{"url_path":"/sec/byah/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F/A","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1986247/0001213900-26-057152-index.html","accession_number":"0001213900-26-057152","cik":"0001986247","ticker":"BYAH","issuer_name":"Park Ha Biological Technology Co., Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1986247/0001213900-26-057152-index.html","primary_entity_key":"0001986247","primary_entity_name":"Park Ha Biological Technology Co., Ltd."},"word_count":31462,"has_tables":true,"body_markdown":"**ITEM\n3. KEY INFORMATION**\n\n \n\n**Our Holding Company Structure and Contractual\nArrangements with the Variable Interest Entities**\n\n \n\nPark Ha Cayman is an exempted\ncompany incorporated in the Cayman Islands. As a holding company with no operations, our operations were conducted through our PRC subsidiaries,\nand contractual arrangements with our variable interest entities (“VIEs”) based in China. For a description of these contractual\narrangements, see “Item 4. Information on the Company — A. History and Development of the Company” for more information.\nOur contractual arrangements with the VIEs are not equivalent of an investment in the equity interest of the VIEs, and our investors\nmay never hold equity interests in the Chinese operating entities, including our PRC subsidiaries and the VIEs. Instead, we are regarded\nas the primary beneficiary of the VIEs for accounting purposes, and, therefore, we are able to consolidate the financial results of the\nVIEs in our consolidated financial statements in accordance with U.S. GAAP. Additionally, we do not operate in an industry that is forbidden\nfor foreign investors to invest in, which typically is why VIEs are utilized.\n\n \n\nOperations in the PRC utilizing\nVIEs are complicated and subject to numerous uncertainties. The VIE structure involves unique risks to investors. For instance, it may\nnot be as effective as direct ownership in providing us with control over the VIEs, and we may incur substantial costs to enforce the\nterms of the arrangements. Companies also face risks and uncertainties associated with, among others, the interpretation and the application\nof the current and future PRC laws, regulations and rules to such contractual arrangements, as the agreements under the contractual arrangements\nhave not been tested in a court of law. The PRC regulatory authorities could disallow the VIE structure at any time in the future, which\nwould likely result in a material change in our operations and/or a material change in the value of our securities, including that it\ncould cause the value of our securities to significantly decline or become worthless. For risks applicable to the VIE structure, see\n” — D. Risk Factors — Risks Related to Our Corporate Structure” beginning on page 9 of this annual report.\n\n \n\n1\n\n \n\n \n\n**Risks\nAssociated with being based in the PRC**\n\n \n\nWe\nare subject to certain legal and operational risks associated with being based in the PRC, which could result in a material change in\nour operations and/or the value of our securities, or could significantly limit or completely hinder our ability to offer or continue\nto offer securities to investors and cause the value of such securities to significantly decline or become worthless. The PRC government\nadopted a series of regulatory actions and issued statements to regulate business operations in the PRC with little advance notice, including\ncracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and\nexpanding the efforts in anti-monopoly enforcement. For example, the General Office of the Central Committee of the Communist Party of\nChina and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities\nAccording to Law, which were made available to the public on July 6, 2021. The opinions emphasized the need to strengthen the administration\nover illegal securities activities and the need to strengthen the supervision over overseas listings by Chinese companies. Such regulatory\nactions and statements could result in a material change in our operations and/or the value of our Class\nA Ordinary Shares or could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares\nand/or other securities to investors and cause the value of such securities to significantly decline or become worthless. Because these\nregulatory actions and statements are subject to evolving, it is highly uncertain what existing or new laws or regulations will be modified\nor promulgated, if any, or the potential impact such modified or new laws and regulations will have on our daily business operations\nor our ability to accept foreign investments and list on an U.S. exchange.\n\n \n\n**Cybersecurity\nReview**\n\n \n\nOn\nDecember 28, 2021, the Cyberspace Administration of China (the “CAC”), together with 12 other regulatory authorities jointly\npromulgated the amended Cybersecurity Review Measures, which became effective on February 15, 2022. The amended Cybersecurity Review\nMeasures provide that a “internet platform operator” that possesses personal information of more than one million users and\nseeks a listing in a foreign country must apply for a cybersecurity review. Further, if a critical information infrastructure operator\n(“CIIO”) purchases Internet products and services that affect or may affect national security, it should be subject to cybersecurity\nreview by the CAC. In addition, on March 22, 2024, the CAC issued the Provisions on Promoting and Standardizing Cross-Border Data Flows,\nwhich set forth the circumstances exempted from performing the security assessment or filing procedures for cross-border data transfer\nand further clarify the thresholds and scenarios for data processors to go through these procedures as stipulated under the aforementioned\nmeasures.\n\n \n\nAs of the date of this annual\nreport, neither we, our PRC subsidiaries or the VIEs has been involved in any investigations on cybersecurity review initiated by any\nPRC regulatory authority, nor has any of them received any inquiry, notice, or sanction.\n\n \n\nAs of the date of this annual\nreport, we are not subject to cybersecurity review with the CAC or national security review, or any other security assessment or filing\nprocedures for cross-border data transfer, given that our PRC subsidiaries and the VIEs are not CIIOs or internet platform operators\nthat possess personal information of more than one million users or engage in data processing activities that affect or may affect national\nsecurity.\n\n \n\n2\n\n \n\n \n\nThere\nremains uncertainty, however, as to how the amended Cybersecurity Review Measures will be interpreted or implemented and whether the\nPRC regulatory authorities may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the amended\nCybersecurity Review Measures. See “— D. Risk Factors — Risks Related to Doing Business in the PRC — Recent greater\noversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our\nbusiness and our offering.”\n\n \n\n**CSRC\nFiling Requirements**\n\n \n\nOn\nFebruary 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic\nCompanies (the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023. Under the Trial\nMeasures, a filing-based regulatory system shall be applied to “indirect overseas offerings and listings” of PRC domestic\ncompanies, which refers to securities offerings and listings in an overseas market made under the name of an offshore entity but based\non the underlying equity, assets, earnings or other similar rights of a domestic company that operates its main business domestically.\nThe Trial Measures state that, any post-listing follow-on offering by an issuer in the same overseas market, including issuance of shares,\nconvertible notes and other similar securities, shall be subject to filing requirement within three business days after the completion\nof the offering. Therefore, any of our future offering in an overseas market shall be subject to the filing requirements under the Trial\nMeasures.\n\n \n\nIf\nwe fail to obtain required approval or complete other review or filing procedures, under the Trial Measures or otherwise, for any future\noverseas securities offering, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties\non our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance\nof dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions\nthat could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects,\nas well as the trading price of the Ordinary Shares. See “— D. Risk Factors — Risks Related to Doing Business in the\nPRC — The approval or filing of the CSRC or other PRC regulatory agencies may be required to maintain our listing status or conduct\nfuture offshore securities offerings.”\n\n \n\n**Permission Required from the PRC Authorities for Our Operations**\n\n \n\nWe conduct our business through\nour PRC subsidiaries and the VIEs in China. Our operations China are governed by laws and regulations of China. As of the date of this\nannual report, our PRC subsidiaries and the VIEs have obtained all permissions and approvals to operate their respective business, including\nbusiness license, social insurance registration and health licenses. In addition, Xinzhan has completed record filing and annual reporting\nwith the Ministry of Commerce of China, or the MOFCOM, to conduct franchise business. Xinzhan has also obtained a medical device operation\npermit, expiring on August 20, 2028, despite the fact that the devices in the stores are not medical devices and that the operation does\nnot require such permit. As of the date of this annual report, we, our PRC subsidiaries and the VIEs have not been asked to obtain, or\nbeen denied by any PRC government authority for, permission by any other PRC government authority. Given the uncertainties of interpretation\nand implementation of relevant laws and regulations and the enforcement practice by the government authorities, our Chinese operating\nentities may be required to obtain additional licenses, permits, filings or approvals for their business operations in the future.\n\n \n\nIn\naddition, as described above, the PRC government has recently tightened the regulation of cybersecurity, and indicated an intent to exert\nmore oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment\nin China-based companies like us. We are required to complete the filing with the CSRC for our future overseas securities offerings under\nthe Trial Measures.\n\n \n\n3\n\n \n\n \n\nWe manage our business operations\nin a prudent manner where we determine whether a particular regulatory permission or approval is required based on opinions and guidance\nfrom our in-house and external legal counsel and relevant governmental authorities, as the case may be. As of the date of this annual\nreport, we have not received any regulatory notice requesting us to obtain a permission or approval that we have concluded is not required.\nIf our PRC subsidiaries and the VIEs (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that\nsuch permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries\nand the VIEs are required to obtain such permissions or approvals in the future, they could be subject to fines, legal sanctions, or\nan order to suspend their relevant services, which may materially and adversely affect our financial condition and results of operations\nand cause our securities to significantly decline in value or become worthless.\n\n \n\nOn\nFebruary 24, 2023, the CSRC jointly with other relevant governmental authorities, promulgated the Provisions on Strengthening the Confidentiality\nand Archives Administration of Overseas Securities Issuance and Listing by Domestic Enterprises, or the Confidentiality and Archives\nManagement Provisions, which took effect on March 31, 2023. According to the Confidentiality and Archives Management Provisions, domestic\ncompanies, whether offering and listing securities overseas directly or indirectly, must strictly abide by the applicable laws and regulations\nwhen providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities\nservices providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering\nand listing. If such documents or materials contain any state secrets or government authorities work secrets, domestic companies must\nobtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative\ndepartment at the same level with the approving governmental authority. Furthermore, the Confidentiality and Archives Management Provisions\nprovide that securities companies and securities service providers shall fulfill the applicable legal procedures when providing overseas\nregulatory institutions and other relevant institutions and individuals with documents or materials containing any state secrets or government\nauthorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest. Since\nthe Confidentiality and Archives Management Provisions were promulgated recently, substantial uncertainties still exist with respect\nto the interpretation and implementation of such provisions and how they will affect us.\n\n \n\nAs\nthere are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that\nwe will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities and we may become\nsubject to more stringent requirements with respect to matters such as cross-border investigation, data privacy, and enforcement of legal\nclaims.\n\n \n\n**Implication\nof the Holding Foreign Companies Accountable Act**\n\n \n\nTrading\nin our securities on U.S. markets, including Nasdaq, may be prohibited under the Holding Foreign Companies Accountable Act (“HFCAA”),\nas amended by the Consolidated Appropriations Act, 2023, if the Public Company Accounting Oversight Board (“PCAOB”) determines\nthat it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB issued\nthe HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely\nregistered public accounting firms headquartered in mainland China and Hong Kong, including our auditor. The inability of the PCAOB to\nconduct inspections in the past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced\nthat it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland\nChina and Hong Kong in 2022. The PCAOB vacated its previous 2021 determinations accordingly.\n\n \n\n4\n\n \n\n \n\nOn\nDecember 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law, amending the HFCAA in two significant ways: (i) reducing\nthe consecutive non-inspection years required to trigger HFCAA prohibitions from three to two, and (ii) allowing any foreign jurisdiction\nto be the basis for the PCAOB’s incomplete access to inspect or investigate a company’s auditor. Initially, the HFCAA applied\nonly if the PCAOB’s inability to inspect or investigate resulted from a stance taken by an authority in the foreign jurisdiction\nwhere the relevant public accounting firm operated. Following the Consolidated Appropriations Act, 2023, the HFCAA now also applies if\nthe PCAOB’s inability to inspect or investigate the relevant accounting firm arises from a stance taken by an authority in any\nforeign jurisdiction, irrespective of the location of the accounting firm. However, whether the PCAOB will continue to conduct inspections\nand investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong\nKong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken\nby authorities of the PRC. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting\nfirms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections\nin early 2023 and beyond. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability\nto inspect and investigate completely accounting firms based in the mainland China and Hong Kong, among other jurisdictions. The possibility\nof being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our\nsecurities. If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered\nin mainland China and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a “Commission-Identified\nIssuer” under the HFCAA following the filing of the annual report for the relevant fiscal year, and if we were so identified for\ntwo consecutive years, trading in our securities on U.S. markets would be prohibited, and Nasdaq may determine to delist our securities.\nFor the details of the risks associated with the enactment of the HFCAA, see “— D. Risk Factors — Risks Related to\nDoing Business in the PRC — The continued U.S. regulatory and legislative focus, including the enactment of the HFCAA, may adversely\naffect the market price of our Ordinary Shares and may eventually require us to delist our securities from the U.S. markets.”