administrative expenses, which exclude share-based compensation expenses of RMB33.3 million (US$4.7 million), expenses of RMB21.5 million (US$3.0 million) related to the Commitment Shares, ESA Offering Costs of RMB4.6 million (US$0.7 million), and expenses of RMB1.8 million (US$0.3 million) related to the Option Shares, were RMB48.4 million (US$6.8 million). Adjusted general and administrative expenses as a percentage of total revenues decreased by 11.3 percentage points from 27.1% in the third quarter of 2021 to 15.8% in the third quarter of 2022. For more details on the reconciliation, see the section “Non-GAAP Financial Measures.”
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Franchise and royalty expenses were RMB11.0 million (US$1.5 million) for the three months ended September 30, 2022, representing an increase of 115.0% from RMB5.1 million in the same quarter of 2021, which was primarily driven by the increase in the number of THIL’s system-wide stores from 280 as of September 30, 2021 to 486 as of September 30, 2022. Franchise and royalty expenses as a percentage of total revenues increased by 0.8 percentage points from 2.8% in the third quarter of 2021 to 3.6% in the third quarter of 2022.
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As a result of the foregoing, operating loss, the most comparable GAAP measure to adjusted corporate EBITDA, was RMB150.5 million (US$21.2 million) for the three months ended September 30, 2022, compared to RMB113.0 million in the same quarter of 2021. Adjusted corporate EBITDA, calculated as operating loss excluding store pre-opening expenses, and certain non-cash expenses consisting of depreciation and amortization, share-based compensation expenses, expenses related to the Commitment Shares, the ESA Offering Costs, expenses related to the Option Shares, impairment losses of long-lived assets and loss on disposal of property and equipment, was a loss of RMB47.6 million (US$6.7 million) for the three months ended September 30, 2022, compared to a loss of RMB56.8 million in the same quarter of 2021. Adjusted corporate EBITDA margin, calculated as adjusted corporate EBITDA as a percentage of total revenues, was negative 15.6% in the third quarter of 2022, representing an improvement of 15.6 percentage points from negative 31.2% in the third quarter of 2021.
​
Net loss was RMB195.0 million (US$27.4 million) for the three months ended September 30, 2022, compared to RMB113.1 million for the same quarter of 2021.
Adjusted net loss, calculated as net loss excluding store pre-opening expenses, share-based compensation expenses, expenses related to the Commitment Shares, the ESA Offering Costs, expenses related to the Option Shares, impairment losses of long-lived assets, loss on disposal of property and equipment, changes in fair value of convertible notes, changes in fair value of warrant liabilities and changes in fair value of ESA derivative liabilities arising from the Reference Period Payments, was RMB87.5 million (US$12.3 million) for the three months ended September 30, 2022, compared to RMB76.4 million for the same quarter of 2021. Adjusted net loss margin, calculated as adjusted net loss as a percentage of total revenues, was 28.6% in the third quarter of 2022, representing an improvement of 13.3 percentage points from 41.9% in the third quarter of 2021. For more details on the reconciliations, see the section “Non-GAAP Financial Measures.”
•
Basic and diluted net loss per ordinary share was RMB1.56 (US$0.22) in the third quarter of 2022, compared to RMB0.90 in the third quarter of 2021. Adjusted basic and diluted net loss per ordinary share, calculated as adjusted net loss attributable to holders of THIL’s Ordinary Shares divided by the weighted-average number of basic and diluted Ordinary Share, was RMB0.70 (US$0.10) in the third quarter of 2022, compared to RMB0.60 in the third quarter of 2021.
​
•
Total cash and cash equivalents and short-term investments as of September 30, 2022 were RMB759.9 million (US$106.8 million), compared to RMB285.1 million as of June 30, 2022 and RMB390.8 million as of December 31, 2021. The change was primarily attributable to net proceeds from the Business Combination and proceeds from the PIPE Investors and ESA Investors.
​
•
Fully-burdened gross loss of THIL’s company owned and operated stores, the most comparable GAAP measure to adjusted store EBITDA, was RMB21.0 million (US$3.0 million) for the three months
​
​
 
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ended September 30, 2022, representing a 59.4% improvement from a loss of RMB51.4 million in the same quarter of 2021.
•
Adjusted store EBITDA, calculated as fully-burdened gross loss of company owned and operated stores excluding depreciation & amortization and store pre-opening expenses, was RMB19.4 million (US$2.7 million) for the three months ended September 30, 2022, representing a 336.6% increase from RMB4.4 million in the same quarter of 2021.
​
•
Adjusted store EBITDA margin, which stands for adjusted store EBITDA as a percentage of revenues from company owned and operated stores, was 6.7% for the three months ended September 30, 2022, representing an increase of 4.1 percentage points from 2.6% in the same quarter of 2021.
​
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
​ ​ ​
For the three months ended September 30,
​ ​
For the nine months ended September 30,
​
​ ​ ​
2021
​ ​
2022
​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands, except for per share data)
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Company owned and operated
stores
​ ​ ​ ​ 173,703 ​ ​ ​ ​ ​ 290,009 ​ ​ ​ ​ ​ 40,769 ​ ​ ​ ​ ​ 403,573 ​ ​ ​ ​ ​ 665,588 ​ ​ ​ ​ ​ 93,567 ​ ​
Other revenues
​ ​ ​ ​ 8,428 ​ ​ ​ ​ ​ 15,710 ​ ​ ​ ​ ​ 2,208 ​ ​ ​ ​ ​ 15,824 ​ ​ ​ ​ ​ 43,995 ​ ​ ​ ​ ​ 6,185 ​ ​
Total revenues
​ ​ ​ ​ 182,131 ​ ​ ​ ​ ​ 305,719 ​ ​ ​ ​ ​ 42,977 ​ ​ ​ ​ ​ 419,397 ​ ​ ​ ​ ​ 709,583 ​ ​ ​ ​ ​ 99,752 ​ ​
Costs and expenses, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Company owned and operated stores ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Food and packaging (including cost of
Company owned and operated stores
from transactions with a related
party of RMB15,993 thousands and
RMB5,434 thousands for the
three months ended September 30,
2022 and 2021, respectively, and
RMB26,528 thousands and
RMB12,794 thousands for the
nine months ended September 30,
2022 and 2021, respectively)
​ ​ ​ ​ 59,776 ​ ​ ​ ​ ​ 96,605 ​ ​ ​ ​ ​ 13,581 ​ ​ ​ ​ ​ 136,351 ​ ​ ​ ​ ​ 225,071 ​ ​ ​ ​ ​ 31,640 ​ ​
Rental expenses
​ ​ ​ ​ 42,877 ​ ​ ​ ​ ​ 36,131 ​ ​ ​ ​ ​ 5,079 ​ ​ ​ ​ ​ 101,287 ​ ​ ​ ​ ​ 134,145 ​ ​ ​ ​ ​ 18,858 ​ ​
Payroll and employee benefits
​ ​ ​ ​ 59,604 ​ ​ ​ ​ ​ 65,992 ​ ​ ​ ​ ​ 9,277 ​ ​ ​ ​ ​ 127,502 ​ ​ ​ ​ ​ 202,158 ​ ​ ​ ​ ​ 28,419 ​ ​
Delivery costs
​ ​ ​ ​ 11,225 ​ ​ ​ ​ ​ 23,590 ​ ​ ​ ​ ​ 3,316 ​ ​ ​ ​ ​ 24,680 ​ ​ ​ ​ ​ 51,699 ​ ​ ​ ​ ​ 7,268 ​ ​
Other operating expenses (including
service fee from transactions with a
related party of RMB150 thousands
and nil for the three months ended
September 30, 2022 and 2021,
respectively, and RMB400 thousands
and nil for the nine months ended
September 30, 2022 and 2021,
respectively)
​ ​ ​ ​ 46,451 ​ ​ ​ ​ ​ 77,538 ​ ​ ​ ​ ​ 10,900 ​ ​ ​ ​ ​ 103,540 ​ ​ ​ ​ ​ 196,532 ​ ​ ​ ​ ​ 27,628 ​ ​
Company owned and operated store costs and expenses
​ ​ ​ ​ 219,933 ​ ​ ​ ​ ​ 299,856 ​ ​ ​ ​ ​ 42,153 ​ ​ ​ ​ ​ 493,360 ​ ​ ​ ​ ​ 809,605 ​ ​ ​ ​ ​ 113,813 ​ ​
Costs of other revenues
​ ​ ​ ​ 5,560 ​ ​ ​ ​ ​ 9,451 ​ ​ ​ ​ ​ 1,329 ​ ​ ​ ​ ​ 10,202 ​ ​ ​ ​ ​ 26,445 ​ ​ ​ ​ ​ 3,718 ​ ​
Marketing expenses
​ ​ ​ ​ 14,578 ​ ​ ​ ​ ​ 24,851 ​ ​ ​ ​ ​ 3,493 ​ ​ ​ ​ ​ 29,791 ​ ​ ​ ​ ​ 56,715 ​ ​ ​ ​ ​ 7,973 ​ ​
 