\n\n \n\n**Transfers\nof Cash through Our Organization**\n\n \n\nWe are a holding company with\nno business operations of our own and conduct our operations through our PRC subsidiaries and the VIEs. As a result, our ability to pay\ndividends and to service any debt we may incur overseas largely depends upon dividends paid by our subsidiaries and the residual interests\nfrom the VIEs under the contractual arrangements. Unlike typical VIE structures, these VIEs do not pay dividends or service fees to us;\ninstead, we directly manage their operations, bear their risks, and are entitled to their residual interests. See “Item 4. Information\non the Company — A. History and Development of the Company” for more information. If our PRC subsidiaries incur debt on their\nown behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.\n\n \n\nWe are permitted under the Cayman\nIslands laws to provide funding to our subsidiary in Hong Kong through loans or capital contributions without restrictions on the amount\nof the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Our Hong Kong subsidiary\nis also permitted under the laws of Hong Kong to provide funding to us through dividend distribution without restrictions on the amount\nof the funds.\n\n \n\nOur\nPRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the\nAccounting Standards for Business Enterprise as promulgated by the Ministry of Finance of the PRC, or the PRC GAAP. Pursuant to the laws\nand regulations applicable to China’s foreign-invested enterprises (“FIEs”), our subsidiaries that are FIEs in the\nPRC have to make appropriation from their after-tax profit, as determined under PRC GAAP, to reserve funds including (i) general reserve\nfund, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general reserve fund must be at\nleast 10% of the after-tax profits calculated in accordance with the PRC GAAP. Appropriation is not required if the reserve fund has\nreached 50% of the registered capital of our subsidiaries. Appropriation to the other two reserve funds is at our subsidiaries’\ndiscretion. See “Item 4. Information on the Company — B. Business Overview — Regulations — Regulations on Dividend\nDistribution” for a detailed discussion of the PRC legal restrictions on dividends and our ability to transfer cash within our\ngroup.\n\n \n\n5\n\n \n\n \n\nIn August 2025, Park Ha Cayman\ntransferred US$1.4 million to WFOE as investments. Other than that, for the fiscal year ended October 31, 2025 and up to the date of\nthis annual report, no cash or assets were transferred among Park Ha Cayman, its subsidiaries, and consolidated VIEs, or to investors.\nIn addition, there have not been any dividends or distributions made by any subsidiaries to Park Ha Cayman for the fiscal year ended\nOctober 31, 2025 and up to the date of this annual report. Park Ha Cayman has not distributed dividends to its shareholders enterprise\nfor PRC tax purposes for the fiscal year ended October 31, 2025 and up to the date of this annual report. The cash transfer among the\nholding company and its subsidiaries is intended to be made through dividends, capital contributions or intercompany loans between the\nholding company and its subsidiaries, if needed in the future. Transferring cash through the VIEs is subject to risks due to the uncertainty\nof the interpretation and application of the PRC laws and regulations, including but not limited to regulatory review of oversea listing\nof PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangement with the VIEs. See\n” — D. Risk Factors — Risks Related to Doing Business in the PRC — Governmental regulations on currency conversion\nmay limit our ability to utilize our revenues effectively and affect the value of your investment.”\n\n \n\n**A.\n[Reserved]**\n\n \n\n**B.\nCapitalization and Indebtedness**\n\n \n\nNot\napplicable.\n\n \n\n**C.\nReasons for the Offer and Use of Proceeds**\n\n \n\nNot\napplicable.\n\n \n\n**D.\nRisk Factors**\n\n \n\nBelow\nplease find a summary of the principal risks we face, organized under relevant headings.\n\n \n\n**Risks\nRelated to Doing Business in the PRC**\n\n \n\n \n●\nTo the extent cash or assets\nin the business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations\nor for other uses outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the\nability of us or our subsidiaries by the PRC government to transfer cash or assets;\n\n \n \n \n\n \n●\nUncertainties with respect\nto the PRC legal system, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China\ncan change quickly with little advance notice, which could materially adversely affect our business;\n\n \n \n \n\n \n●\nThe PRC government may\nintervene or influence our operations at any time and with no advance notice, or may exert more oversight and control over our operations,\nand offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our\noperations and/or significantly limit or completely hinder our ability to offer or continue to offer securities to investors and\ncause the value of such securities to significantly decline or become worthless;\n\n \n \n \n\n \n●\nThe approval or filing\nof the CSRC or other PRC regulatory agencies may be required to maintain our listing status or conduct future offshore securities\nofferings;\n\n \n \n \n\n \n●\nThe continued U.S. regulatory\nand legislative focus, including the enactment of the HFCAA, may adversely affect the market price of our Ordinary Shares and may\neventually require us to delist our securities from the U.S. markets;\n\n \n \n \n\n \n●\nRecent greater oversight\nby the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business\nand our offering;\n\n \n\n6\n\n \n\n \n\n \n●\nWe may rely on dividends\nand other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation\non the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct\nour business;\n\n \n \n \n\n \n●\nYou may experience difficulties\nin effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named\nin this annual report based on foreign laws;\n\n \n \n \n\n \n●\nIt may be difficult for\noverseas regulators to conduct investigations or collect evidence within China;\n\n \n \n \n\n \n●\nChanges in international\ntrade policies, trade disputes, barriers to trade, or the emergence of a trade war may influence growth in China;\n\n \n \n \n\n \n●\nFluctuations in currency\nexchange rates could have a material and adverse effect on the value of your investment;\n\n \n \n \n\n \n●\nGovernmental regulations\non currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment;\n\n \n \n \n\n \n●\nChanges in PRC political,\neconomic and governmental policies may have an adverse impact on our business;\n\n \n \n \n\n \n●\nFailure to comply with\nPRC laws and regulations related to labor and employee benefits may subject us to penalties or additional cost;\n\n \n \n \n\n \n●\nThe PRC Labor Contract\nLaw, increased labor costs or other factors affecting our labor force in the PRC may adversely affect our business and results of\noperations;\n\n \n \n \n\n \n●\nPRC regulation of loans\nto, and direct investment in, PRC entities by offshore holding companies may delay or prevent us from using the proceeds from any\nfuture financings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely\naffect our liquidity and our ability to fund and expand our business;\n\n \n \n \n\n \n●\nCertain PRC regulations\nmay make it more difficult for us to pursue growth through acquisitions;\n\n \n \n \n\n \n●\nWe may be classified as\na PRC resident enterprise for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our\nshareholders; and\n\n \n \n \n\n \n●\nPRC regulations relating\nto offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to change their registered capital\nor distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC laws.\n\n \n\n**Risks\nRelated to Our Business and Industry**\n\n \n\nRisks\nand uncertainties related to our business and industry, include but are not limited to the following:\n\n \n\n \n●\nThe PRC subsidiaries operate\nin a dynamic industry and have a limited operating history. Our historical results of operations and financial performance may not\nbe indicative of future performance;\n\n \n \n \n\n \n●\nThe beauty industry is\nhighly competitive. If we are unable to compete effectively, we may lose our market share and our business, results of operations\nand financial condition may be materially and adversely affected;\n\n \n\n7\n\n \n\n \n\n \n●\nOur success is dependent\non the continued popularity of our products and our ability to anticipate and respond to changes in industry trends and consumer\npreferences and behavior in a timely manner;\n\n \n \n \n\n \n●\nOur business depends, in\npart, on the quality, effectiveness and safety of our products;\n\n \n \n \n\n \n●\nIf we are unable to provide\nsuperior customer experiences, our business and reputation may be materially and adversely affected;\n\n \n \n \n\n \n●\nWe rely on a limited number\nof suppliers to provide us with the raw materials and ingredients we use for the products. We may not be able to obtain such supplies\nat competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition\nand results of operations;\n\n \n \n \n\n \n●\nWe derive a significant\nportion of our revenue from a few major customers. Any significant decrease in the demand from our largest customers for our products\nmay materially and adversely affect our financial conditions and results of operations; and\n\n \n \n \n\n \n●\nOur success depends on\nthe implementation of the franchise business model. Our growth through franchising may not occur as rapidly as we anticipate.\n\n \n\n**Risks\nRelated to the Our Ordinary Shares**\n\n \n\nRisks\nand uncertainties related to our business and industry, include but are not limited to the following:\n\n \n\n \n●\nOur\nChairperson of the Board of Directors and Chief Executive Officer, Ms. Xiaoqiu Zhang, has a significant influence over our Company\nand future corporate decisions. Her interests may not always be aligned with those of other shareholders;\n\n \n \n \n\n \n●\nWe\nare an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements;\n\n \n \n \n\n \n●\nAs\na company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance\nmatters that differ significantly from the Nasdaq Listing Rules;\n\n \n \n \n\n \n●\nWe\nare a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions\napplicable to U.S. domestic public companies;\n\n \n \n \n\n \n●\nThe\ntrading price of the Ordinary Shares is likely to be volatile, which could result in substantial losses to investors; and\n\n \n \n \n\n \n●\nIf\nwe fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our\nfinancial results or prevent fraud.\n\n \n\n**Risks\nRelated to Our Corporate Structure**\n\n** **\n\n \n●\nOur\nbusiness is subject to extensive regulation in the PRC. If the PRC government finds that the contractual arrangement does not comply\nwith applicable PRC laws and regulations, we could be subject to severe penalties.\n\n \n \n \n\n \n●\nSubstantial\nuncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the\nviability of the current corporate structure, corporate governance and business operations of us and the VIEs.\n\n \n \n \n\n \n●\nAny\nfailure by the VIEs or its registered operators to perform their obligations under our contractual arrangements would have an adverse\neffect on our business and results of operations.\n\n \n \n \n\n \n●\nWe\nrely on contractual arrangements with the VIEs and their registered operators for our operations in the PRC, which may not be as\neffective in providing control as direct ownership.\n\n \n\n8\n\n \n\n \n\n**Risks\nRelated to Doing Business in the PRC**\n\n \n\n**To\nthe extent cash or assets in the business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available\nto fund operations or for other uses outside of the PRC or Hong Kong due to the imposition of restrictions and limitations on the ability\nof us or our subsidiaries by the PRC government to transfer cash or assets.**\n\n \n\nThe\ntransfer of funds and assets between the Company and its subsidiaries is subject to restrictions. The PRC government regulates the conversion\nof the RMB into foreign currencies and the remittance of currencies out of the PRC. In addition, the PRC Enterprise Income Tax Law, or\nthe EIT Law, and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by\nPRC enterprises to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and\nthe governments of other countries or regions where the non-PRC resident enterprises are tax resident. As of the date of this annual\nreport, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out\nof Hong Kong (including funds from Hong Kong to the PRC), unless the transfer of funds involves money laundering and criminal activities.\nHowever, there is no guarantee that the Hong Kong government will not promulgate new laws or regulations that may impose such restrictions\nin the future.\n\n \n\nAs\na result of the above, to the extent cash or assets in the business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the PRC\ngovernment may, in the future, impose restrictions or limitations on our ability to transfer money into and out of Hong Kong, to distribute\nearnings and pay dividends to and from and among our subsidiaries. Such restrictions and limitations, if imposed in the future, may delay\nor hinder the expansion of our business and may affect our ability to receive funds from our subsidiary in Hong Kong.\n\n \n\n**Uncertainties\nwith respect to the PRC legal system, including risks and uncertainties regarding the enforcement of laws and that rules and regulations\nin China can change quickly with little advance notice, which could materially adversely affect our business.**\n\n \n\nOur PRC subsidiaries and the\nVIEs are incorporated under and governed by the laws of the PRC. The overall effect of legislation over the past three decades has significantly\nenhanced the protections afforded to various forms of foreign investments in China. In particular, the PRC legal system is a civil law\nsystem based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. In 1979, the\nPRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, such as foreign\ninvestment, corporate organization and governance, commerce, taxation and trade. The PRC legal system continues to evolve rapidly, the\ninterpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules still\nevolving, which may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the\nability of a China-based company, such as our Company, to obtain or maintain permits or licenses required to conduct business in China.\nIn the absence of required permits or licenses, governmental authorities could impose material sanctions or penalties on us. In addition,\nsome regulatory requirements issued by certain PRC government authorities may not be consistently applied by other PRC government authorities\n(including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances\nimpossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy\neither by law or contract.\n\n \n\nMoreover,\nthe PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may\nbe more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more\ndeveloped legal systems. We cannot predict the effects of future developments in the PRC legal system on our business operations, including\nthe promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit\nthe legal protections available to us and our investors, including you.\n\n \n\n9\n\n \n\n \n\n**The\nPRC government may intervene or influence our operations at any time and with no advance notice, or may exert more oversight and control\nover our operations, and offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material\nchange in our operations and/or significantly limit or completely hinder our ability to offer or continue to offer securities to investors\nand cause the value of such securities to significantly decline or become worthless.**\n\n \n\nWe\nconduct all of our business in China through our PRC subsidiaries and the VIEs. Accordingly, our business, results of operations and\nfinancial condition may be influenced to a significant degree by the PRC political, economic and social conditions. The PRC government\nmay intervene or influence the operations of our PRC subsidiaries and the VIEs at any time and with no advance notice, which could result\nin a material change in these entities’ operations and/or the value of our securities.