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​ ​ ​
For the three months ended September 30,
​ ​
For the nine months ended September 30,
​
​ ​ ​
2021
​ ​
2022
​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands, except for per share data)
​
General and administrative
expenses
​ ​ ​ ​ 49,364 ​ ​ ​ ​ ​ 109,567 ​ ​ ​ ​ ​ 15,403 ​ ​ ​ ​ ​ 116,405 ​ ​ ​ ​ ​ 223,085 ​ ​ ​ ​ ​ 31,361 ​ ​
Franchise and royalty expenses (including franchise and royalty expenses from transactions with a related party of RMB10,157 thousands and RMB5,038 thousands for the three months ended September 30, 2022 and 2021, respectively, and RMB22,811 thousands and RMB11,029 thousands for the nine months ended September 30, 2022 and 2021, respectively)
​ ​ ​ ​ 5,126 ​ ​ ​ ​ ​ 11,021 ​ ​ ​ ​ ​ 1,549 ​ ​ ​ ​ ​ 13,455 ​ ​ ​ ​ ​ 25,301 ​ ​ ​ ​ ​ 3,557 ​ ​
Other operating costs and
expenses
​ ​ ​ ​ 424 ​ ​ ​ ​ ​ 1,377 ​ ​ ​ ​ ​ 194 ​ ​ ​ ​ ​ 489 ​ ​ ​ ​ ​ 5,945 ​ ​ ​ ​ ​ 836 ​ ​
Loss on disposal of property and equipment
​ ​ ​ ​ 391 ​ ​ ​ ​ ​ 1,475 ​ ​ ​ ​ ​ 207 ​ ​ ​ ​ ​ 1,132 ​ ​ ​ ​ ​ 8,835 ​ ​ ​ ​ ​ 1,242 ​ ​
Impairment losses of long-lived
assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5,473 ​ ​ ​ ​ ​ 769 ​ ​
Other income
​ ​ ​ ​ 281 ​ ​ ​ ​ ​ 1,404 ​ ​ ​ ​ ​ 197 ​ ​ ​ ​ ​ 319 ​ ​ ​ ​ ​ 1,999 ​ ​ ​ ​ ​ 281 ​ ​
Total costs and expenses, net
​ ​ ​ ​ 295,095 ​ ​ ​ ​ ​ 456,194 ​ ​ ​ ​ ​ 64,131 ​ ​ ​ ​ ​ 664,515 ​ ​ ​ ​ ​ 1,159,405 ​ ​ ​ ​ ​ 162,988 ​ ​
Operating loss
​ ​ ​ ​ (112,964) ​ ​ ​ ​ ​ (150,475) ​ ​ ​ ​ ​ (21,154) ​ ​ ​ ​ ​ (245,118) ​ ​ ​ ​ ​ (449,822) ​ ​ ​ ​ ​ (63,236) ​ ​
Interest income
​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 642 ​ ​ ​ ​ ​ 90 ​ ​ ​ ​ ​ 286 ​ ​ ​ ​ ​ 976 ​ ​ ​ ​ ​ 137 ​ ​
Interest expenses
​ ​ ​ ​ (183) ​ ​ ​ ​ ​ (4,262) ​ ​ ​ ​ ​ (599) ​ ​ ​ ​ ​ (183) ​ ​ ​ ​ ​ (10,280) ​ ​ ​ ​ ​ (1,445) ​ ​
Foreign currency transaction
(loss)/gain
​ ​ ​ ​ 34 ​ ​ ​ ​ ​ (367) ​ ​ ​ ​ ​ (52) ​ ​ ​ ​ ​ (907) ​ ​ ​ ​ ​ (1,134) ​ ​ ​ ​ ​ (159) ​ ​
Changes in fair value of convertible notes
​ ​ ​ ​ — ​ ​ ​ ​ ​ 19,452 ​ ​ ​ ​ ​ 2,735 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,627) ​ ​ ​ ​ ​ (229) ​ ​
Changes in fair value of warrant liabilities
​ ​ ​ ​ — ​ ​ ​ ​ ​ 9,950 ​ ​ ​ ​ ​ 1,399 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 9,950 ​ ​ ​ ​ ​ 1,399 ​ ​
Changes in fair value of ESA derivative
liabilities
​ ​ ​ ​ — ​ ​ ​ ​ ​ (69,932) ​ ​ ​ ​ ​ (9,831) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (69,932) ​ ​ ​ ​ ​ (9,831) ​ ​
Loss before income taxes
​ ​ ​ ​ (113,093) ​ ​ ​ ​ ​ (194,992) ​ ​ ​ ​ ​ (27,412) ​ ​ ​ ​ ​ (245,922) ​ ​ ​ ​ ​ (521,869) ​ ​ ​ ​ ​ (73,364) ​ ​
Income tax expenses
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net loss
​ ​ ​ ​ (113,093) ​ ​ ​ ​ ​ (194,992) ​ ​ ​ ​ ​ (27,412) ​ ​ ​ ​ ​ (245,922) ​ ​ ​ ​ ​ (521,869) ​ ​ ​ ​ ​ (73,364) ​ ​
Less: Net Loss attributable to non-controlling interests
​ ​ ​ ​ (2,086) ​ ​ ​ ​ ​ (611) ​ ​ ​ ​ ​ (86) ​ ​ ​ ​ ​ (2,532) ​ ​ ​ ​ ​ (3,091) ​ ​ ​ ​ ​ (435) ​ ​
Net Loss attributable to shareholders of
the Company
​ ​ ​ ​ (111,007) ​ ​ ​ ​ ​ (194,381) ​ ​ ​ ​ ​ (27,326) ​ ​ ​ ​ ​ (243,390) ​ ​ ​ ​ ​ (518,778) ​ ​ ​ ​ ​ (72,929) ​ ​
Basic and diluted loss per Ordinary Share
​ ​ ​ ​ (0.90) ​ ​ ​ ​ ​ (1.56) ​ ​ ​ ​ ​ (0.22) ​ ​ ​ ​ ​ (2.02) ​ ​ ​ ​ ​ (4.17) ​ ​ ​ ​ ​ (0.59) ​ ​
Net loss
​ ​ ​ ​ (113,093) ​ ​ ​ ​ ​ (194,992) ​ ​ ​ ​ ​ (27,412) ​ ​ ​ ​ ​ (245,922) ​ ​ ​ ​ ​ (521,869) ​ ​ ​ ​ ​ (73,364) ​ ​
Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
 
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​ ​ ​
For the three months ended September 30,
​ ​
For the nine months ended September 30,
​
​ ​ ​
2021
​ ​
2022
​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands, except for per share data)
​
Fair value changes of convertible notes
due to instrument-specific credit risk,
net of nil income
taxes
​ ​ ​ ​ — ​ ​ ​ ​ ​ (3,262) ​ ​ ​ ​ ​ (459) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,026) ​ ​ ​ ​ ​ (285) ​ ​
Foreign currency translation adjustment, net of nil income
taxes
​ ​ ​ ​ 309 ​ ​ ​ ​ ​ (14,089) ​ ​ ​ ​ ​ (1,981) ​ ​ ​ ​ ​ (776) ​ ​ ​ ​ ​ (24,628) ​ ​ ​ ​ ​ (3,462) ​ ​
Total comprehensive loss
​ ​ ​ ​ (112,784) ​ ​ ​ ​ ​ (212,343) ​ ​ ​ ​ ​ (29,852) ​ ​ ​ ​ ​ (246,698) ​ ​ ​ ​ ​ (548,523) ​ ​ ​ ​ ​ (77,111) ​ ​
Less: Comprehensive loss attributable to non-controlling interests
​ ​ ​ ​ (2,086) ​ ​ ​ ​ ​ (611) ​ ​ ​ ​ ​ (86) ​ ​ ​ ​ ​ (2,532) ​ ​ ​ ​ ​ (3,091) ​ ​ ​ ​ ​ (435) ​ ​
Comprehensive loss attributable to shareholders of the Company
​ ​ ​ ​ (110,698) ​ ​ ​ ​ ​ (211,732) ​ ​ ​ ​ ​ (29,766) ​ ​ ​ ​ ​ (244,166) ​ ​ ​ ​ ​ (545,432) ​ ​ ​ ​ ​ (76,676) ​ ​
​
Unaudited Condensed Balance Sheet
​ ​ ​
September 30, 2022
​
​ ​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands, except for number of shares)
​
ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash
​ ​ ​ ​ 382,448 ​ ​ ​ ​ ​ 53,764 ​ ​
Short term investment
​ ​ ​ ​ 377,491 ​ ​ ​ ​ ​ 53,067 ​ ​
Accounts receivable
​ ​ ​ ​ 7,672 ​ ​ ​ ​ ​ 1,079 ​ ​
Inventories
​ ​ ​ ​ 52,180 ​ ​ ​ ​ ​ 7,335 ​ ​
Prepaid expenses and other current assets
​ ​ ​ ​ 118,127 ​ ​ ​ ​ ​ 16,606 ​ ​
Total current assets
​ ​ ​ ​ 937,918 ​ ​ ​ ​ ​ 131,851 ​ ​
Non-current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property and equipment, net
​ ​ ​ ​ 636,618 ​ ​ ​ ​ ​ 89,494 ​ ​
Intangible assets, net
​ ​ ​ ​ 86,180 ​ ​ ​ ​ ​ 12,115 ​ ​
Other non-current assets
​ ​ ​ ​ 78,562 ​ ​ ​ ​ ​ 11,044 ​ ​
Total non-current assets
​ ​ ​ ​ 801,360 ​ ​ ​ ​ ​ 112,653 ​ ​
Total assets
​ ​ ​ ​ 1,739,278 ​ ​ ​ ​ ​ 244,504 ​ ​
LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Short-term bank borrowings
​ ​ ​ ​ 363,926 ​ ​ ​ ​ ​ 51,160 ​ ​
Accounts payable
​ ​ ​ ​ 91,935 ​ ​ ​ ​ ​ 12,924 ​ ​
Contract liabilities
​ ​ ​ ​ 29,350 ​ ​ ​ ​ ​ 4,126 ​ ​
Amount due to related parties
​ ​ ​ ​ 14,855 ​ ​ ​ ​ ​ 2,088 ​ ​
Derivative financial liabilities
​ ​ ​ ​ 157,900 ​ ​ ​ ​ ​ 22,197 ​ ​
Other current liabilities
​ ​ ​ ​ 297,801 ​ ​ ​ ​ ​ 41,865 ​ ​
Total current liabilities
​ ​ ​ ​ 955,767 ​ ​ ​ ​ ​ 134,360 ​ ​
 
22
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​ ​ ​
September 30, 2022
​
​ ​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands, except for number of shares)
​
Non-current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Long -term bank borrowings
​ ​ ​ ​ 8,501 ​ ​ ​ ​ ​ 1,195 ​ ​
Convertible notes, at fair value
​ ​ ​ ​ 358,540 ​ ​ ​ ​ ​ 50,403 ​ ​
Contract liabilities – non-current
​ ​ ​ ​ 1,319 ​ ​ ​ ​ ​ 185 ​ ​
Derivative financial liabilities – non-current
​ ​ ​ ​ 55,378 ​ ​ ​ ​ ​ 7,785 ​ ​
Other non-current liabilities
​ ​ ​ ​ 56,163 ​ ​ ​ ​ ​ 7,895 ​ ​
Total non-current liabilities
​ ​ ​ ​ 479,901 ​ ​ ​ ​ ​ 67,463 ​ ​
Total liabilities
​ ​ ​ ​ 1,435,668 ​ ​ ​ ​ ​ 201,823 ​ ​
Shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ordinary Shares (US$0.0000094 par value, 500,000,000 shares
authorized, 148,355,092 shares and 124,193,929 shares issued and
outstanding as of September 30, 2022 and December 31, 2021,
respectively)
​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 1 ​ ​
Additional paid-in capital
​ ​ ​ ​ 1,450,352 ​ ​ ​ ​ ​ 203,887 ​ ​
Accumulated losses
​ ​ ​ ​ (1,156,306) ​ ​ ​ ​ ​ (162,550) ​ ​
Accumulated other comprehensive income
​ ​ ​ ​ 9,090 ​ ​ ​ ​ ​ 1,278 ​ ​
Total equity attributable to shareholders of the Company
​ ​ ​ ​ 303,145 ​ ​ ​ ​ ​ 42,616 ​ ​
Non-controlling interests
​ ​ ​ ​ 465 ​ ​ ​ ​ ​ 65 ​ ​
Total shareholders’ equity
​ ​ ​ ​ 303,610 ​ ​ ​ ​ ​ 42,681 ​ ​
Commitments and Contingencies
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total liabilities and shareholders’ equity
​ ​ ​ ​ 1,739,278 ​ ​ ​ ​ ​ 244,504 ​ ​
​
Unaudited Condensed Consolidated Statements of Cash Flow
​ ​ ​
For the three months ended September 30,
​ ​
For the nine months ended September 30,
​
​ ​ ​
2021
​ ​
2022
​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Net cash used in operating activities
​ ​ ​ ​ (73,517) ​ ​ ​ ​ ​ (35,884) ​ ​ ​ ​ ​ (5,044) ​ ​ ​ ​ ​ (188,244) ​ ​ ​ ​ ​ (190,826) ​ ​ ​ ​ ​ (26,826) ​ ​
Net cash used in investing activities
​ ​ ​ ​ (99,767) ​ ​ ​ ​ ​ (431,081) ​ ​ ​ ​ ​ (60,600) ​ ​ ​ ​ ​ (221,003) ​ ​ ​ ​ ​ (611,435) ​ ​ ​ ​ ​ (85,954) ​ ​
Net cash provided by financing activities
​ ​ ​ ​ 82,587 ​ ​ ​ ​ ​ 563,473 ​ ​ ​ ​ ​ 79,212 ​ ​ ​ ​ ​ 370,057 ​ ​ ​ ​ ​ 790,079 ​ ​ ​ ​ ​ 111,068 ​ ​
Effect of foreign currency exchange rate
changes on cash
​ ​ ​ ​ 93 ​ ​ ​ ​ ​ 806 ​ ​ ​ ​ ​ 113 ​ ​ ​ ​ ​ (1,285) ​ ​ ​ ​ ​ 3,793 ​ ​ ​ ​ ​ 533 ​ ​
Net decrease in cash
​ ​ ​ ​ (90,604) ​ ​ ​ ​ ​ 97,314 ​ ​ ​ ​ ​ 13,680 ​ ​ ​ ​ ​ (40,475) ​ ​ ​ ​ ​ (8,389) ​ ​ ​ ​ ​ (1,179) ​ ​
Cash at beginning of the period
​ ​ ​ ​ 225,003 ​ ​ ​ ​ ​ 285,134 ​ ​ ​ ​ ​ 40,084 ​ ​ ​ ​ ​ 174,874 ​ ​ ​ ​ ​ 390,837 ​ ​ ​ ​ ​ 54,943 ​ ​
Cash at end of the period
​ ​ ​ ​ 134,399 ​ ​ ​ ​ ​ 382,448 ​ ​ ​ ​ ​ 53,764 ​ ​ ​ ​ ​ 134,399 ​ ​ ​ ​ ​ 382,448 ​ ​ ​ ​ ​ 53,764 ​ ​
Regulatory Matters
Substantially all of THIL’s revenue is derived from the operations of its PRC Subsidiaries in mainland China. THIL and its PRC Subsidiaries are subject to PRC laws relating to, among others, restrictions over foreign investments and data security. The PRC government has been seeking to exert more control and impose more restrictions on companies based in mainland China raising capital offshore and such efforts may continue or intensify in the future. The PRC government’s exertion of more control over offerings
 
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conducted overseas and/or foreign investment in issuers based in mainland China could result in a material change in the operations of THIL’s PRC Subsidiaries, significantly limit or completely hinder THIL’s ability to offer or continue to offer securities to investors, and cause the value of THIL’s securities to significantly decline or be worthless. Based on the opinion of THIL’s PRC counsel, Han Kun Law Offices, according to its interpretation of the currently in-effect PRC laws and regulations, THIL believes that the issuance of THIL’s securities to foreign investors does not require permission or approval from any PRC governmental authority. However, as PRC governmental authorities have significant discretion in interpreting and implementing statutory provisions, there is no assurance that such approval or permission will not be required under existing PRC laws, regulations or policies if the relevant PRC governmental authorities take a contrary position or adopt new interpretations, or under any new laws or regulations that may be promulgated in the future. Below is a summary of potential PRC laws and regulations that, in the opinion of Han Kun Law Offices according to its interpretation of the currently in-effect PRC laws and regulations, could be interpreted by the in-charge PRC government authorities, namely, the China Securities Regulatory Commission (the “CSRC”), the CAC and their enforcement agencies, to require THIL to obtain permission or approval in order to issue securities to foreign investors. Based on the experience of THIL’s management team, THIL does not believe that any permission or approval is required under any laws or regulations of the HKSAR for it to issue securities to non-PRC investors or for any of its PRC Subsidiaries to conduct their business operations in mainland China. However, there is no assurance that such approval or permission will not be required under HKSAR laws, regulations or policies if the relevant HKSAR governmental authorities take a contrary position, nor can THIL predict whether or how long it will take to obtain such approval.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors adopted by six PRC regulatory agencies, including the Ministry of Commerce of the PRC (the “MOFCOM”), the State-Owned Assets Supervision and Administration Commission, the State Administration of Taxation, the State Administration for Industry and Commerce, currently known as the PRC State Administration for Market Regulation (the “SAMR”), the CSRC, and the SAFE in 2006 and amended in 2009, as well as some other regulations and rules concerning mergers and acquisitions (collectively, the “M&A Rules”) include provisions that purport to require that an offshore special purpose vehicle that is controlled by PRC domestic companies or individuals and that has been formed for the purpose of an overseas listing of securities through acquisitions of PRC domestic companies or assets to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published its approval procedures for overseas listings by special purpose vehicles. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles. While the application of the M&A Rules remains unclear, THIL believes, based on the advice of its PRC legal counsel and its understanding of the current PRC laws and regulations, that the CSRC approval is not required in the context of this offering because (i) its PRC Subsidiaries were established by means of direct investment, rather than by merger or acquisition, directly or indirectly, of the equity interest or assets of any “domestic company,” as defined under the M&A Rules, and (ii) the CSRC currently has not issued any definitive rule or interpretation concerning whether a transaction of the kind contemplated herein is subject to the M&A Rules. However, there can be no assurance that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as THIL’s PRC legal counsel.
On December 24, 2021, the CSRC released the draft Administrative Provisions on the Offshore Listing and Securities Issuance of PRC-Based Companies and the draft Administrative Measures on the Filing of Offshore Listing and Securities Issuance of PRC-Based Companies for public comments through January 23, 2022 (collectively, the “CSRC Draft Rules”), which seek to impose certain filing requirements on issuers that intend to list or offer securities on foreign stock exchanges through direct or indirect offshore listings. Based on the opinion of THIL’s PRC counsel, Han Kun Law Offices, according to its interpretation of the currently in-effect PRC laws and regulations, THIL does not believe that this offering is subject to the filing requirements under the CSRC Draft Rules (if enacted) or that there will be any substantial obstacle in making the filings if it is deemed to be subject to the filing requirements. Failure to comply with the filing requirements or any other requirements under the CSRC Draft Rules (if enacted) could result in warnings, a fine ranging from RMB1 million to RMB10 million, suspension of certain business operations, orders of rectification and revocation of business license. If THIL fails to receive or maintain any requisite permission or approval from the CSRC for this offering or any future offerings, or the waiver for such permission or approval, in a timely manner, or at all, or inadvertently concludes that such permission or approval is not
 