\n\n \n\nThe Chinese government has\nexercised and continues to exercise substantial control over the Chinese economy through regulation and state ownership. The ability\nof our PRC subsidiaries and the VIEs to operate in China may be harmed by changes in its laws and regulations, including those relating\nto taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions\nmay impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts\non our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including\nany decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local\nvariations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular\nregions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties.\n\n \n\nAs such, the business operations\nof our PRC subsidiaries and the VIEs may be subject to various government and regulatory interference in the provinces in which we operate.\nOur PRC subsidiaries and the VIEs could be subject to regulation by various political and regulatory entities, including various local\nand municipal agencies and government sub-divisions. We may incur increased costs necessary to comply with existing and newly adopted\nlaws and regulations or penalties for any failure to comply. In the event that our PRC subsidiaries or the VIEs are not able to substantially\ncomply with any existing or newly adopted laws and regulations, its business operations may be materially adversely affected and the\nvalue of our Class A Ordinary Shares may significantly decrease.\n\n \n\nFurthermore, the PRC government\nmay strengthen oversight and control over offerings and/or listings that are conducted overseas and/or foreign investment in China-based\nissuers like us. Such actions taken by the PRC government authorities may intervene or influence operations of our PRC subsidiaries and\nthe VIEs at any time, which are beyond their control. Therefore, any such action may adversely affect the operations of our PRC subsidiaries\nand the VIEs and result in material change in these entities’ operations and/or the value of our securities. In addition, the PRC\ngovernment has recently indicated an intent to exert more oversight over offerings that are conducted overseas and/or foreign investment\nin China-based issuers. Any such action could significantly limit or completely hinder our ability to offer or continue to offer securities\nto investors and cause the value of such securities to significantly decline or become worthless. \n\n \n\n**The\napproval or filing of the CSRC or other PRC regulatory agencies may be required to maintain our listing status or conduct future offshore\nsecurities offerings.**\n\n \n\nOn\nFebruary 17, 2023, the CSRC promulgated the Trial Measures, which came into effect on March 31, 2023. Under the Trial Measures, a filing-based\nregulatory system shall be applied to “indirect overseas offerings and listings” of PRC domestic companies. Pursuant to the\nTrial Measures, if the issuer meets either of the following conditions, its securities offerings and listing will be deemed as an “indirect\noverseas offering and listing by a PRC domestic company” and is therefore subject to the filing requirements: (i) any of the revenues,\nprofits, total assets or net assets of the issuer’s Chinese operating entities in the most recent financial year accounts for more\nthan 50% of the corresponding data in the issuer’s audited consolidated financial statements for the same period; and (ii) the\nkey link of its business operations are conducted in mainland China or its principal place of business is located in the mainland China,\nor the majority of senior management in charge of business operations are Chinese citizens or have domicile in the PRC. The Trial Measures\nstate that, any post-listing follow-on offering by an issuer in the same overseas market, including issuance of shares, convertible notes\nand other similar securities, shall be subject to filing requirement within three business days after the completion of the offering.\nTherefore, any of our future offerings in an overseas market will be subject to the filing requirements under the Trial Measures. If\nwe fail to complete the filing procedures with the CSRC for any future overseas securities offering, we may face sanctions by the CSRC,\nwhich may include fines and penalties, limitations on our operating privileges in China, restrictions on or prohibition of the payments\nor remittance of dividends by our subsidiaries in China, restrictions on or delays to our future overseas securities offerings, or other\nactions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects,\nas well as the trading price of the Ordinary Shares.\n\n \n\n10\n\n \n\n \n\nWe\ncannot guarantee that new rules or regulations promulgated in the future will not impose any additional requirement on us. If there are\nany other approvals, filings and/or other administration procedures to be obtained from or completed with any other PRC regulatory authorities\nas required by any new laws and regulations for any of our future proposed offering of securities overseas, we cannot assure you that\nwe can obtain the required approval or complete the required filings or other regulatory procedures in a timely manner, or at all. Any\nfailure to obtain the relevant approvals or complete the filings and other relevant regulatory procedures may subject us to regulatory\nactions or other sanctions from such PRC regulatory authorities, which may have a material adverse effect on our business, financial\ncondition or results of operations.\n\n \n\n**The\ncontinued U.S. regulatory and legislative focus, including the enactment of the HFCAA, may adversely affect the market price of our Ordinary\nShares and may eventually require us to delist our securities from the U.S. markets.**\n\n \n\nTrading\nin our securities on U.S. markets, including the Nasdaq, may be prohibited under the HFCAA if the PCAOB determines that it is unable\nto inspect or investigate completely our auditor for two consecutive years.\n\n \n\nOn\nDecember 16, 2021, the PCAOB issued a report to notify the SEC of its determination that it was unable to inspect or investigate completely\nthe registered public accounting firms headquartered in mainland China and Hong Kong.\n\n \n\nOn\nAugust 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and MOF, which established a specific, accountable framework\nto make possible complete inspections and investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required\nunder U.S. law. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland\nChina and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting\nfirms. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong,\namong other jurisdictions.\n\n \n\nOur\nauditor, WWC, P.C., has been inspected by the PCAOB on a regular basis, with the last inspection completed in 2023, and it is not subject\nto the determinations announced by the PCAOB on December 16, 2021. However, whether the PCAOB will continue to conduct inspections and\ninvestigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong\nis subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken\nby authorities of the PRC and the PCAOB. The PCAOB is expected to continue to demand complete access to inspections and investigations\nagainst accounting firms headquartered in mainland China and Hong Kong in the future. The PCAOB is required under the HFCAA to make its\ndetermination on an annual basis with regard to its ability to inspect and investigate completely accounting firms based in mainland\nChina and Hong Kong. The possibility of being a “Commission-Identified Issuer” and the risk of delisting could continue to\nadversely affect the trading price of our securities. If the PCAOB determines in the future that it no longer has full access to inspect\nand investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firms to conduct\naudit work, we would be identified as a “Commission-Identified Issuer” under the HFCAA following the filing of the annual\nreport for the relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets\nwould be prohibited.\n\n \n\n11\n\n \n\n \n\n**Recent\ngreater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact\nour business and our offering.**\n\n \n\nOn\nJune 10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security\nLaw, which came into effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and\nindividuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance\nof data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate\nrights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used.\nThe PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security\nand imposes export restrictions on certain data and information.\n\n \n\nOn\nAugust 20, 2021, the SCNPC promulgated the PRC Personal Information Protection Law, or the PIPL, which came into effect in November 2021.\nIn addition to other rules and principles of personal information processing, the PIPL specifically provides rules for processing sensitive\npersonal information. Sensitive personal information refers to personal information that, once leaked or illegally used, could easily\nlead to the infringement of human dignity or harm to the personal or property safety of an individual, including biometric recognition,\nreligious belief, specific identity, medical and health, financial account, personal whereabouts and other information of an individual,\nas well as any personal information of a minor under the age of 14. Only where there is a specific purpose and sufficient necessity,\nand under circumstances where strict protection measures are taken, may personal information processors process sensitive personal information.\nA personal information processor shall inform the individual of the necessity of processing such sensitive personal information and the\nimpact thereof on the individual’s rights and interests. As uncertainties remain regarding the interpretation and implementation\nof the PIPL, we cannot assure you that we will comply with the PIPL in all respects and regulatory authorities may order us to rectify.\n\n \n\nOn\nNovember 14, 2021, the CAC released the Draft Network Data Security Regulations for public commenting until December 13, 2021, which\nprovides that data processing operators engaging in data processing activities that affect or may affect national security must be subject\nto network data security review by the CAC. According to the Draft Network Data Security Regulations, data processing operators who possess\npersonal data of at least one million users or collect data that affects or may affect national security must be subject to network data\nsecurity review by the CAC.\n\n \n\n12\n\n \n\n \n\nOn\nDecember 28, 2021, together with 12 other regulatory authorities jointly promulgated the amended Cybersecurity Review Measures, which\ncame into effect on February 15, 2022. The amended Cybersecurity Review Measures provide that, in addition to CIIOs that intend to purchase\ninternet products and services, internet platform operators engaging in data processing activities that affect or may affect national\nsecurity must be subject to cybersecurity review by the CAC. According to the amended Cybersecurity Review Measures, a cybersecurity\nreview assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing.\nThe amended Cybersecurity Review Measures require that an internet platform operator who possesses the personal information of at least\none million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.\n\n \n\nOn\nSeptember 28, 2023, the CAC enacted the Draft Data Export Regulations that proposed significant changes to the cross-border data transfer\nregime. This update to China’s cybersecurity and data protection regulatory landscape try to relax some of the obligations, such\nas exempting personal information handlers from certain safeguarding measures if they handle data for less than 10,000 individuals per\nyear. Basically, this would reduce the regulatory burden on smaller enterprises who deal with less sensitive data.\n\n \n\nIn\nDecember 2023, the CAC released the Cybersecurity Incident Reporting Draft Measures. These are measures that are aimed at standardizing\nhow cybersecurity incidents are reported, showing China’s broader effects to enhance data security and ensure timely responses\nto cyber threats.\n\n \n\nFurthermore,\non September 24, 2024, the State Council promulgated the Regulations on the Network Data Security Management (the “Network Data\nRegulation”), which became effective on January 1, 2025. The Network Data Regulation restates and further specifies the legal requirements\nfor personal information, important data, cross-border data transfer, network platform services, and data security. Among others, if\nthe network data processing activities have or may have impacts on national security, such activities shall be subject to national security\nreview in accordance with relevant laws and regulations.\n\n \n\nAs of the date of this annual\nreport, our PRC subsidiaries and the VIEs have not been subject to any material claims, investigations or legal proceedings settled,\npending or threatened for any material noncompliance with or violations of applicable PRC laws and regulations with respect to privacy\nand personal data protection and have not received any cybersecurity-related warning or sanction from the PRC regulatory authorities,\nor any notice from relevant authorities requiring us to file for a cybersecurity review. We believe our PRC subsidiaries and the VIEs\nare not subject to the cybersecurity review by the CAC since our they are not CIIOs or internet platform operators that possess personal\ninformation of more than one million users or engage in data processing activities that affect or may affect national security. However,\nthe relevant PRC regulatory authorities may take a view that is contrary to or otherwise different from the opinion stated above.\n\n \n\nAs\nuncertainties remain regarding the interpretation and implementation of these laws and regulations, we cannot assure you that we will\ncomply with such regulations in all respects, and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory\nauthorities. We may also become subject to fines and/or other sanctions which may have material adverse effect on our business, operations\nand financial condition.\n\n \n\n13\n\n \n\n \n\n**We\nmay rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may\nhave, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our\nability to conduct our business.**\n\n \n\nWe\nare a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC subsidiaries\nfor our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders\nand services of any debt we may incur. Our PRC subsidiaries’ ability to distribute dividends is based upon its distributable earnings.\nCurrent PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits,\nif any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is required\nto set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its\nregistered capital. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in\nthe future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.\n\n \n\nTo\naddress the persistent capital outflow and the RMB’s depreciation against the U.S. dollar, the People’s Bank of China and\nthe State Administration of Foreign Exchange, or the SAFE, have implemented a series of capital regulation measures since 2016. For instance,\nthe Circular on Further Promoting the Reform of Foreign Exchange Management and Improving Authenticity and Compliance Review issued on\nJanuary 18, 2017, provides that the banks shall, when dealing with dividend remittance transactions from domestic enterprise to its offshore\nshareholders of more than US$50,000, review the relevant board resolutions (or resolutions of partners), original tax filing form and\naudited financial statements of such domestic enterprise based on the principle of genuine transaction. The PRC government may strengthen\nits capital controls from time to time and our PRC subsidiaries’ dividends and other distributions may be subject to tightened\nscrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could\nmaterially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends,\nor otherwise fund and conduct our business.\n\n \n\nIn\naddition, the EIT Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable\nby PRC enterprises to non-PRC resident enterprises unless reduced under treaties or arrangements between the PRC central government and\ngovernments of other countries or regions where the non-PRC resident enterprises are tax resident.\n\n \n\n**You\nmay experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us\nor our management named in this annual report based on foreign laws.