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required, or if applicable laws, regulations or interpretations change and obligate it to obtain such permission or approvals in the future, THIL or its PRC Subsidiaries may be subject to fines and penalties (the details of which are unknown at this point), limitations on its business activities in mainland China, delay or restrictions on the contribution of the proceeds from THIL’s offerings of its listed securities into the PRC, or other sanctions that could have a material adverse effect on its business, financial condition, results of operations, reputation and prospects. The CSRC may also take actions requiring THIL, or making it advisable for THIL, to halt future offerings of THIL’s securities to foreign investors. For a more detailed analysis, see “Risk Factors — Risks Related to Doing Business in China — The approval and/or other requirements of Chinese governmental authorities may be required in connection with this offering or our future issuance of securities to foreign investors under PRC laws, regulations or policies.”
Furthermore, in April 2020, the PRC government promulgated the Cybersecurity Review Measures (the “2020 Cybersecurity Review Measures”), which came into effect on June 1, 2020. On November 14, 2021, the CAC released the draft Administrative Regulation on Network Data Security for public comments through December 13, 2021 (the “Draft Administrative Regulation”). Under the Draft Administrative Regulation, (i) data processors (i.e., individuals and organizations who can decide on the purpose and method of their data processing activities at their own discretion) that process personal information of more than one million individuals shall apply for cybersecurity review before listing in a foreign country; (ii) foreign-listed data processors shall carry out annual data security evaluation and submit the evaluation report to the municipal cyberspace administration authority; and (iii) where a data processor undergoes merger, reorganization and subdivision that involves important data and personal information of more than one million individuals, the recipient of the data shall report the transaction to the in-charge authority at the municipal level. On December 28, 2021, the PRC government promulgated amended Cybersecurity Review Measures (the “2022 Cybersecurity Review Measures”), which came into effect and replaced the 2020 Cybersecurity Review Measures on February 15, 2022. According to the 2022 Cybersecurity Review Measures, (i) critical information infrastructure operators that purchase network products and services and internet platform operators that conduct data processing activities shall be subject to cybersecurity review in accordance with the 2022 Cybersecurity Review Measures if such activities affect or may affect national security; and (ii) internet platform operators holding personal information of more than one million users and seeking to have their securities list on a stock exchange in a foreign country shall file for cybersecurity review with the Cybersecurity Review Office. Based on the opinion of THIL’s PRC counsel, Han Kun Law Offices, according to its interpretation of the currently in-effect PRC laws and regulations, THIL believes that neither THIL nor any of its PRC Subsidiaries is subject to cybersecurity review, reporting or other permission requirements by the CAC under the applicable PRC cybersecurity laws and regulations with respect to this offering or the business operations of its PRC Subsidiaries, because neither THIL nor any of its PRC Subsidiaries qualifies as a critical information infrastructure operator or has conducted any data processing activities that affect or may affect national security or holds personal information of more than one million users. However, as PRC governmental authorities have significant discretion in interpreting and implementing statutory provisions and there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, there is no assurance that THIL or any of its PRC Subsidiaries will not be deemed to be subject to PRC cybersecurity review or that THIL or any of its PRC Subsidiaries will be able to pass such review. If THIL or any of its PRC Subsidiaries fails to receive any requisite permission or approval from the CAC for its business operations, or the waiver for such permission or approval, in a timely manner, or at all, or inadvertently concludes that such permission or approval is not required, or if applicable laws, regulations or interpretations change and obligate it to obtain such permission or approvals in the future, THIL or its PRC Subsidiaries may be subject to fines, suspension of business, website closure, revocation of business licenses or other penalties, as well as reputational damage or legal proceedings or actions against THIL or its PRC Subsidiaries, which may have a material adverse effect on its business, financial condition or results of operations. In addition, THIL and its PRC Subsidiaries could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future pursuant to new laws, regulations or policies. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with applicable laws and regulations may result in fines, suspension of business, website closure, revocation of business licenses or other penalties, as well as reputational damage or legal proceedings or actions against THIL or its PRC Subsidiaries, which may have a material adverse effect on their business, financial condition or results of operations. For a more detailed analysis, see “Risk Factors — Risks Related to THIL’s Business and Industry — We and our PRC Subsidiaries
 
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are subject to a variety of laws and regulations regarding cybersecurity and data protection, and any failure to comply with applicable laws and regulations could have a material adverse effect on our business, financial condition and results of operations.”
In addition, with respect to their business operations, THIL’s PRC Subsidiaries are required to maintain various approvals, licenses and permits to operate the company owned and operated stores and engage in commercial franchising activities in accordance with relevant PRC laws and regulations. In the opinion of Han Kun Law Offices according to its interpretation of the currently in-effect PRC laws and regulations, THIL’s PRC Subsidiaries are required to obtain and maintain the following approvals, licenses and permits for the operation of THIL’s company owned and operated stores: (i) business licenses issued by the local SAMR, (ii) food operation licenses issued by the competent food safety supervision and administration department, and (iii) for some stores, fire safety inspection permits from the local fire department. These approvals, licenses and permits can be obtained upon satisfactory compliance with, among other things, the applicable laws and regulations. Any PRC Subsidiary that is engaged in commercial franchising is required to (i) register as a commercial franchisor with the commerce department of the local government within fifteen days after entering into a franchise agreement with a franchisee located in mainland China for the first time; (ii) file with the in-charge authority information regarding franchise agreements entered into, withdrawn, renewed or amended each year by March 31 of the following year; and (iii) report any changes to its previously filed registration information and information on its operational resources and the geographical distribution of its franchisees’ stores in mainland China within 30 calendar days following such change.
As of September 30, 2022, out of the 454 company owned and operated stores operated by THIL’s PRC Subsidiaries, seven stores had not obtained the requisite business licenses or the requisite food operation licenses, which stores represented less than 1% of THIL’s total revenues for the nine months ended September 30, 2022. Local governments have significant discretion in promulgating, interpreting and implementing fire safety rules and policies. As a result, there is no assurance that the fire safety inspection permit will not be required for certain company owned and operated stores that THIL believes, based on evaluations conducted by external fire safety specialists, are not required to obtain a fire safety inspection permit under existing PRC laws, regulations or policies if relevant PRC governmental authorities take a contrary position or adopt new interpretations, or under any new laws or regulations that may be promulgated in the future. Based on evaluations conducted by fire safety specialists engaged by THIL, two of THIL’s company owned and operated stores have not obtained those fire safety inspection permits that THIL believes are required under the applicable laws and regulations. THIL’s PRC Subsidiaries are still in the process of applying for these outstanding licenses and permits, and how soon these licenses and permits can be obtained is subject to regulatory approvals and certain other factors that are beyond their control. Failure to obtain the necessary licenses, permits and approvals could subject THIL’s PRC Subsidiaries to fines, confiscation of gains derived from the stores, or the suspension of operations of the stores. Specifically, (i) for stores without a business license, the in-charge government authorities may order such stores to rectify the non-compliance and impose a fine of up to RMB500,000 for each store; (ii) for stores without a food operation license, the in-charge government authorities may confiscate the income of such stores and their food and beverage products, raw materials and equipment and impose fines based on a multiple of the value of the food and beverage products of such store; and (iii) for stores that operate without the requisite fire safety inspection permit, the in-charge government authorities may order such stores to rectify the non-compliance, suspend their operations and impose a fine ranging from RMB30,000 to RMB300,000 for each store. Except for the outstanding licenses and permits mentioned above, none of THIL’s PRC Subsidiaries have been denied or are missing any of such approvals, licenses and permits for the company owned and operated stores that they operate, nor have they been subject to any fines or penalties with respect to the lack of such approvals, licenses and permits.
Tim Hortons China, the only PRC Subsidiary of THIL that is, or has been, engaged in commercial franchising, has received the requisite governmental approval to be registered as a commercial franchisor and has fulfilled its annual and ongoing reporting obligations up until March 2022, when the government reporting system was shut down due to the COVID-19 outbreak in Shanghai. In general, if a commercial franchisor fails to comply with the annual filing requirement by the filing deadline, it could be ordered by the in-charge authority to rectify the non-compliance and be subject to a fine ranging from RMB10,000 to RMB50,000. However, based on its discussions with local government officials, Tim Hortons China does
 
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not believe that it will be subject to any administrative penalty, including fines, as a result of its failure to timely file the 2021 annual report because the reporting system was closed to all local filers before the filing deadline.
THHK, a wholly-owned subsidiary of THIL incorporated under the laws of the HKSAR, does not currently have any business operations. THHK holds the requisite business license and has not been required by the HKSAR government to hold any other license, permit or approval under the laws and regulations of the HKSAR. Based on the experience of its management team, THIL does not believe that THHK is required to obtain such license, permit or approval. However, there is no assurance that the relevant HKSAR governmental authorities will not take a contrary position or that THHK can obtain such license, permit or approval, if required. If THHK fails to obtain such license, permit or approval in a timely manner, or at all, THIL’s business and results of operations could be materially and adversely affected. For a more detailed analysis, see “Risk Factors — Risks Related to Doing Business in China — Any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial condition and results of operations.”
Summary Risk Factors
You should consider all the information contained in this prospectus in before investing in our securities. In particular, you should consider the risk factors described under “Risk Factors” beginning on page 39. Such risks include, but are not limited to:
•
THIL has a limited operating history in China, which makes it difficult to predict its business, financial performance and prospects, and THIL may not be able to maintain its historical growth rates in future periods.
​
•
THIL may not be able to successfully execute its strategies, sustain its growth or manage the increasing complexity of its business.
​
•
Economic conditions have adversely affected, and may continue to adversely affect, consumer discretionary spending, which could negatively impact THIL’s business, financial condition and results of operations.
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•
Uncertainties relating to the growth of China’s coffee industry and food and beverage sector could adversely affect THIL’s results of operations and business prospects.
​
•
Food safety concerns and concerns about the health risk of THIL’s products may have an adverse effect on its business.
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•
The COVID-19 pandemic has adversely affected and may from time to time adversely affect THIL’s financial condition and results of operations in the future.
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•
If relations between China and the United States or China and Canada deteriorate, THIL’s business, results of operations and financial condition could be adversely affected.
​
•
If we are unable to maintain or increase prices, we may fail to maintain a positive margin.
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In addition, THIL and its PRC Subsidiaries face various other legal and operational risks associated with doing business in China, which could result in a material change in the operations of THIL’s PRC Subsidiaries, cause the value of THIL’s securities to significantly decline or become worthless, and significantly limit or completely hinder its ability to accept foreign investments and offer or continue to offer securities to foreign investors. These risks include:
•
The offering of THIL securities may be subject to additional disclosure requirements and review that the SEC or other regulatory authorities in the United States may adopt for companies with China-based operations, which could increase THIL’s compliance costs, subject it to additional disclosure requirements, and/or suspend or terminate its future securities offerings. See “Risk Factors — Risks Related to Doing Business in China — Additional disclosure requirements to be adopted by and regulatory scrutiny from the SEC in response to risks related to companies with substantial operations in China, which could increase our compliance costs, subject us to additional disclosure requirements, and/or suspend or terminate our future securities offerings, making capital-raising more difficult.”
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•
Regulatory developments in mainland China, in particular with respect to restrictions on companies based in mainland China raising capital offshore and the government-led cybersecurity reviews of certain companies, may lead to additional PRC regulatory review over THIL’s financing and capital raising activities in the United States. The approval and/or other requirements of PRC governmental authorities, such as the CSRC and the CAC, may be required under PRC laws, regulations or policies. See “Risk Factors — Risks Related to Doing Business in China — The approval and/or other requirements of Chinese governmental authorities may be required in connection with this offering or our future issuance of securities to foreign investors under PRC laws, regulations or policies.”
​
•
PRC governmental authorities have significant oversight and discretion over the business operations of THIL’s PRC Subsidiaries and may seek to intervene or influence such operations at any time that the government deems appropriate to further its regulatory, political and societal goals. In addition, the PRC governmental authorities may also exert more control over offerings that are conducted overseas and/or foreign investment in issuers based in mainland China. The PRC government’s exertion of more control over offerings conducted overseas and/or foreign investment in issuers based in mainland China could result in a material change in the operations of THIL’s PRC Subsidiaries, significantly limit or completely hinder THIL’s ability to offer or continue to offer securities to investors, and cause the value of THIL’s securities to significantly decline or be worthless. See “Risk Factors — Risks Related to Doing Business in China — PRC governmental authorities’ significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our securities.”
​
•
THIL’s business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China, including, among others, overall economic growth, level of urbanization and level of per capita disposable income. See “Risk Factors — Risks Related to Doing Business in China — Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.”
​
•
THIL is subject to significant uncertainty and inconsistency regarding the interpretation and enforcement of many PRC laws and regulations, and these laws and regulations can change quickly with limited advance notice. See “Risk Factors — Risks Related to Doing Business in China — The business operations of our PRC Subsidiaries are subject to various PRC laws and regulations, the interpretation and enforcement of which involve significant uncertainties as the PRC legal system is evolving rapidly.”
​
•
Due to the existing and/or potential interventions in or the imposition of restrictions and limitations by the PRC government on the ability of THIL or its PRC Subsidiaries to transfer cash and/or non-cash assets based on existing or new PRC laws and regulations, THIL’s cash and/or non-cash assets located in mainland China or held by THIL’s PRC Subsidiaries, such as Tim Hortons China and Tim Hortons (Shanghai) Food and Beverage Management Co., Ltd., may not be available to fund its foreign currency needs or any foreign operations that it may have in the future or for other uses outside of mainland China, and THIL may not be able to effectively utilize the proceeds from the offerings of its listed securities to fund the operations or liquidity needs of its PRC Subsidiaries. For example, payment of dividends by THIL’s PRC Subsidiaries is subject to various restrictions, loans by THIL to its PRC Subsidiaries to finance their operations are subject to certain statutory limits and must be registered with the local counterpart of the SAFE, and any capital contribution from THIL to its PRC Subsidiaries is required to be registered with the competent PRC governmental authorities. Based on the experience of its management team, THIL does not believe that remittance of cash and/or non-cash assets from Hong Kong, including cash and/or non-cash assets held by THHK, a wholly-owned subsidiary of THIL incorporated under the laws of the HKSAR with no current business operations, is subject to the aforementioned interventions, restrictions and limitations by the PRC government or similar interventions, restrictions or limitations from the government of the HKSAR. To the extent that THIL’s cash and/or non-cash assets in Hong Kong or any cash and/or non-cash assets held by its Hong Kong Subsidiaries are subject to the aforementioned interventions, restrictions and limitations by the PRC government or the government of the HKSAR, then, as a
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result of such interventions, restrictions and limitations, such cash/assets may not be available to pay dividends to THIL, to fund the operations of THIL’s subsidiaries outside Hong Kong or to be used outside of Hong Kong for other purposes. See “Risk Factors — Risks Related to Doing Business in China — Restrictions on our subsidiaries on paying dividends or making other payments to us under existing or new laws and regulations of the PRC and the HKSAR may restrict our ability to satisfy our liquidity requirements” and “Foreign exchange controls may limit our ability to effectively utilize our revenues and the proceeds from the offerings of our listed securities and adversely affect the value of your investment.”
•
THIL’s auditors are headquartered in mainland China and are subject to the determinations announced by the PCAOB on December 16, 2021, which set out a list of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong that the PCAOB is unable to inspect or investigate completely because of positions taken by local authorities. As such, the PCAOB has been and currently is unable to inspect THIL’s auditors, which may cause THIL’s securities to be delisted under the HFCAA and the AHFCAA. See “Risk Factors — Risks Related to Doing Business in China — The PCAOB has been and currently is unable to inspect our auditor. Our securities may be delisted under the HFCAA if the PCAOB is unable to inspect our auditors for three consecutive years after we are identified by the SEC as a Commission-Identified Issuer, or two consecutive years if the AHFCAA is enacted. The delisting of our securities, or the threat of our securities being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives investors of the benefits of such inspections.”
​
•
THIL is a Cayman Islands holding company that conducts its operations in mainland China through wholly owned subsidiaries. A majority of THIL’s assets, its entire management team and three of its directors are based in mainland China, and one of its directors is based in Hong Kong. Therefore, it may be difficult or costly for you to effect service of process within the U.S., enforce judgments of U.S. courts against THIL, its officers or these directors based upon the civil liability provisions of the U.S. federal securities laws or bring an original action in an appropriate foreign court to enforce liabilities against THIL, its officers or these directors or any person based upon the U.S. federal securities laws. See “Risk Factors — Risks Related to Doing Business in China — Your ability to effect service of legal process, enforce judgments or bring actions against us or certain of our officers and directors outside the U.S. will be limited and additional costs may be required.”
​
In addition, this offering involves a number of risks, including:
•
The price of our securities may be volatile, and the value of our securities may decline.
​
•
A market for our securities may not develop or be sustained, which would adversely affect the liquidity and price of our securities.
​
•
If we do not meet the expectations of equity research analysts, if they do not publish research reports about our business or if they issue unfavorable commentary or downgrade our securities, the price of our securities could decline.
​
•
Sales of a substantial number of our securities in the public market by the Selling Securityholders and/or by our existing securityholders could cause the price of our securities to fall.
​
•
Future issuance of our Ordinary Shares will result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.
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THE REGISTERED SECURITIES
The summary below describes the principal terms of the offering. The “Description of Share Capital” section of this prospectus contains a more detailed description of our securities.
We are registering the issuance by us of up to 22,900,000 Ordinary Shares that may be issued upon exercise of Warrants at an exercise price of $11.50 per share.
We are also registering the resale by the Selling Securityholders of up to 55,399,324 Ordinary Shares (including 5,650,000 Ordinary Shares underlying Warrants), 5,650,000 Warrants to purchase Ordinary Shares, and 6,752,041 Ordinary Shares underlying the Notes.
Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” on page 39 of this prospectus.
Issuance of Ordinary Shares
Ordinary Shares outstanding prior to exercise of all Warrants and conversion of the Notes
148,355,092 Ordinary Shares.
Ordinary Shares issuable upon exercise of all Warrants
22,900,000 Ordinary Shares.
Ordinary Shares issuable upon the conversion of the Notes
6,752,041
Use of proceeds
We will receive up to an aggregate of approximately $263,350,000 from the exercise of all Warrants, assuming the exercise in full of all of the Warrants for cash. The exercise price of the Warrants is $11.50 per share, subject to adjustment as described herein, and the closing price of our Ordinary Shares on Nasdaq on December 6, 2022 was $3.81 per share. The likelihood that warrant holders will exercise the Warrants and any cash proceeds that we would receive are dependent upon the market price of our Ordinary Shares, among other things. If the market price for our Ordinary Shares is less than $11.50 per share, we believe warrant holders will be unlikely to exercise their Warrants. We expect to use the net proceeds from the exercise of Warrants for general corporate purposes. See the section titled “Use of Proceeds” appearing elsewhere in this prospectus for more information.
Resale of Ordinary Shares and Warrants
Ordinary Shares offered by the Selling Securityholders
Up to 62,151,365 Ordinary Shares consisting of:
•
35,186,824 Legacy Shares;
​
•
4,312,500 Sponsor Shares;
​
•
4,450,000 Ordinary Shares issuable upon the exercise of the Sponsor Warrants;
​
•
5,050,000 PIPE Shares;
​
•
1,200,000 Ordinary Shares issuable upon the exercise of the PIPE Warrants;
​
•
5,000,000 ESA Shares;
​
•
6,752,041 Conversion Shares; and
​
•
200,000 Option Shares.
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Warrants offered by the Selling Securityholders
Up to 5,650,000 Warrants consisting of:
•
4,450,000 Sponsor Warrants; and
​
•
1,200,000 PIPE Warrants.
​
Offering price
The Registered Securities offered by this prospectus may be offered, sold or distributed from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. See the section titled “Plan of Distribution.”
Redemption
The Sponsor Warrants and PIPE Warrants are redeemable in certain circumstances. See the section titled “Description of Share Capital — Warrants” for further discussion.
Use of proceeds
We will not receive any proceeds from the sale of the securities to be offered by the Selling Securityholders. The likelihood that warrant holders will exercise the Warrants and any cash proceeds that we would receive are dependent upon the market price of our Ordinary Shares, among other things. If the market price for our Ordinary Shares is less than $11.50 per share, we believe warrant holders will be unlikely to exercise their Warrants. See the section titled “Use of Proceeds.”
Dividend policy
As of the date of this prospectus, neither THIL nor any of its subsidiaries has made any dividends or distributions to its parent company or any investor. THIL plans to distribute cash dividends after it becomes profitable. See “Dividend Policy.”
Earn-out shares
If the trading price per share of our Ordinary Shares at any point during the trading hours of a trading day equals or exceeds $12.50 per share for any 20 trading days within any consecutive 30 trading day period at any time commencing on or after the Closing Date and ending on or prior to the five-year anniversary of the Closing Date (the “Earn-out Expiration Date”), then the Company shall issue, as promptly as reasonably practicable following the date of the first occurrence of the foregoing, an aggregate of 7,000,000 Ordinary Shares to XXIIA, Tencent Mobility Limited, SCC Growth VI Holdco D, Ltd., Eastern Bell International XXVI Limited, Pangaea Two Acquisition Holdings XXIII, Ltd., Tim Hortons Restaurants International GmbH, L&L Tomorrow Holdings Limited and Lord Winterfell Limited, pro rata to their shareholding as of October 12, 2022, provided that the share price milestone in the succeeding paragraph has been not achieved.
If the trading price per share of our Ordinary Shares at any point during the trading hours of a trading day equals or exceeds $15.00 per share for any 20 trading days within any consecutive 30 trading day period at any time commencing on or after the Closing Date and ending on or prior to the Earn-out Expiration Date, then the Company shall issue, as promptly as reasonably practicable following the date of the first occurrence of the foregoing, an aggregate of 7,000,000 Ordinary Shares (if the share price milestone in the preceding paragraph has been achieved), or 14,000,000 Ordinary Shares (if the share price milestone in the preceding paragraph has not been achieved), to the aforementioned shareholders pro rata to their shareholding as of October 12, 2022.
 