**\n\n \n\nAll\nof our business and operations are located in the PRC. In addition, all of our directors and executive officers reside within China and\nare PRC nationals. All of their assets are located outside of the United States. As a result, it may be difficult for investors to effect\nservice of process upon us or those persons inside China.\n\n \n\n14\n\n \n\n \n\nThe\nrecognition and enforcement of foreign judgments are basically provided for under the PRC Civil Procedures Law. PRC courts may recognize\nand enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law and other applicable laws and regulations\nbased either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions.\nChina does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States,\nthe Cayman Islands or many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any\nof these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.\nIn addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment if it is decided as having\nviolated the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether\nand on what basis a PRC court would enforce a judgment rendered by a court in the United States or the Cayman Islands.\n\n \n\nThe\nSEC, U.S. Department of Justice and other U.S. authorities often have substantial difficulties in bringing and enforcing actions against\nnon-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China. Legal\nand other obstacles to obtaining information needed for investigations or litigation or to obtaining access to funds outside the United\nStates, lack of support from local authorities, and other various factors make it difficult for the U.S. authorities to pursue actions\nagainst non-U.S. companies and individuals, who may have engaged in fraud or other wrongdoings. Additionally, public shareholders investing\nin the Ordinary Shares have limited rights and few practical remedies in emerging markets where we operate, as shareholder claims that\nare common in the United States, including class actions under securities law and fraud claims, generally are difficult or impossible\nto pursue as a matter of law or practicality in many emerging markets, including China. As a result of all of the above, you may have\nmore difficulties in protecting your interests in your emerging market investments.\n\n \n\n**It\nmay be difficult for overseas regulators to conduct investigations or collect evidence within China.**\n\n \n\nShareholder\nclaims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue\nas a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information\nneeded for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities\nin China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to\nimplement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the\nUnities States have not been efficient in the absence of a mutual and practical cooperation mechanism. According to Article 177 of the\nPRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation\nor evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation of rules under\nArticle 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence\ncollection activities within China may further increase difficulties faced by you in protecting your interests.\n\n \n\n**Fluctuations\nin currency exchange rates could have a material and adverse effect on the value of your investment.**\n\n \n\nOur\nrevenue and expenses have been and are expected to continue to be primarily denominated in RMB, and we are exposed to the risks associated\nwith the fluctuation in the currency exchange rate of RMB. Should RMB appreciate against other currencies, the value of the proceeds\nfrom any future financings, which are to be converted from US dollar or other currencies into RMB, would be reduced and might accordingly\nhinder our business development due to the lessened amount of funds raised. On the other hand, in the event of the devaluation of RMB,\nthe dividend payments of our Company, which are to be paid in US dollars after the conversion of the distributable profit denominated\nin RMB, would be reduced. Hence, substantial fluctuation in the currency exchange rate of RMB may have a material adverse effect on our\nbusiness, operations and financial position and the value of your investment in the ordinary shares.\n\n \n\n15\n\n \n\n \n\n**Governmental\nregulations on currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.**\n\n \n\nThe PRC government imposes\nregulations on the convertibility of the renminbi into foreign currencies and, in certain cases, the remittance of currency out of China.\nWe receive all of our revenues in RMB. Under our current corporate structure, our Cayman Islands holding company primarily relies on\ndividend payments from our PRC subsidiaries and residual interests from the VIEs to fund any cash and financing requirements we may have.\nUnder existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments\nand trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the SAFE by\ncomplying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of the\nSAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our Company. However, approval\nfrom or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted\nout of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain\nthe SAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective debt in a currency other\nthan renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than RMB.\nAccess to foreign currencies for current account transactions may be further restricted in the future as the applicable laws, regulations\nand policies evolve. If the foreign exchange regulation system prevents us from obtaining sufficient foreign currencies to satisfy our\nforeign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.\n\n \n\n**Changes\nin PRC political, economic and governmental policies may have an adverse impact on our business.**\n\n \n\nWe\nconduct all of our operations in China and all of our revenue is derived from our operations in China. Accordingly, our results of operations\nand prospects are, to a significant degree, subject to economic, political and legal developments in China. The economy of China differs\nfrom the economies of most developed countries in many respects, including its level of development, its growth rate and its control\nover foreign exchange. In addition, the PRC government continues to play a significant role in regulating industrial development. It\nalso has significant influence over China’s economic growth through the allocation of resources, controlling payment of foreign\ncurrency-denominated obligations, setting monetary policies, restricting the inflow and outflow of foreign capital and providing preferential\ntreatment to particular industries or companies. The PRC government also has significant authority to exert influence on the ability\nof a China-based company, such as our company, to conduct its business.\n\n \n\nThe\nglobal macroeconomic environment faces significant challenges in the near-term future. For example, there is considerable uncertainty\nabout the short and long-term economic impact of the monetary and fiscal policies adopted by the central banks and government authorities\nof some of the world’s leading economies, including but not limited to the United States and China. There are also material concerns\nabout the current and future relationship between the United States and China. Deterioration in political conditions and abrupt changes\nin Sino-U.S. relations are difficult to predict and could adversely affect China’s overall economic and market conditions and consequently\nour business, operating results and financial condition. Moreover, any ongoing controversies between the United States and China, whether\nor not related to our business, could cause investors to be unwilling to hold or buy the Ordinary Shares and consequently cause the trading\nprice of the Ordinary Shares to decline. The various economic and policy measures enacted by the PRC government to forestall economic\ndownturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions\nin China, policies of the PRC government or laws and regulations in China could have a material adverse effect on the overall economic\ngrowth of China and, in turn, our business.\n\n \n\n**Failure\nto comply with PRC laws and regulations related to labor and employee benefits may subject us to penalties or additional cost.**\n\n \n\nCompanies\noperating in China are required to comply with various laws and regulations related to labor and employment benefits. For example, companies\nare required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing provident\nfunds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries,\nincluding bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations\nwhere our employees are based. The requirement of employee benefit plans has not been implemented consistently by the local governments\nin China given the different levels of economic development in different locations. Apart from that, if a company intends to adopt flexible\nworking hour arrangement and comprehensive working hour scheme, it shall fulfill the requirements in relevant regulations, and make filings\nwith labor authorities, or the company will be subject to penalties and may be required to pay extra fees to its employees.\n\n \n\nWe\ncannot assure you that we will be able to comply with all labor-related law and regulations, including those relating to obligations\nto make social insurance payments, contribute to the housing provident funds, as well as make all filing for comprehensive working hour\nscheme. Our failure to make contributions to various employee benefit plans and in complying with applicable PRC labor-related laws may\nsubject us to fines, penalties, government investigations or labor disputes and we could be required to make up the contributions for\nthese plans as well as to pay late fees and fines, which may adversely affect our financial condition and results of operations.\n\n \n\n16\n\n \n\n \n\n**The\nPRC Labor Contract Law, increased labor costs or other factors affecting our labor force in the PRC may adversely affect our business\nand results of operations.**\n\n \n\nThe currently effective\nPRC Labor Law was published on July 5, 1994 and latest amended on December 29, 2018. The PRC Labor Law has sets forth restrictions\nand increases the costs involved with dismissing employees and established the minimum wage guarantee system. All of our PRC subsidiaries\nand the VIEs’ workforce is employed in China where the average labor cost has been steadily increasing over the past years as a\nresult of inflation, government-mandated wage increases and other changes in labor laws and local economics. Further changes in the labor\nlaws, rules and regulations may be promulgated by the PRC government in the future and our PRC subsidiaries and the VIEs’ operations\nmay be materially and adversely affected if such laws, rules or regulations impose additional burden on the employers. The labor cost\nwill continue to increase in the future which is in line with the economic growth in China. Competition for employees would require us\nand the VIEs to pay higher wages, which would result in higher labor costs.\n\n \n\n**PRC\nregulation of loans to, and direct investment in, PRC entities by offshore holding companies may delay or prevent us from using the proceeds\nfrom any future financings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely\naffect our liquidity and our ability to fund and expand our business.**\n\n \n\nAccording\nto the Guidelines on Foreign Exchange Business under Capital Account (2024 Edition) issued by the SAFE, which came into effect on May\n6, 2024, as well as other regulatory principles, the funds raised by domestic companies through overseas offerings should be repatriated\nto China in a timely manner, either in RMB or in foreign currency. Therefore, we have to comply with these requirements in connection\nwith any future offering and PRC residents who are or become our shareholders or beneficial owners would also have to comply with these\nrequirements.\n\n \n\nWe\nmay make loans to our PRC subsidiaries subject to the approval from governmental authorities and limitation of amount, or we may make\nadditional capital contributions to our PRC subsidiaries in China. Any loans to our PRC subsidiaries in China, which are treated as FIEs\nunder PRC laws, are subject to PRC regulations and foreign exchange loan registrations. For example, any loans to our PRC subsidiaries,\nwhich are FIEs, cannot exceed a statutory limit, and shall be filed with the SAFE or its local counterparts through the online filing\nsystem of SAFE after the loan agreement is signed and at least three business days before the borrower withdraws any amount from the\nforeign loan. Furthermore, if we provide our PRC subsidiaries with capital contributions, such PRC subsidiaries are required to apply\nfor registrations with the State Administration for Market Regulation, or the SAMR or its local branches, submit a change report to the\nMOFCOM or its local counterpart through the online enterprise registration system, and complete the exchange registration with qualified\nbanks.\n\n \n\nIn\nlight of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,\nwe cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals\non a timely basis, if at all, with respect to future loans to our PRC subsidiaries or future capital contributions by us to our wholly\nforeign-owned subsidiaries in China. As a result, uncertainties exist as to our ability to provide prompt financial support to our PRC\nsubsidiaries when needed. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect\nto receive from any future offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially\nand adversely affect our liquidity and our ability to fund and expand our business.\n\n \n\n17\n\n \n\n \n\n**Certain\nPRC regulations may make it more difficult for us to pursue growth through acquisitions.**\n\n \n\nThe\nRegulations on Mergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, established specific procedures and requirements\nfor merger and acquisition activities by foreign investors. Such regulation requires, among other things, that the MOFCOM be notified\nin advance of any change of control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important\nindustry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii)\nsuch transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.\nMoreover, the Anti-Monopoly Law promulgated by the SCNPC, which became effective in 2008 and last amended in 2022 requires that transactions\nwhich are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the relevant anti-monopoly\nauthority before they can be completed. We may pursue potential strategic acquisitions that are complementary to our business and operations.\nComplying with the requirements of these regulations to complete such transactions could be costly, and any required approval processes,\nincluding obtaining approval or clearance from the competent governmental authority, may delay or inhibit our ability to complete such\ntransactions, which could affect our ability to expand our business or maintain our market share.\n\n \n\n**We\nmay be classified as a PRC resident enterprise for PRC enterprise income tax purposes, which could result in unfavorable tax consequences\nto us and our shareholders.**\n\n \n\nUnder\nthe EIT Law and its implementation rules, an enterprise established outside of the PRC with its “de facto management body”\nwithin the PRC is considered a “resident enterprise” and will be subject to enterprise income tax on its global income at\nthe rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and\nsubstantial control and overall management over the business, productions, personnel, accounting and properties of an enterprise. The\nState Administration of Taxation (“SAT”) issued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated\nEnterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or SAT Circular 82, on April 22, 2009 and last\namended on December 29, 2017. SAT Circular 82 provides certain specific criteria for determining whether the “de facto management\nbody” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to\noffshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the\ncriteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text\nshould be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated\nenterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de\nfacto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following\nconditions are met (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s\nfinancial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s\nprimary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC;\nand (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.\n\n \n\nFurther\nto SAT Circular 82, on July 27, 2011, the SAT issued the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore\nIncorporated Resident Enterprises (Trial), or SAT Circular 45, to provide more guidance on the implementation of SAT Circular 82; the\ncircular became effective on September 1, 2011 and revised on June 15, 2018. SAT Circular 45 clarified certain issues in the areas of\nresident status determination, post-determination administration and competent tax authorities’ procedures.\n\n \n\n18\n\n \n\n \n\nWe\nbelieve our Company is not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject\nto determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management\nbody.” If the PRC tax authorities determine that our Company or any of our offshore subsidiaries is a PRC resident enterprise for\nenterprise income tax purposes, our Company or the relevant offshore subsidiaries will be subject to PRC enterprise income on its worldwide\nincome at the rate of 25%. Furthermore, if we are treated as a PRC tax resident enterprise, we will be required to withhold a 10% tax\nfrom dividends we pay to our shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be\nsubject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of the Ordinary Shares, if such gain is treated\nas derived from a PRC source. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders\nand any gain realized on the transfer of Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the\ncase of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether\nour non-PRC shareholders would, in practice, be able to obtain the benefits of any tax treaties between their country of tax residence\nand the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in\nthe Ordinary Shares.\n\n \n\n**PRC\nregulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to change their\nregistered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties\nunder PRC laws.**\n\n \n\nIn\nJuly 2014, the SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore\nInvestment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 is applicable\nto our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.\n\n \n\nSAFE\nCircular 37 requires registration with the SAFE or its local branches in connection with direct or indirect control of an offshore entity\nby PRC residents (including PRC individuals and PRC corporate entities). The term “control” under SAFE Circular 37 is broadly\ndefined as the operation rights, beneficiary rights or decision-making rights acquired by PRC residents in the offshore special purpose\nvehicles by means of acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. In addition, any\nPRC resident who is a direct or indirect shareholder of an offshore special purpose vehicle is required to update its filed registration\nwith the local branch of the SAFE with respect to that offshore special purpose vehicles to reflect any material change. On February\n13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment,\nor SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound\nforeign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with\nqualified banks instead of the SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision\nof the SAFE.\n\n \n\nAs\nof the date of this annual report, all of our shareholders who we are aware of being subject to the SAFE regulations have completed the\ninitial registrations as required by SAFE Circular 37. We may not be informed of the identities of all the PRC residents holding direct\nor indirect interest in our Company, however, and we have no control over any of our future beneficial owners. Thus, we cannot provide\nany assurance that our current or future PRC resident beneficial owners will comply with our request to make or obtain any applicable\nregistrations or continuously comply with all registration procedures set forth in these SAFE regulations. Such failure or inability\nof our PRC residents beneficial owners to comply with these SAFE regulations may subject us or our PRC resident beneficial owners to\nfines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiaries’ ability to distribute\ndividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being able to make distributions or pay dividends,\nas a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.\n\n \n\n19\n\n \n\n \n\n**Risks\nRelated to Our Business and Industry**\n\n \n\n**The\nPRC subsidiaries operate in a dynamic industry and have a limited operating history. Our historical results of operations and financial\nperformance may not be indicative of future performance.**\n\n \n\nAs\na company with a relatively limited operating history, our historical results may not be indicative of our future performance. We may\nnot be successful in executing our growth strategy, and even if we achieve our strategic plan, we may not be able to sustain profitability.\nIn future periods, our revenue could decline or grow more slowly than we expect. We may also incur significant losses in the future for\na number of reasons, including as a result of the materialization of the following risks and the other risks described in this annual\nreport, and we may encounter unforeseen difficulties, complications, delays and other unknown factors:\n\n \n\n \n●\nwe may be unsuccessful\nin predicting and capturing industry trends and consumer preferences;\n\n \n\n \n●\nwe may be unable to introduce\nnew products that appeal to consumers;\n\n \n\n \n●\nwe may be unsuccessful\nin protecting or enhancing the recognition and reputation of our brand;\n\n \n\n \n●\nwe may be unsuccessful\nin competing for market share with our existing or new competitors;\n\n \n\n \n●\nthe ability of our third-party\nsuppliers, manufacturers and logistics providers to produce and deliver our products in a timely way and subject to ever changing\ncustomer expectations could be disrupted;\n\n \n\n \n●\nwe may fail to adjust our\nsales and marketing strategies fast enough to stay current with consumers’ behavioral changes in using internet and mobile\ndevices;\n\n \n\n \n●\nwe may not be able to maintain\nand improve our customer experience;\n\n \n\n \n●\nwe may experience service\ninterruptions, data corruption, cyber-based attacks or network security breaches which may result in the disruption of our operating\nsystems;\n\n \n\n \n●\nwe may be unable to retain\nkey members of our senior management team or attract and retain other qualified personnel;\n\n \n\n \n●\nwe may fail to successfully\nimplement new business initiatives, especially expansion into new offerings or new business lines in which we have limited or no\nprior experience, including sustaining continued expansion of our business;\n\n \n\n20\n\n \n\n \n\n \n●\nwe may fail to successfully\nexpand our physical stores providing light beauty experience; and\n\n \n\n \n●\nwe may be affected by international\ntrade tension and any adverse economic conditions in China or internationally.\n\n \n\nWe\ncannot be sure that we will be successful in addressing these and other risks and challenges we may face in the future. Any of these\noccurrences could have a material and adverse impact on our business, results of operations and financial condition. Our customer base\nmay not continue to grow or may decline as a result of such risks. Any of these risks could cause our net sales growth to decline and\nmay adversely affect our margins and profitability. Failure to continue our net sales growth or improve margins could have a material\nadverse effect on our business, financial condition, and results of operations. You should not rely on our historical rate of net sales\ngrowth as an indication of our future performance.\n\n \n\n**We\nrely on the formulas provided by our third-party manufacturers.**\n\n \n\nWe\nengage and commission third-party manufacturers to produce our products and we rely on the third-party manufacturers to provide the formulas\nfor our products. The standard form of Agreements of Commissioned Processing with our third-party manufacturers (“Agreement of\nCommissioned Processing”) provides that, the third-party manufacturers engaged by us shall provide the formulas to be used in our\nproducts and a packaging material inspection report, produce a manufacture plan in written form, and manufacture and process our products\nthat meet the relevant national standards, industry standards, and our requirements, as well as provide temporary storage of our products.\nThe standard form of Agreements of Commissioned Processing also requires us to provide the third-party manufacturers with packaging materials\nthat meet the requirements under applicable laws and regulations such as the Advertising Law and intellectual property regulations. Given\nour reliance on our third-party manufacturers to provide us with the formulas for our products and that we do not own the formulas, if\nwe fail to enforce such agreements and if our competitors engage the same manufacturers and introduce the same or similar products at\na significantly lower price in the same markets that we operate in, our results of operations may be adversely affected.\n\n \n\n**The\nbeauty industry is highly competitive. If we are unable to compete effectively, we may lose our market share and our business, results\nof operations and financial condition may be materially and adversely affected.**\n\n \n\nWe\nface vigorous competition from both domestic and international players in China in the beauty industry, including large multinational\nconsumer products companies that own or operate multiple beauty brands. Competition in the beauty industry is intense and based on multiple\nfactors, including the ability to launch new products, pricing of products, quality of products and packaging, brand awareness, perceived\nvalue and quality, innovation, offline sales capabilities, customers’ functional and emotional satisfaction, promotional activities,\nadvertising, editorials, e-commerce and mobile-commerce initiatives and other activities. We must compete with a high volume\nof new product introductions and a large number of existing products sold by diverse companies across several different distribution\nchannels.\n\n \n\n21\n\n \n\n \n\nMany\ndomestic and multinational consumer goods companies have greater financial, technical or marketing resources, longer operating histories,\ngreater brand recognition or larger customer bases than we do and may be able to respond more effectively to changing business and economic\nconditions than we can. Despite our differentiated business model, existing and new players in the industry may also transform their\nbusiness models and directly compete with us. Competitors may also roll out products targeting younger generations at a competitive price\nor adopt a price-cutting strategy for their current products to directly compete with us. Given the established sales network these large\nconsumer goods companies maintain and the greater brand power they have, we cannot ensure that our existing customers will not allocate\nmore market share to our competitor’s products or cease to purchase products from us completely. Further, our competitors may attempt\nto gain market share by offering products at prices at or below the prices at which our products are typically offered. Competitive pricing\nmay require us to reduce our prices, which would decrease our profitability or result in lost sales. Because many of our competitors\nhave greater resources than we do, they may be able to better withstand these price reductions and loss of sales under a competitive\npricing strategy.\n\n \n\nIt\nis difficult for us to predict the timing and scale of our competitors’ activities in these areas or whether new competitors will\nemerge in the beauty industry. In addition, further technological breakthroughs, including new and enhanced technologies which increase\ncompetition in the online retail market, new product offerings by competitors and the strength and success of our competitors’\nmarketing programs may impede our growth and the implementation of our business strategy.\n\n \n\nOur\nability to compete also depends on the continued strength of our brand and products, our ability to predict and capture industry trends\nand consumer preferences, the success of our marketing, innovation and execution strategies, the continued diversification of our product\nofferings, the successful management of new product introductions and innovations, strong operational execution, including in order fulfillment\nand supply chain management, and our success in entering new markets and expanding our business in existing geographies. If we are unable\nto continue to compete effectively, we may lose our market share and our business, results of operations and financial condition may\nbe materially and adversely affected.\n\n \n\n**Our\nsuccess is dependent on the continued popularity of our products and our ability to anticipate and respond to changes in industry trends\nand consumer preferences and behavior in a timely manner.**\n\n \n\nThe\nsuccess of our business and operations depends on our ability to continuously offer quality products that are attractive to consumers.\nThe beauty industry is driven in part by fashion and beauty trends and consumer preferences and behavior, which may shift quickly and\nhave been heavily affected by the rapidly increasing use and proliferation of social and digital media by consumers, and the speed with\nwhich information and opinions are shared. As industry trends and consumers’ preferences and behavior continue to change, we must\nalso continually work to develop, produce and market new products, maintain and enhance the recognition of our brand, achieve a favorable\nmix of products and refine our approach as to how and where we market and sell our products.\n\n \n\n22\n\n \n\n \n\nOur\nsuccess depends on our products appeal to a broad range of consumers whose preferences and behavior cannot be predicted with certainty\nand may change rapidly, and on our ability to anticipate and respond in a timely and cost-effective manner to industry trends and consumer\npreferences and behavior through product innovations, product line extensions and marketing and promotional activities, among other things.\nWe collect, store, process and use a variety of customer data and information for analysis of the changing consumer preferences and fashion\ntrends to guide our product development and to improve our products and customer experience, and to predict and react to industry trends\nand consumers’ preferences and behavior effectively and efficiently. However, we cannot assure you that we will be able to successfully\nanticipate and respond to consumers’ preferences and behavior at all times, especially as we continue to broaden our customer base\nand diversify our product offerings aimed at customers with differing characteristics. If we are unable to anticipate and respond to\nthe changes in industry trends and consumer preferences and behavior, we may fail to continuously develop products with wide market acceptance,\ncapture emerging growth opportunities, adopt competitive sales strategies for our existing products, or properly predict and manage our\ninventory. Such failure could also negatively impact our brand image and result in diminished customer experience and brand loyalty.\nAny of these occurrences could materially and adversely affect our business, prospects and results of operations.\n\n \n\n**Our\nnew product introductions may not be as successful as we anticipate, which could have a material adverse effect on our business, prospects,\nfinancial condition and results of operations.**\n\n \n\nFast-evolving\nbeauty trends, and consumer preferences have shortened the life cycles of beauty products and required us to continually work to develop,\nproduce and market new products, maintain and enhance the recognition of our brand and shorten our product development and supply chain\ncycles. Our continued success depends on our ability to develop and launch products in a timely and cost-effective manner in response\nto beauty industry trends, consumer preferences for beauty products and consumer attitudes toward our industry and brand. If we do not\nsuccessfully and consistently develop new products that appeal to our customers our total revenue and margins could suffer.