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Such Earn-out Shares may also be issued in connection with a transfer to or acquisition by a person or entity or group of affiliated persons or entities (other than an underwriter pursuant to an offering) (whether by tender offer, merger, consolidation, division or other similar transaction), in one transaction or a series of related transactions, of the Company’s voting securities if, after such transfer or acquisition, such person, entity or group of affiliated persons or entities would beneficially own (as defined in Rule 13d-3 promulgated under the Exchange Act) more than 50% of the outstanding voting securities of the Company, provided that the per share value of the consideration to be received by our shareholders in such company sale equals or exceeds $12.50 or $15.00, as applicable, and certain other conditions are met.
Lock-up agreements
On August 13, 2021, we entered into the Sponsor Lock-Up Agreement with the Sponsor and the Lock-up and Support Agreement with XXIIB, Tim Hortons Restaurants International GmbH, L&L Tomorrow Holdings Limited and Lord Winterfell Limited. On October 11, 2022, XXIIB distributed all of its Ordinary Shares to its shareholders, namely, XXIIA, Tencent Mobility Limited, SCC Growth VI Holdco D, Ltd. and Eastern Bell International XXVI Limited, each of which entered into a joinder agreement to the Lock-up and Support Agreement with us on the same day. On October 12, 2022, Tim Hortons Restaurants International GmbH transferred 6,191,018 Ordinary Shares to Pangaea Two Acquisition Holdings XXIII, Ltd., which entered into a joinder agreement to the Lock-up and Support Agreement with us on the same day. For a more detailed description of the lock-up restrictions, see the section titled “Plan of Distribution.”
Vesting conditions for certain Sponsor Shares
Pursuant to the Sponsor Lock-Up Agreement, 1,400,000 Ordinary Shares held by the Sponsor became unvested and subject to forfeiture upon the Closing, only to be vested again if certain share price milestones are achieved before the five-year anniversary of the Closing Date, subject to the terms and conditions contemplated by the Sponsor Lock-Up Agreement. If the trading price of our Ordinary Shares at any point during the trading hours of a trading day equals or exceeds $12.50 per share for any 20 trading days within any consecutive 30-trading day period, 700,000 of such Ordinary Shares shall vest. If the trading price of our Ordinary Shares at any point during the trading hours of a trading day equals or exceeds $15.00 per share for any 20 trading days within any consecutive 30-trading day period, 700,000 of such Ordinary Shares (if the $12.50 milestone has previously been achieved) or 1,400,000 of such Ordinary Shares (if the $12.50 milestone has not previously been achieved) shall vest.
Market for our securities
Our Ordinary Shares and Public Warrants are listed on The Nasdaq Stock Market LLC under the symbols “THCH” and “THCHW,” respectively.
 
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following tables present the summary consolidated financial data of THIL. THIL prepares its consolidated financial statements in accordance with U.S. GAAP. Except for numbers in U.S. dollars, the summary consolidated statement of operations data for the years ended December 31, 2021, 2020 and 2019, the summary consolidated balance sheet data as of December 31, 2021 and 2020 and the summary consolidated statement of cash flows data for the years ended December 31, 2021, 2020 and 2019 have been derived from THIL’s audited consolidated financial statements, which are included elsewhere in this prospectus. The following summary consolidated statement of operations data and statement of cash flows data for the six months ended June 30, 2021 and 2022 and summary consolidated balance sheet data as of June 30, 2022 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. THIL’s historical results for any prior period are not necessarily indicative of results expected in any future period.
The financial data set forth below should be read in conjunction with, and is qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus.
Summary Consolidated Statements of Operations Data
​ ​ ​
Year ended December 31,
​ ​
Six months
ended June 30,
​
​ ​ ​
2019
​ ​
2020
​ ​
2021
​ ​
2021
​ ​
2022
​
​ ​ ​
(in thousands except per share data)
​
​ ​ ​
RMB
​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
Total revenues
​ ​ ​ ​ 57,257 ​ ​ ​ ​ ​ 212,085 ​ ​ ​ ​ ​ 643,372 ​ ​ ​ ​ ​ 96,053 ​ ​ ​ ​ ​ 237,266 ​ ​ ​ ​ ​ 403,864 ​ ​ ​ ​ ​ 60,295 ​ ​
Company owned and operated store costs and expenses
​ ​ ​ ​ 76,614 ​ ​ ​ ​ ​ 243,731 ​ ​ ​ ​ ​ 755,818 ​ ​ ​ ​ ​ 112,841 ​ ​ ​ ​ ​ 273,426 ​ ​ ​ ​ ​ 509,749 ​ ​ ​ ​ ​ 76,104 ​ ​
Costs of other revenues
​ ​ ​ ​ 7,842 ​ ​ ​ ​ ​ 5,208 ​ ​ ​ ​ ​ 16,731 ​ ​ ​ ​ ​ 2,498 ​ ​ ​ ​ ​ 4,642 ​ ​ ​ ​ ​ 16,994 ​ ​ ​ ​ ​ 2,537 ​ ​
Marketing expenses
​ ​ ​ ​ 8,020 ​ ​ ​ ​ ​ 16,986 ​ ​ ​ ​ ​ 50,317 ​ ​ ​ ​ ​ 7,512 ​ ​ ​ ​ ​ 15,213 ​ ​ ​ ​ ​ 31,865 ​ ​ ​ ​ ​ 4,757 ​ ​
General and administrative expenses
​ ​ ​ ​ 51,067 ​ ​ ​ ​ ​ 79,366 ​ ​ ​ ​ ​ 174,963 ​ ​ ​ ​ ​ 26,121 ​ ​ ​ ​ ​ 67,040 ​ ​ ​ ​ ​ 113,518 ​ ​ ​ ​ ​ 16,948 ​ ​
Franchise and royalty expenses
​ ​ ​ ​ 4,727 ​ ​ ​ ​ ​ 8,592 ​ ​ ​ ​ ​ 18,800 ​ ​ ​ ​ ​ 2,807 ​ ​ ​ ​ ​ 8,330 ​ ​ ​ ​ ​ 14,280 ​ ​ ​ ​ ​ 2,132 ​ ​
Other operating costs and expenses
​ ​ ​ ​ 439 ​ ​ ​ ​ ​ 2,713 ​ ​ ​ ​ ​ 2,135 ​ ​ ​ ​ ​ 319 ​ ​ ​ ​ ​ 66 ​ ​ ​ ​ ​ 4,568 ​ ​ ​ ​ ​ 682 ​ ​
Loss on disposal of property and equipment
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,546 ​ ​ ​ ​ ​ 231 ​ ​ ​ ​ ​ 741 ​ ​ ​ ​ ​ 7,360 ​ ​ ​ ​ ​ 1,099 ​ ​
Impairment losses of long-lived
assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,002 ​ ​ ​ ​ ​ 149 ​ ​ ​ ​ ​  — ​ ​ ​ ​ ​ 5,473 ​ ​ ​ ​ ​ 817 ​ ​
Other income
​ ​ ​ ​ (196) ​ ​ ​ ​ ​ (3,339) ​ ​ ​ ​ ​ (3,476) ​ ​ ​ ​ ​ (519) ​ ​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (596) ​ ​ ​ ​ ​ (89) ​ ​
Total costs and expenses, net
​ ​ ​ ​ 148,513 ​ ​ ​ ​ ​ 353,257 ​ ​ ​ ​ ​ 1,017,836 ​ ​ ​ ​ ​ 151,959 ​ ​ ​ ​ ​ 369,420 ​ ​ ​ ​ ​ 703,211 ​ ​ ​ ​ ​ 104,987 ​ ​
Operating loss
​ ​ ​ ​ (91,256) ​ ​ ​ ​ ​ (141,172) ​ ​ ​ ​ ​ (374,464) ​ ​ ​ ​ ​ (55,906) ​ ​ ​ ​ ​ (132,154) ​ ​ ​ ​ ​ (299,347) ​ ​ ​ ​ ​ (44,691) ​ ​
Interest income
​ ​ ​ ​ 2,272 ​ ​ ​ ​ ​ 511 ​ ​ ​ ​ ​ 316 ​ ​ ​ ​ ​ 47 ​ ​ ​ ​ ​ 266 ​ ​ ​ ​ ​ 334 ​ ​ ​ ​ ​ 50 ​ ​
Interest expenses
​ ​ ​ ​  —  ​ ​ ​ ​ ​  —  ​ ​ ​ ​ ​ (1,902) ​ ​ ​ ​ ​ (284) ​ ​ ​ ​ ​  — ​ ​ ​ ​ ​ (6,018) ​ ​ ​ ​ ​ (898) ​ ​
Foreign currency transaction gain / (loss)
​ ​ ​ ​ 1,156 ​ ​ ​ ​ ​ (2,399) ​ ​ ​ ​ ​ (1,302) ​ ​ ​ ​ ​ (194) ​ ​ ​ ​ ​ (941) ​ ​ ​ ​ ​ (768) ​ ​ ​ ​ ​ (115) ​ ​
Changes in fair value of convertible notes, excluding impact of instrument-specific credit risk
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,577) ​ ​ ​ ​ ​ (833) ​ ​ ​ ​ ​  — ​ ​ ​ ​ ​ (21,078) ​ ​ ​ ​ ​ (3,147) ​ ​
Loss before income taxes
​ ​ ​ ​ (87,828) ​ ​ ​ ​ ​ (143,060) ​ ​ ​ ​ ​ (382,929) ​ ​ ​ ​ ​ (57,170) ​ ​ ​ ​ ​ (132,829) ​ ​ ​ ​ ​ (326,877) ​ ​ ​ ​ ​ (48,801) ​ ​
Income tax expenses
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​  — ​ ​ ​ ​ ​  — ​ ​ ​ ​ ​ — ​ ​
Net loss
​ ​ ​ ​ (87,828) ​ ​ ​ ​ ​ (143,060) ​ ​ ​ ​ ​ (382,929) ​ ​ ​ ​ ​ (57,170) ​ ​ ​ ​ ​ (132,829) ​ ​ ​ ​ ​ (326,877) ​ ​ ​ ​ ​ (48,801) ​ ​
 