\n\n \n\nWe\nhave an established process for the development, evaluation and validation of our new product concepts. Nonetheless, each new product\nlaunch involves risks, as well as the possibility of unexpected consequences. For example, the acceptance of new product launches and\nsales to our customers may not be as high as we anticipate, due to a lack of acceptance of the products themselves or their price, or\nthe limited effectiveness of our marketing strategies. The introduction of new products targeted at expanding our product reach beyond\nour current customer base may not be as successful as we anticipate due to insufficient data insights on and understanding about the\npreferences, trends and behaviors of such new customer group. Our ability to launch new products may be limited by delays or difficulties\naffecting the ability of our suppliers or manufacturers to timely manufacture new products. In addition, we may experience a decrease\nin sales of certain existing products as a result of newly launched products. Also, product innovation may place a strain on our employees\nand our financial resources, including incurring expenses in connection with product innovation and development, marketing and advertising\nthat are not subsequently supported by a sufficient level of sales. Further, sales of new products may be affected by the efficacy of\nour inventory management and quality of delivery and order fulfillment services provided by our logistics providers, and we may experience\nproduct shortages and delayed or defective or improper product delivery. Any of these occurrences could delay or impede our ability to\nachieve our sales objectives, which could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\nAs\npart of our ongoing business strategy, we expect to continue introducing new skincare products while expanding our product launches into\nadjacent categories that target eye and lip care, in which we may have little or no prior operating experience. The success of product\nlaunches in adjacent product categories could be hampered by our relative inexperience operating in such categories, the strength of\nour competitors or any of the other risks referred to above. Furthermore, any expansion into new product categories may subject us to\nadditional operational and financial constraints which could inhibit our ability to accomplish such expansion. If we fail to continue\nto roll out commercially successful products in our traditional categories or in adjacent categories, our business, financial condition\nand results of operations may be materially and adversely affected.\n\n \n\n23\n\n \n\n \n\n**Our\nbusiness depends, in part, on the quality, effectiveness and safety of our products.**\n\n \n\nAny\nloss of confidence on the part of consumers in the ingredients used in our products, whether related to product contamination or product\nsafety or quality failures, actual or perceived, or inclusion of prohibited or restricted ingredients or an improper mixture of ingredients,\ncould tarnish the image of our brand and could cause consumers to choose other products. Allegations of contamination or other adverse\neffects on product safety or suitability for use by a particular consumer, even if untrue, may require us to expend significant time\nand resources responding to such allegations and could, from time to time, result in the suspension of sales or a recall of a product\nfrom any or all of the markets in which the affected product was distributed. Any such issues or recalls could negatively affect our\nprofitability and brand image.\n\n \n\nIf\nour products are found to be, or perceived to be, defective or unsafe, or if they otherwise fail to meet our consumers’ expectations,\nour relationships with consumers could suffer, the appeal of our brand could be diminished, we may need to recall some of our products\nand/or become subject to regulatory action, and we could lose sales or market share or become subject to boycotts or liability claims.\nIn addition, safety or other defects in our competitors’ products could reduce consumer demand for our products if consumers view\nthem to be similar. Any of these outcomes could result in a material adverse effect on our business, financial condition and results\nof operations.\n\n \n\n**We\nmay not be able to successfully implement our growth strategy.**\n\n \n\nOur\nfuture growth, profitability and cash flows depend upon our ability to successfully implement our business strategy, which, in turn,\nis dependent upon a number of factors, including our ability to:\n\n \n\n \n●\nbuild a strong and well-recognized\nbrand;\n\n \n\n \n●\nfurther penetrate our targeted\nmarkets by attracting new consumers and retaining and further engaging our existing customers;\n\n \n\n \n●\ncapture the industry trends\nand develop and launch new products and expand into relevant adjacencies in answer to such trends;\n\n \n\n \n●\ncontinue to use innovation\nto drive sales, improve technological and operational efficiencies-and improve profit margin;\n\n \n\n \n●\nenhance Removed our market\nstudy and ability to predict and follow customers’ preferences, trends and behaviors;\n\n \n\n \n●\neffectively manage the\nquality and efficiency of the third-party manufacturing partners and packaging supply partners and logistics and other third-party\nservice providers’ performance;\n\n \n\n \n●\ncontinue to broaden and\ndiversify our distribution channels;\n\n \n\n24\n\n \n\n \n\n \n●\npursue strategic investments\nand collaborations to complement our existing capabilities and geographic reach; and\n\n \n\n \n●\nleverage our high-performance\nteam culture to drive margins.\n\n \n\nThere\ncan be no assurance that we can successfully achieve any or all of the above initiatives in the manner or time period that we expect.\nFurther, achieving these objectives will require investments which may result in short-term costs without generating any current net\nsales and therefore may be dilutive to our earnings. We cannot provide any assurance that we will realize, in full or in part, the anticipated\nbenefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business,\nfinancial condition and results of operations.\n\n \n\n**We\nmay be unable to manage our growth effectively or efficiently.**\n\n \n\nGrowing\nour business rapidly may place a strain on our management team, financial and information systems, supply chain and distribution capacity\nand other resources. To manage growth effectively, we must continue to enhance our operational, financial and management systems, including\nour warehouse management and inventory control; maintain and improve our internal controls and disclosure controls and procedures; maintain\nand improve our information technology systems and procedures; and expand, train and manage our employee base.\n\n \n\nWe\nmay not be able to effectively manage our expansion in any one or more of these areas, and any failure to do so could significantly harm\nour business, financial condition and results of operations. Growing our business rapidly may make it difficult for us to adequately\npredict the expenditures we may need to make in the future. If we do not make the necessary overhead expenditures to accommodate our\nfuture growth, we may not be successful in executing our growth strategy, and our results of operations would suffer.\n\n \n\n**If\nwe are unable to provide superior customer experiences, our business and reputation may be materially and adversely affected.**\n\n \n\nThe\nsuccess of our business hinges on our ability to provide superior customer experience, which in turn depends on a variety of factors.\nThese factors include our ability to bring innovative products to the market at competitive prices that respond to consumer demands and\npreferences, our ability to fit in the lifestyle of our customers and deeply engage with our customers. These factors also include our\nability to maintain the quality of our products and services, provide timely and reliable delivery and responsive and superior before-\nand after-sales service. In addition, we have made efforts to maintain a superior customer experience that is driven by our relentless\nefforts to maintain product quality and curate our products offerings so they are responsive to industry trends and customers’\npreferences. Similarly, we substantially focus on to providing quality and responsive customer service.\n\n \n\nAlthough\nwe provide standardized employee conduct training and beauty product training for all our beauty advisors and maintain a detailed employee\nhandbook regulating employee conduct, there is no assurance that our beauty advisors will provide consistently satisfactory customer\nservice to our customers. In addition, as our network of beauty advisors continues to rapidly expand along with our growth, it may be\nharder for us to manage our advisors and ensure the quality of services they provide to our customers. Any negative customer service\nexperience with our beauty advisors either offline in our physical stores or online through our customer communities or one-on-one chats\nmay discourage customers from purchasing our products and adversely affect our reputation and brand image.\n\n \n\n25\n\n \n\n \n\nIf\nour customer service representatives fail to provide satisfactory service, or if waiting times are too long due to the high volume of\ncalls from customers at peak times, our brand and customer loyalty may be adversely affected. There is no assurance that we will be able\nto maintain a low turnover rate of existing employees and provide sufficient training to new employees to meet our standards of customer\nservice or that an influx of less experienced personnel will not dilute the quality of our customer service. In addition, any negative\npublicity or poor feedback regarding our customer service may harm our brand and reputation and in turn cause us to lose customers and\nmarket share.\n\n \n\n**Our\nPRC subsidiaries have incurred significant costs for a variety of sales and marketing efforts, including social media-based advertising\nand heavy promotions to attract customers through multiple sales channels. If we are unable to conduct sales and marketing efforts in\na cost-effective and efficient manner, our results of operations and financial conditions may be materially and adversely affected.**\n\n \n\nAs\na relatively young company, we have invested, and will continue to invest, a large amount of financial and other resources in promoting\nour brand awareness and acquiring customers, including expanding our marketing and sales teams or campaigns, and purchasing advertisements.\n\n \n\nOur\nmarketing and branding activities may not be well received, successful or cost-effective, which may lead to significantly higher marketing\nexpenses in the future. We may not be able to continue our existing marketing and branding activities, or successfully identify and utilize\nnew marketing strategy trends, sales channels and approaches that appeal to or fit in the lifestyle of our targeted customers. We may\nalso fail to adjust our sales and marketing strategies fast enough to stay current with consumers’ behavioral changes in using\nthe internet and mobile devices. Failure to refine our existing marketing strategies or introduce new effective marketing strategies\nin a cost-effective manner could negatively impact our business, results of operations and financial condition. In addition, failure\nto comply with relevant provisions of the Advertising Law of the PRC, the Supervision Regulations and other relevant laws and regulations\nwill result in the restriction, inhibition or delay of our ability to sell products.\n\n \n\n**Our\nbusiness is subject to complex and evolving product safety laws, regulations and standards. If we fail to comply with these laws, regulations\nand safety standards or if our products otherwise have defects, we may be required to recall products and may face penalties and product\nliability claims, either of which could result in unexpected costs and damage our reputation.**\n\n \n\nThe\nmanufacturing, distribution and packaging of beauty products and their components, ingredients and raw materials are subject to complex\nproduct safety-related laws, regulations and national and industrial standards. To maintain compliance and promote product safety, we\nhave established a team dedicated to product quality inspection, product sampling and quality issues resolution and cooperate with qualified\ntesting centers to continually oversee the quality and safety of our products. In addition, we closely work with our counsel to monitor\nthe development of laws, regulations and standards applicable to our business. However, certain of these laws, regulations and standards\nare relatively new and because their interpretation and implementation are evolving, we cannot assure you that the competent authorities\nwill always hold the same view as our counsel does in terms of the compliance of our business operations.\n\n \n\n26\n\n \n\n \n\nAny\nfailure or perceived failure to comply with laws, regulations or standards with respect to product safety, or any sale suspension or\nproduct recall may lead to government investigations of us, penalties and lawsuits against us which may result in adverse publicity.\nFurthermore, we may experience significant costs in connection with the suspension of sales or recall, litigation, investigations or\npenalties which could have a material and adverse effect on our business, financial condition and results of operations.\n\n \n\n**Our\noperating results could be materially harmed if we are unable to accurately forecast consumer demand for our products or adequately manage\nour inventory.**\n\n \n\nOur\nbusiness requires us to manage a large volume of inventory effectively. Due to the particularity of the cosmetics industry, the storage\nand distribution of cosmetics production enterprises must meet timeliness requirements and monitor the uncertainty of terminal demand.\nBecause we must maintain a certain inventory of the products, we depend on our forecasts of product demand for, and popularity of various\nproducts to make purchasing decisions to manage our inventory. If we subsequently fail to effectively manage our inventory, there may\nbe a risk of inventory loss.\n\n \n\nThe\ndemand for our inventory of products can change significantly between the time that components, ingredients or raw materials are ordered\nand the date of sale. Demand may be affected by seasonality, new product launches, rapid changes in product cycles and pricing, product\ndefects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors,\nand our consumers may not purchase products in the quantities that we expect. It may be difficult to accurately forecast demand and determine\nappropriate levels of product or componentry.\n\n \n\nWe\nmust maintain a certain inventory of their products to ensure products do not expire or reach the end of the period of validity. The\nperiod of validity of cosmetics is more strictly controlled than that of general merchandise and cosmetics close to the period of validity\nwill be destroyed after relevant procedures are performed. Generally, we do not have the right to return unsold products to the third-party\nmanufacturing partners and third-party packaging supply partners. If we fail to manage our inventory effectively or negotiate favorable\ncredit terms with third-party manufacturers and suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline\nin inventory values, and significant inventory write-downs or write-offs in the case of overestimation of consumer demand, or increased\ncosts to secure necessary production and delivery delays in the case of underestimation of consumer demand. An inability to meet consumer\ndemand and delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships.\nIn addition, if we are required to lower sale prices in order to incentivize sales to reduce our inventory levels, our profit margins\nmight be negatively affected. Any of the above may materially and adversely affect our business, financial condition and results of operations.\n\n \n\n27\n\n \n\n \n\n**We\nrely on third-party service providers for logistics services. If these service providers fail to provide reliable services, our business\nand reputation may be adversely affected.**\n\n \n\nWe\nrely on third-party couriers and logistics providers for order fulfillment and delivery services, including, among others, collection\nof products, warehousing services, shipping products to customers, stores and designated warehouse and handling product returns. While\nthese arrangements allow us to focus on our central business, they reduce our direct control over the logistics services provided to\nour customers. Logistics in our primary locations or transit to final destinations may be disrupted for a variety of reasons, including\nevents that are beyond our control or the control of these service providers, such as inclement weather, natural and man-made disasters,\nhealth epidemics, information technology system failures, transportation disruptions, labor unrest, commercial disputes, military actions\nor economic, business, labor, environmental, public health, or political issues. In addition, if our third-party logistics service providers\nfail to comply with applicable rules and regulations in China, our delivery services may be materially and adversely affected. If any\nof our service providers’ operations or services are disrupted or terminated, we may not be able to find alternative service providers\nwith quality and on commercial terms to our satisfaction in a timely and reliable manner, or at all. Furthermore, delivery personnel\nof contracted third-party logistics service providers act on our behalf and interact with our customers personally. We need to effectively\nmanage these third-party logistics service providers to ensure the quality of customer services.\n\n \n\nIf\nour products are not delivered in the proper condition or in a timely manner or there is any other failure to provide high-quality delivery\nservices to our customers, our products may be compromised, customer experience may be impaired and, as a result, our business and reputation\ncould suffer. Further, if our logistics providers raise their fee rate, we may incur additional costs and may not be able to pass such\ncosts to our customers.\n\n \n\n**Our\ndelivery, return and exchange policies may adversely affect our results of operations.**\n\n \n\nWe\nhave adopted shipping policies that do not necessarily pass the full cost of shipping onto our customers. We also have adopted customer-friendly\nreturn and exchange policies that make it convenient and easy for customers to change their minds within seven days after completing\ndirect online purchases from us. We may also be legally required to adopt new or amend existing return and exchange policies from time\nto time. These policies improve customers’ shopping experience and promote customer loyalty, which in turn helps us acquire and\nretain customers. However, these policies also subject us to additional costs and expenses which we may not recoup through increased\nrevenues. If our delivery, return and exchange policies are misused by a significant number of customers or if the return or exchange\nrates increase beyond historical records or otherwise substantially then our costs may increase significantly, and our results of operations\nmay be materially and adversely affected.\n\n \n\nIf\nwe revise our shipping policies to reduce our costs and expenses, our customers may be dissatisfied. Our customers dissatisfaction may\nresult in the loss of their business or our failure to acquire new customers at a desirable pace, which may materially and adversely\naffect our results of operations.\n\n \n\n**Failure\nto successfully lease suitable warehouse facilities or any interruption in the operation of the warehouse for an extended period may\nnegatively affect the business and results of operations.**\n\n \n\nWe\nbelieve that our warehouse, located in Wuxi, Jiangsu Province, PRC is essential to our supply chain management. We cannot assure you\nthat we will be able to add suitable warehouse facilities on commercially acceptable terms or at all. In addition, our ability to process\nand fulfill orders accurately depends on the smooth operation of the warehouse facilities. The warehouse may be vulnerable to damage\ncaused by fire, flood, power outage, telecommunications failure, break-ins, earthquake, health epidemics, human error and other\nevents. If the warehouse were rendered incapable of operations, then we may be unable to fulfill our orders on a timely basis, which\ncould result in canceled sales and a loss of customer loyalty and have a material adverse impact on our business, financial condition\nand results of operations. We do not carry business interruption insurance, and the occurrence of any of the foregoing risks could have\na material adverse effect on our business, prospects, financial condition and results of operations.\n\n \n\n28\n\n \n\n \n\n**Our\nbusiness expansion has required and will continue to require a substantial investment and commitment of resources, that is subject to\nrisks and uncertainties.**\n\n \n\nWe\nare diversifying and expanding our distribution channels, which includes expansion of store network in a measured manner to better connect\nwith our customers and deliver a more immersive beauty experience. Our brick-and-mortar experience stores required substantial investment\nin equipment and leasehold improvements, information systems, inventory and personnel. Often times our investments are made prior to\ngenerating any sales in these stores. We also have entered into substantial operating lease commitments. A decline in sales, the closure,\nor poor performance of individual or multiple storefronts could result in significant lease termination costs, write-offs of equipment\nand leasehold improvements and severance costs.\n\n \n\nThe\nsuccess of our brick-and-mortar experience store network expansion depends in part on our ability to manage the financial and operational\naspects of our brick-and-mortar experience stores expansion strategy. This includes our ability to properly assess the potential profitability\nand payback period of potential new experience store locations, our ability to hire and train skilled store operating personnel, especially\nmanagement personnel, our ability to immerse such personnel in our culture, and our ability to guarantee timely supply of inventory for\nour experience stores In addition, there are many factors unique to brick-and-mortar retail operations, some of which are beyond our\ncontrol which pose risks and uncertainties to our brick-and-mortar experience store network expansion. These risks and uncertainties\ninclude, but are not limited to, macro-economic factors that could have an adverse effect on general retail activity. They include but\nare not limited to health epidemics, the overall customer traffic or our ability to attract high consumer traffic in and around the location\nof our brick-and-mortar experience stores, competing stores in the same geographic area, our opening of new stores in the same geographic\narea as our existing stores, our failure in identifying appropriate locations for opening new stores and accurately predicting customer\ntraffic at such new stores, our inability to manage costs associated with store construction and operation, more challenging environments\nin managing in-store retail operations, costs associated with unanticipated fluctuations in the value of retail inventory, and our inability\nto obtain and renew leases in quality retail locations at a reasonable cost. If we are unable to open brick-and-mortar experience stores\nat convenient locations in cities that have large numbers of customers attributable to our online product sales and offer similar competitive\nprices at our brick-and-mortar experience stores as our online stores, our ability to retain these customers, foster strong brand loyalty\nand further enlarge our customer base may be negatively impacted. Meanwhile, if we are unable to generate sufficient sales from these\nstores, we may fail to recover the advanced costs and investments in connection with such brick-and-mortar experience store expansion\nand our business and profitably may suffer. The substantial time and resources that any future store expansion strategy may require could\nalso result in disruption to our existing business operations, which may decrease our total revenue and profitability.\n\n \n\n29\n\n \n\n \n\n**An\neconomic downturn may adversely affect consumer discretionary spending and demand for our products and services.**\n\n \n\nOur\nbeauty products may be considered discretionary purchases for consumers. Factors affecting the level of consumer spending for such discretionary\nitems include general economic conditions and other factors, such as consumer confidence in future economic conditions, consumer sentiment,\nthe availability and cost of consumer credit, levels of unemployment, and tax rates. Unfavorable economic conditions may lead consumers\nto delay or reduce purchases of our products and consumer demand for our products may not grow as we expect. Our sensitivity to economic\ncycles and any related fluctuation in consumer demand for our products and services may have an adverse effect on our results of operations\nand financial condition.\n\n \n\n**We\ncollect, store, process and use a variety of customer data and information for analysis of the changing consumer preferences and fashion\ntrends, which subjects us to laws and regulations related to privacy, information security and data protection. Any failure to comply\nwith these laws and regulations could materially and adversely harm our business.**\n\n \n\nWe\ncollect, store, process and use a variety of customer data and information for analysis of the changing consumer preferences and beauty\ntrends to guide our product development and to improve our products and customer experience and to predict and react to industry trends\nand consumers’ preferences and behavior effectively and efficiently. The confidentiality, access, collection, use and disclosure\nof customers’ data are highly regulated in China. PRC government authorities have enacted a series of laws and regulations relating\nto the protection of privacy, personal information and data, under which we are required to clearly indicate the purposes, methods and\nscope of any information collection and usage, to obtain appropriate customer consent and to establish customer information protection\nsystems with appropriate remedial measures. While we strive to comply with such laws and regulations, as well as our privacy policies\nand other obligations we may have with respect to privacy and data protection, some of our data collection activities may be deemed beyond\nthe scope of or without the consent of our customers. Any failure or perceived failure to comply with laws, regulations or policies related\nto privacy, information security and data protection may result in inquiries and other proceedings or actions against us by government\nauthorities or others, as well as negative publicity and damage to our reputation and brand, each of which could cause us to lose customers.\nIn addition, as data protection and privacy issues draw more and more attention from society, we may also become subject to new laws\nand regulations, or newly adopted interpretations and applications of existing privacy and data protection laws or regulations, which\nare often uncertain and in flux and could further restrict collection and usage of customer data, or otherwise inconsistent with our\npractice. Any additional enactment or promulgation of this type of law or regulation may, among other things, require us to implement\nnew security measures or bring within the legislation or promulgation other personal data not currently regulated. Compliance with any\nadditional laws could be expensive, may place restrictions on our data collection and processing practice, the conduct of our business\nand the manner in which we interact with our customers.\n\n \n\n**Any\ndata breach or security incident may lead to leaks and/or unauthorized access, disclosure, or use of personal data we collect, which\nmay hurt our reputation and brand image, disrupt our operations, as well as materially and adversely affect our financial condition and\nresults of operations.**\n\n \n\nWe\ncollect, store and analyze customer and operations data, some of which are sensitive personal data. As such, any data breach or security\nincident could expose us to the risk of unintentional leaks and/or unauthorized access, disclosure, or use of these personal data, which\nmay hurt our reputation and brand image, disrupt our operations, as well as materially and adversely affect our financial condition and\nresults of operations. We could face government enforcement, significant fines, litigation settlements or judgments, and declining share\nprices, if we were to be found liable for data breaches. Our data is encrypted and saved on cloud-based servers, segregated from the\ninternet, protected by access control, and further backed up in long-distance servers, so as to minimize the possibility of data loss\nor breach. As of the date of this annual report, we have not experienced any material security breaches.\n\n \n\n30\n\n \n\n \n\nDespite\nthe security measures we have implemented, we may experience cyber-attacks of varying degrees, including attempts to hack into our cloud\nor our intranet and steal customer and business information or obtain economic benefits from us. Our security measures may also be breached\ndue to employee error, malfeasance or otherwise. Additionally, outside parties may attempt to fraudulently induce our employees to disclose\nsensitive information in order to gain access to our data, or may otherwise obtain access to such data. Any such breach or unauthorized\naccess could result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of\nour information system that could deter our customers from engaging with us, and have an adverse effect on our business and results of\noperations. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently\nand often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate\npreventative measures. If an actual or perceived breach of our security occurs, our customers’ and business partners’ perception\nof the effectiveness of our security measures could be harmed, we could lose customers and business partners, may not be able to maintain\nthe level of engagement with customers and business partners and we may be exposed to significant legal and financial risks, including\nlegal claims and regulatory fines and penalties. Any of these actions could have a material and adverse effect on our business and results\nof operations.\n\n \n\n**User\nmisconduct on and misuse of the online consumer communities we organize may adversely impact our brand and reputation, and may subject\nus to liabilities.**\n\n \n\nIn\naddition to interactions with our customers at our brick-and-mortar experience stores, we organize customer communities on WeChat. On\nWeChat we have established closer relationships with our customers, and developed a better understanding of our customers through deep\nengagement with them. These communities allow our customers to share shopping experiences and freely communicate with each other. However,\nwe don’t have full control over how and what our customers will communicate, and our communities could be misused by some of our\ncustomers. For example, some of our customers may use our communities as a platform to distribute content that could be deemed as spam\nby other customers, such as marketing materials for his or her own businesses or businesses he or she is employed to promote, which could\nimpair our customers’ experience. In addition, once invited into our online communities, our customers can add each other as contacts\nand communicate and interact privately. We have no control over our customers’ behaviors of our online communities and cannot rule\nout the possibility that some of them may engage in immoral, disrespectful, fraudulent or illegal activities. To the extent such behaviors\nor activities are associated with our communities, the public perception of our reputation and brand image could be harmed and prospective\ncustomers may be deterred from joining our online communities, which could have a material and adverse effect on our business and reputation.\n\n \n\n31\n\n \n\n \n\n**The\npayment methods that we accept subject us to third-party payment-related risks and other risks.**\n\n \n\nWe\naccept payments from our customers using a variety of methods, including online payments with credit cards and debit cards issued by\nmajor banks and payment through third-party online payment platforms such as WeChat Pay and Alipay. We also rely on third parties to\nprovide payment processing services. For certain payment methods, including credit and debit cards, we pay interchange and other fees,\nwhich may increase over time and raise our operating costs and lower our profit margins. We may also be subject to fraud and other illegal\nactivities in connection with the various payment methods we offer, including online payment options. We may also be subject to various\nrules, regulations, and requirements, regulatory or otherwise, governing electronic fund transfers and online payment, which could change\nor be reinterpreted to make it difficult or impossible for us to comply with. If we fail to comply with these rules or requirements,\nwe may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers,\nprocess electronic fund transfers, or facilitate other types of online payments, and our business, financial condition, and results of\noperations could be materially and adversely affected.