33
TABLE OF CONTENTS
 
​ ​ ​
Year ended December 31,
​ ​
Six months
ended June 30,
​
​ ​ ​
2019
​ ​
2020
​ ​
2021
​ ​
2021
​ ​
2022
​
​ ​ ​
(in thousands except per share data)
​
​ ​ ​
RMB
​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
Less: Net Loss attributable to non-controlling interests
​ ​ ​ ​ (174) ​ ​ ​ ​ ​ (1,060) ​ ​ ​ ​ ​ (1,208) ​ ​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (447) ​ ​ ​ ​ ​ (2,480) ​ ​ ​ ​ ​ (370) ​ ​
Net Loss attributable to shareholders of THIL
​ ​ ​ ​ (87,654) ​ ​ ​ ​ ​ (142,000) ​ ​ ​ ​ ​ (381,721) ​ ​ ​ ​ ​ (56,989) ​ ​ ​ ​ ​ (132,382) ​ ​ ​ ​ ​ (324,397) ​ ​ ​ ​ ​ (48,431) ​ ​
Basic and diluted loss per ordinary share – pre merger
​ ​ ​ ​ (877) ​ ​ ​ ​ ​ (1,416) ​ ​ ​ ​ ​ (3,340) ​ ​ ​ ​ ​ (499) ​ ​ ​ ​ ​ (1,183) ​ ​ ​ ​ ​ (2,780) ​ ​ ​ ​ ​ (415) ​ ​
Basic and diluted loss per ordinary share – post merger(1)
​ ​ ​ ​ (0.82) ​ ​ ​ ​ ​ (1.33) ​ ​ ​ ​ ​ (3.14) ​ ​ ​ ​ ​ (0.47) ​ ​ ​ ​ ​ (1.11) ​ ​ ​ ​ ​ (2.61) ​ ​ ​ ​ ​ (0.39) ​ ​
​
​
Note:
​
(1)
Upon the completion of the Business Combination, the basic and diluted weighted average number of Ordinary Shares outstanding used in computing basic and diluted loss per ordinary share was retrospectively adjusted to reflect the Share Split by subdividing it using the exchange ratio of 1064.3 for the years ended December 31, 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022.
​
Summary Consolidated Balance Sheet Data
​ ​ ​
As of December 31,
​ ​
As of June 30,
​
​ ​ ​
2020
​ ​
2021
​ ​
2022
​
​ ​ ​
(in thousands)
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
US$
​
Total current assets
​ ​ ​ ​ 250,893 ​ ​ ​ ​ ​ 585,973 ​ ​ ​ ​ ​ 87,483 ​ ​ ​ ​ ​ 503,397 ​ ​ ​ ​ ​ 75,155 ​ ​
Total non-current assets
​ ​ ​ ​ 329,467 ​ ​ ​ ​ ​ 698,920 ​ ​ ​ ​ ​ 104,346 ​ ​ ​ ​ ​ 734,002 ​ ​ ​ ​ ​ 109,584 ​ ​
Total assets
​ ​ ​ ​ 580,360 ​ ​ ​ ​ ​ 1,284,893 ​ ​ ​ ​ ​ 191,829 ​ ​ ​ ​ ​ 1,237,399 ​ ​ ​ ​ ​ 184,739 ​ ​
Total current liabilities
​ ​ ​ ​ 128,244 ​ ​ ​ ​ ​ 567,290 ​ ​ ​ ​ ​ 84,694 ​ ​ ​ ​ ​ 803,621 ​ ​ ​ ​ ​ 119,977 ​ ​
Total non-current liabilities
​ ​ ​ ​ 19,064 ​ ​ ​ ​ ​ 378,508 ​ ​ ​ ​ ​ 56,510 ​ ​ ​ ​ ​ 420,899 ​ ​ ​ ​ ​ 62,839 ​ ​
Total liabilities
​ ​ ​ ​ 147,308 ​ ​ ​ ​ ​ 945,798 ​ ​ ​ ​ ​ 141,204 ​ ​ ​ ​ ​ 1,224,520 ​ ​ ​ ​ ​ 182,816 ​ ​
Total shareholders’ equity
​ ​ ​ ​ 433,052 ​ ​ ​ ​ ​ 339,095 ​ ​ ​ ​ ​ 50,625 ​ ​ ​ ​ ​ 12,879 ​ ​ ​ ​ ​ 1,923 ​ ​
Total liabilities and shareholders’ equity
​ ​ ​ ​ 580,360 ​ ​ ​ ​ ​ 1,284,893 ​ ​ ​ ​ ​ 191,829 ​ ​ ​ ​ ​ 1,237,399 ​ ​ ​ ​ ​ 184,739 ​ ​
Summary Consolidated Statements of Cash Flow Data
​ ​ ​
Year ended December 31,
​ ​
Six months
ended June 30,
​
​ ​ ​
2019
​ ​
2020
​ ​
2021
​ ​
2021
​ ​
2022
​
​ ​ ​
(in thousands)
​
​ ​ ​
RMB
​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
Net cash used in operating activities
​ ​ ​ ​ (77,121) ​ ​ ​ ​ ​ (145,773) ​ ​ ​ ​ ​ (244,966) ​ ​ ​ ​ ​ (36,573) ​ ​ ​ ​ ​ (114,727) ​ ​ ​ ​ ​ (154,942) ​ ​ ​ ​ ​ (23,132) ​ ​
Net cash used in investing activities
​ ​ ​ ​ (56,095) ​ ​ ​ ​ ​ (144,747) ​ ​ ​ ​ ​ (335,277) ​ ​ ​ ​ ​ (50,056) ​ ​ ​ ​ ​ (121,236) ​ ​ ​ ​ ​ (180,355) ​ ​ ​ ​ ​ (26,926) ​ ​
Net cash provided by financing
activities
​ ​ ​ ​ 212,802 ​ ​ ​ ​ ​ 221,125 ​ ​ ​ ​ ​ 797,997 ​ ​ ​ ​ ​ 119,138 ​ ​ ​ ​ ​ 287,470 ​ ​ ​ ​ ​ 226,606 ​ ​ ​ ​ ​ 33,831 ​ ​
Effect of foreign currency exchange rate
changes on cash
​ ​ ​ ​ 4,730 ​ ​ ​ ​ ​ (16,173) ​ ​ ​ ​ ​ (1,791) ​ ​ ​ ​ ​ (267) ​ ​ ​ ​ ​ (1,379) ​ ​ ​ ​ ​ 2,988 ​ ​ ​ ​ ​ 446 ​ ​
Net increase/(decrease) in cash
​ ​ ​ ​ 84,316 ​ ​ ​ ​ ​ (85,568) ​ ​ ​ ​ ​ 215,963 ​ ​ ​ ​ ​ 32,242 ​ ​ ​ ​ ​ 50,128 ​ ​ ​ ​ ​ (105,703) ​ ​ ​ ​ ​ (15,781) ​ ​
Cash at beginning of year/period
​ ​ ​ ​ 176,126 ​ ​ ​ ​ ​ 260,442 ​ ​ ​ ​ ​ 174,874 ​ ​ ​ ​ ​ 26,108 ​ ​ ​ ​ ​ 174,874 ​ ​ ​ ​ ​ 390,837 ​ ​ ​ ​ ​ 58,350 ​ ​
Cash at end of year/period
​ ​ ​ ​ 260,442 ​ ​ ​ ​ ​ 174,874 ​ ​ ​ ​ ​ 390,837 ​ ​ ​ ​ ​ 58,350 ​ ​ ​ ​ ​ 225,002 ​ ​ ​ ​ ​ 285,134 ​ ​ ​ ​ ​ 42,569 ​ ​
 
34
TABLE OF CONTENTS
 
Non-GAAP Financial Measures
In this prospectus, THIL has included certain non-GAAP financial measures that are key measures used by THIL’s management and board of directors in evaluating its operating performance and making strategic decisions regarding capital allocation, such as adjusted store EBITDA, adjusted store EBITDA margin, adjusted general and administrative expenses, adjusted corporate EBITDA, adjusted corporate EBITDA margin, adjusted net loss, adjusted net loss margin, and adjusted basic and diluted net loss per ordinary share.
These non-GAAP financial measures result from the removal of certain items to reflect what THIL’s management and board of directors believe presents a clearer picture of store-level performance.
THIL believes that the exclusion of certain items in calculating these non-GAAP financial measures facilitates store-level operating performance comparisons on a period-to-period basis. Accordingly, THIL believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating THIL’s operating results in the same manner as its management and board of directors.
These non-GAAP financial measures have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of THIL’s results as reported under U.S. GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”
The following table reflects the reconciliation of revenues of company owned and operated stores to adjusted store EBITDA for the periods indicated.
​ ​ ​
Year ended December 31,
​ ​
Six months
ended June 30,
​
​ ​ ​
2020
​ ​
2021
​ ​
2022
​
​ ​ ​
(in thousands)
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
US$
​
Revenues – company owned and operated stores
​ ​ ​ ​ 206,036 ​ ​ ​ ​ ​ 617,226 ​ ​ ​ ​ ​ 92,149 ​ ​ ​ ​ ​ 375,579 ​ ​ ​ ​ ​ 56,072 ​ ​
Food and packaging costs – company owned and operated stores
​ ​ ​ ​ (74,402) ​ ​ ​ ​ ​ (207,948) ​ ​ ​ ​ ​ (31,046) ​ ​ ​ ​ ​ (128,466) ​ ​ ​ ​ ​ (19,180) ​ ​
Rental expenses – company owned and operated stores
​ ​ ​ ​ (54,719) ​ ​ ​ ​ ​ (148,152) ​ ​ ​ ​ ​ (22,118) ​ ​ ​ ​ ​ (98,014) ​ ​ ​ ​ ​ (14,633) ​ ​
Payroll and employee benefits – company owned and
operated stores
​ ​ ​ ​ (50,314) ​ ​ ​ ​ ​ (199,330) ​ ​ ​ ​ ​ (29,759) ​ ​ ​ ​ ​ (136,166) ​ ​ ​ ​ ​ (20,329) ​ ​
Delivery costs – company owned and operated stores
​ ​ ​ ​ (12,233) ​ ​ ​ ​ ​ (38,605) ​ ​ ​ ​ ​ (5,764) ​ ​ ​ ​ ​ (28,109) ​ ​ ​ ​ ​ (4,197) ​ ​
Other operating expenses – company owned and operated stores
​ ​ ​ ​ (52,063) ​ ​ ​ ​ ​ (161,783) ​ ​ ​ ​ ​ (24,154) ​ ​ ​ ​ ​ (118,994) ​ ​ ​ ​ ​ (17,765) ​ ​
Franchise and royalty expenses – company owned and
operated stores
​ ​ ​ ​ (8,592) ​ ​ ​ ​ ​ (18,800) ​ ​ ​ ​ ​ (2,806) ​ ​ ​ ​ ​ (14,280) ​ ​ ​ ​ ​ (2,132) ​ ​
Fully-burdened gross profit – company owned and operated stores
​ ​ ​ ​ (46,287) ​ ​ ​ ​ ​ (157,392) ​ ​ ​ ​ ​ (23,498) ​ ​ ​ ​ ​ (148,450) ​ ​ ​ ​ ​ (22,164) ​ ​
Depreciation and amortization(1)
​ ​ ​ ​ 27,838 ​ ​ ​ ​ ​ 74,276 ​ ​ ​ ​ ​ 11,089 ​ ​ ​ ​ ​ 64,738 ​ ​ ​ ​ ​ 9,665 ​ ​
Pre-opening material and labor costs(2)
​ ​ ​ ​ 19,850 ​ ​ ​ ​ ​ 81,109 ​ ​ ​ ​ ​ 12,109 ​ ​ ​ ​ ​ 14,312 ​ ​ ​ ​ ​ 2,137 ​ ​
Pre-opening rental expenses(3)
​ ​ ​ ​ 12,118 ​ ​ ​ ​ ​ 29,474 ​ ​ ​ ​ ​ 4,400 ​ ​ ​ ​ ​ 8,072 ​ ​ ​ ​ ​ 1,205 ​ ​
Adjusted store EBITDA
​ ​ ​ ​ 13,519 ​ ​ ​ ​ ​ 27,467 ​ ​ ​ ​ ​ 4,099 ​ ​ ​ ​ ​ (61,328) ​ ​ ​ ​ ​ (9,157) ​ ​
​
Notes:
(1)
Primarily consists of depreciation related to property, equipment and store renovations and amortization of the franchise right to use the Tim Hortons brand.
​
(2)
Primarily consists of material costs and labor costs incurred for training purposes during the store pre-opening period.
​
(3)
Primarily consists of rental expenses recognized under U.S. GAAP, using straight-line recognition, during the store pre-opening period.
​
​
 
35
TABLE OF CONTENTS
 
​ ​ ​
For the three months ended
September 30,
​ ​
For the nine months ended
September 30,
​
​ ​ ​
2021
​ ​
2022
​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands, except for %)
​
Revenues – company owned and operated stores
​ ​ ​ ​ 173,703 ​ ​ ​ ​ ​ 290,009 ​ ​ ​ ​ ​ 40,769 ​ ​ ​ ​ ​ 403,573 ​ ​ ​ ​ ​ 665,588 ​ ​ ​ ​ ​ 93,567 ​ ​
Food and packaging costs – company owned and operated stores
​ ​ ​ ​ (59,776) ​ ​ ​ ​ ​ (96,605) ​ ​ ​ ​ ​ (13,581) ​ ​ ​ ​ ​ (136,351) ​ ​ ​ ​ ​ (225,071) ​ ​ ​ ​ ​ (31,640) ​ ​
Rental expenses – company owned and operated stores
​ ​ ​ ​ (42,877) ​ ​ ​ ​ ​ (36,131) ​ ​ ​ ​ ​ (5,079) ​ ​ ​ ​ ​ (101,287) ​ ​ ​ ​ ​ (134,145) ​ ​ ​ ​ ​ (18,858) ​ ​
Payroll and employee benefits –  company owned and operated stores
​ ​ ​ ​ (59,604) ​ ​ ​ ​ ​ (65,992) ​ ​ ​ ​ ​ (9,277) ​ ​ ​ ​ ​ (127,502) ​ ​ ​ ​ ​ (202,158) ​ ​ ​ ​ ​ (28,419) ​ ​
Delivery costs – company owned and operated stores
​ ​ ​ ​ (11,225) ​ ​ ​ ​ ​ (23,590) ​ ​ ​ ​ ​ (3,316) ​ ​ ​ ​ ​ (24,680) ​ ​ ​ ​ ​ (51,699) ​ ​ ​ ​ ​ (7,268) ​ ​
Other operating expenses – company owned and operated stores
​ ​ ​ ​ (46,451) ​ ​ ​ ​ ​ (77,538) ​ ​ ​ ​ ​ (10,900) ​ ​ ​ ​ ​ (103,540) ​ ​ ​ ​ ​ (196,532) ​ ​ ​ ​ ​ (27,628) ​ ​
Franchise and royalty expenses –  company
owned and operated stores
​ ​ ​ ​ (5,126) ​ ​ ​ ​ ​ (11,021) ​ ​ ​ ​ ​ (1,549) ​ ​ ​ ​ ​ (13,455) ​ ​ ​ ​ ​ (25,301) ​ ​ ​ ​ ​ (3,557) ​ ​
Fully-burdened gross loss – company owned and operated stores
​ ​ ​ ​ (51,356) ​ ​ ​ ​ ​ (20,868) ​ ​ ​ ​ ​ (2,933) ​ ​ ​ ​ ​ (103,242) ​ ​ ​ ​ ​ (169,318) ​ ​ ​ ​ ​ (23,803) ​ ​
Depreciation and amortization(1)
​ ​ ​ ​ 19,453 ​ ​ ​ ​ ​ 35,943 ​ ​ ​ ​ ​ 5,053 ​ ​ ​ ​ ​ 46,124 ​ ​ ​ ​ ​ 95,233 ​ ​ ​ ​ ​ 13,388 ​ ​
Store pre-opening expenses(2)
​ ​ ​ ​ 36,335 ​ ​ ​ ​ ​ 4,277 ​ ​ ​ ​ ​ 601 ​ ​ ​ ​ ​ 70,118 ​ ​ ​ ​ ​ 26,660 ​ ​ ​ ​ ​ 3,748 ​ ​
Adjusted store EBITDA
​ ​ ​ ​ 4,432 ​ ​ ​ ​ ​ 19,352 ​ ​ ​ ​ ​ 2,721 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ (47,425) ​ ​ ​ ​ ​ (6,667) ​ ​
Adjusted store EBITDA margin(3)
​ ​ ​ ​ 2.6% ​ ​ ​ ​ ​ 6.7% ​ ​ ​ ​ ​ 6.7% ​ ​ ​ ​ ​ 3.2% ​ ​ ​ ​ ​ -7.1% ​ ​ ​ ​ ​ -7.1% ​ ​
​
Notes:
(1)
Primarily consists of depreciation related to property, equipment and store renovations and amortization of the franchise right to use the Tim Hortons brand.
​
(2)
Primarily consists of material costs and labor costs incurred for training purposes and rental expenses recognized under U.S. GAAP, using straight-line recognition, during the store pre-opening period.
​
(3)
Adjusted store EBITDA as a percentage of revenues from company owned and operated stores.
​
The following table reflects the reconciliation of general and administrative expenses to adjusted general and administrative expenses for the periods indicated.
​ ​ ​
For the three months ended
September 30,
​ ​
For the nine months ended
September 30,
​
​ ​ ​
2021
​ ​
2022
​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
General and administrative expenses
​ ​ ​ ​ (49,364) ​ ​ ​ ​ ​ (109,567) ​ ​ ​ ​ ​ (15,403) ​ ​ ​ ​ ​ (116,405) ​ ​ ​ ​ ​ (223,085) ​ ​ ​ ​ ​ (31,361) ​ ​
Adjusted for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Share-based compensation expenses
​ ​ ​ ​ — ​ ​ ​ ​ ​ 33,276 ​ ​ ​ ​ ​ 4,678 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 33,276 ​ ​ ​ ​ ​ 4,678 ​ ​
Expenses related to the Commitment Shares
​ ​ ​ ​ — ​ ​ ​ ​ ​ 21,521 ​ ​ ​ ​ ​ 3,025 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 21,521 ​ ​ ​ ​ ​ 3,025 ​ ​
Expenses related to the Option Shares
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,778 ​ ​ ​ ​ ​ 250 ​ ​ ​ ​ ​ — ​