\n\n \n\n**If\nthe content we produce and distribute through online social and content platforms, or content available on our website, is deemed to\nviolate PRC laws or regulations, our business and results of operations may be materially and adversely affected.**\n\n \n\nWe\nproduce and distribute professionally generated beauty and wellness related content on third party online social and content platforms\nsuch as WeChat, and RED to promote beauty related knowledge, improve our brand awareness and generate consumers interest in our products.\nUnder PRC laws, we are required to monitor the content we produce and distribute that is factually incorrect, socially destabilizing,\nobscene or defamatory, and promptly take actions with respect to such content.** **Sometimes, it is arguable as to whether\ncontent is factually incorrect or involved other types of illegality, and it may be difficult to determine the type of content that may\nresult in liability to us. Our burden to administer the content, and costs associated therewith, may be exacerbated if we develop our\nown app with user discussion panel or other interactive functions or features in the future, or introduce such interactive features and\nfunctions to our website and WeChat mini-program. If we are found to be liable, we may be subject to fines, revocation of our relevant\nlicenses and other administrative and civil actions, which may interrupt our business. We have implemented measures to review content\nin light of the relevant laws and regulations before any of them is published. However, such procedures may not prevent all illegal or\nimpropriate content from being distributed, especially content created during living streaming by key opinion leaders (“KOLs”)\nwe may collaborate with.\n\n \n\n**If\nour cash from operations is not sufficient to meet our current or future operating needs and expenditures, our business, financial condition\nand results of operations may be materially and adversely affected.**\n\n \n\nWe\nmay require additional cash resources due to changed business conditions or other future developments, including any marketing initiatives,\ninvestments or acquisitions we may decide to pursue. To the extent we are unable to generate sufficient cash flow, we may be forced to\ncancel, reduce or delay these activities. Our ability to generate cash to meet our operating needs and expenditures will depend on our\nfuture performance and financial condition, which will be affected by financial, business, economic, legislative, regulatory and other\nfactors, including potential changes in costs, pricing, the success of product innovation and marketing, competitive pressure and consumer\npreferences. If our cash flows and capital resources are insufficient to fund our cash needs, we could face substantial liquidity problems\nand could be forced to reduce or delay investments and capital expenditures or dispose of material assets or operations. Alternatively,\nif our sources of funding are insufficient to satisfy our cash requirements, we may seek to obtain credit facilities or sell equity or\ndebt securities. The sale of equity securities would result in the dilution of our existing shareholders. The incurrence of indebtedness\nwould result in debt service obligations and operating and financing covenants that could restrict our operations. Furthermore, it is\nuncertain whether financing will be available in amounts or on terms acceptable to us, if at all, which could materially and adversely\naffect our business, financial condition and results of operations.\n\n \n\n32\n\n \n\n \n\n**We\nmay be subject to infringement claims of intellectual property rights or other rights of third parties, which may be expensive to defend\nand may disrupt our business and operations.**\n\n \n\nOur\ncommercial success depends in part on our ability to operate without infringing, misappropriating or otherwise violating the trademarks,\npatents, copyrights, trade secrets and other proprietary rights of others. We have adopted and implemented internal procedures and licensing\npractices to prevent unauthorized use of such intellectual properties or the infringement by us of other rights of third parties. However,\nwe cannot be certain that these measures can be effective in completely preventing all possible infringement, misappropriation and other\nviolations of third-party’s intellectual property rights or other rights during the course of our business. As we face increasing\ncompetition and as litigation becomes a more common way to resolve disputes in China, we face a higher risk of being the subject of intellectual\nproperty infringement claims.\n\n \n\nWe\ncannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate patents, copyrights\nor other intellectual property rights held by third parties. This is especially true because our sales and marketing activities may use\nphotos or video clips that contain portraits of individuals and shows performed by others such as recorded product promotion live-streaming\nheld by our cooperating KOLs. We cannot rule out the possibility that some of these use cases are not properly authorized by the relevant\nperformers and/or proprietary right holders, which may expose us to potential liabilities for infringement of portrait rights or rights\nto network dissemination of information under Chinese laws. There could also be existing intellectual property of which we are not aware\nthat our operations and business may inadvertently infringe upon. Further, our internal procedures and licensing practices may not be\neffective in completely preventing the unauthorized use of copyrighted materials or the infringement of other rights of third parties\nby us and/or our employees. We may receive claims by third parties that we and/or our employees have infringed or otherwise violated\ntheir software copyright. We license and use software and other technologies from third parties in our ordinary course of business. The\nthird-party software or technology licenses may not continue to be available to us on acceptable terms or at all and may expose us to\npotential infringement liability. Any such liability, or our inability to use any of these third-party software or technologies on acceptable\nterms or at all, could harm our reputation, result in increased operating costs, and/or disruptions to our business that may materially\nand adversely affect our operating and financial results.\n\n \n\n33\n\n \n\n \n\nWe\nmay from time to time in the future be subject to legal proceedings and claims relating to the intellectual property rights of others.\nAlso, although we have not been subject to claims or lawsuits outside China, we cannot assure you that we will not become subject to\nintellectual property laws in other jurisdictions, such as the United States. If an infringement claim brought against us in China,\nthe United States or another jurisdiction is successful, we may be required to pay substantial penalties or other damages and fines,\nenter into license agreements that may not be available on commercially reasonable terms or at all or be subject to injunctions or court\norders. Even if allegations or claims lack merit, defending against them could be both costly and time consuming and could significantly\ndivert the efforts and resources of our management and other personnel. Competitors and other third parties may claim as well that our\nofficers or employees or the third-party manufacturing partners third-party manufacturing partners and packaging supply partners have\ninfringed, misappropriated or otherwise violated their product formulas, confidential information, trade secrets or other proprietary\ninformation or technology in the course of their employment with us or in their designing and manufacturing products for us, as the case\nmay be. Although we take steps to prevent the unauthorized use or disclosure of such third-party information, intellectual property or\ntechnology by our officers, employees or the third-party manufacturing partners and packaging supply partners, we cannot guarantee that\nour internal intellectual property policy, any other policies or contractual provisions that we have implemented or may implement will\nbe effective. If a claim of infringement, misappropriation or violation is brought against us or one of our officers or employees, we\nmay suffer reputational harm and may be required to pay substantial damages, subject to an injunction or court orders or be required\nto suspend sales of our products or to remit to the plaintiff the revenues we derive from the sales, any of which could adversely affect\nour business, financial condition and results of operations.\n\n \n\n**If\nwe are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business\nmay be adversely affected.**\n\n \n\nWe\nrely on a combination of trademark, copyright, trade secret, patent and other laws protecting proprietary rights, nondisclosure and confidentiality\nagreements and other practices, to protect our brand and proprietary information, know-how, technologies and processes. Our principal\nintellectual property assets include the registered trademarks for our brand, the design patents and copyrights for our product packaging\nand logos. Our copyrights, trademarks and design patents are valuable assets that support our brand and consumers’ perception of\nour products. Although we have existing and pending trademark and patent registrations in China, there can be no assurance that all of\nthem will be issued or registered. Historically, some of our trademark applications on certain key categories were rejected, which result\nin difficulties in our ability to protect our use of our brand name or logo on products of such categories, and may subject us to possible\nintellectual property disputes with third parties over such uses. Third parties may also oppose our trademark or patent applications\ndomestically or abroad, or otherwise challenge our use of the trademarks or patents. In the event that our trademarks or patents are\nsuccessfully challenged, we could be forced to rebrand our products or to refrain from using certain designs, which could result in the\nloss of brand recognition, impair the attractiveness of our products and could require us to devote resources to advertising and marketing\nnew brands and product designs.\n\n \n\nDespite\nour efforts to protect our intellectual property rights and proprietary information, unauthorized parties may attempt to copy or otherwise\nobtain and use our intellectual properties or know-how. Monitoring for infringement or other unauthorized use of our intellectual property\nrights and know-how is difficult and costly, and such monitoring may not be effective. From time to time, we may have to resort to courts\nor administrative proceedings to enforce our intellectual property rights, which may result in substantial costs and the diversion of\nresources.\n\n \n\n**Our\nemployees or business partners or other parties with whom we maintain business relationships may engage in misconduct or other improper\nactivities, which may disrupt our business, hurt our reputation and results of operations.**\n\n \n\nOur\nemployees or business partners, including third-party manufacturers and logistics service providers, may be subject to regulatory penalties\nor punishments or other legal proceedings because of their wrongdoings or regulatory compliance failures, which may disrupt our business.\nFor example, we currently rely on third-party manufacturers to produce our products. Although we usually require our third-party manufacturers\nto provide compliance representations and covenants, we cannot assure that they will not engage in any incompliant practices such as\nenvironmental or product safety requirement violations. If they engage in any noncompliance or face regulatory sanctions or operation\nsuspensions, our business may as a result be disrupted and our reputation may be harmed.\n\n \n\n34\n\n \n\n \n\nWe\nare exposed to the risk of fraud or other misconduct by our employees or third-party partners with whom we have business arrangements.\nMisconduct by employees or third-party partners could include inadvertent or intentional failures to comply with the laws and regulations\nto which we are subject or with our policies, provide accurate information to regulatory authorities, comply with ethical, social, product,\nlabor and environmental standards, comply with fraud and abuse laws and regulations, report financial information or data accurately,\nor disclose unauthorized activities to us. We have no control over the off-work time and behaviors of our employees and the\noperations of our third-party partners. Any legal liabilities of, or regulatory actions against, our employees, especially key employees,\nor business partners may affect our business activities and reputation and, in turn, our results of operations.\n\n \n\n**If our Chinese operating entities fail\nto obtain and maintain the requisite licenses, permits, registrations and filings applicable to the business, or fail to obtain additional\nlicenses, permits, registrations or filings that become necessary as a result of new enactment or promulgation of government policies,\nlaws or regulations or the expansion of our business, the business and results of operations may be materially and adversely affected.**\n\n \n\nIn general, the beauty industry\nand certain business practices such as the operation of franchise businesses in China are highly regulated, and may require multiple\nlicenses, permits, filings and approvals to conduct and develop business. As of the date of this annual report, our PRC subsidiaries\nand the VIEs have obtained and maintained valid business licenses or permits, among other things, necessary for their operations and\nfor the provision of beauty services and sale of cosmetic products. Xinzhan has also completed record filing and annual reporting with\nthe MOFCOM to conduct franchise business. Xinzhan has also obtained a medical device operation permit, expiring on August 20, 2028, despite\nthe fact that the devices in the stores are not medical devices and that the operation does not require such permit.\n\n \n\nHowever, as a fast-growing\ncompany with a limited operating history that is continuously exploring other approaches to conduct sales and marketing cost-effectively\nand capture points of growth, we may not be able to obtain in time all the additional licenses, registrations and filings that are advisable\nto obtain for certain aspects of our operations. Failure to obtain such additional licenses, permits, registrations or filings that could\nlater become necessary to obtain as a result of new enactment or promulgation of government policies, laws or regulations, which may\nsubject us to warnings, orders of correction, pecuniary penalties or other administrative proceedings from relevant governmental authorities,\ncould materially and adversely affect our business and results of operations. As of the date of this annual report, none of us and our\nsubsidiaries or the VIEs has received any notice, warning or sanctions nor have us and our subsidiaries or the VIEs been subject to any\nadministrative penalties or other disciplinary actions from the relevant governmental authorities for lack of licenses, permits, registrations\nor filings. However, we cannot assure you that we will not be subject to any administrative action that may materially and adversely\naffect our business, financial condition and results of operations.\n\n \n\n35\n\n \n\n \n\nIf our PRC subsidiaries\nor the VIEs fail to maintain or renew one or more of our licenses and certificates when their current term expires, or obtain such renewals\non a timely manner, our operations could be disrupted. In addition, under relevant PRC laws and regulations are required to update certain\nlicenses if any change to their respective name, registered capital or legal representative during the validity period of such license.\nIf we fail to properly renew and maintain all such requisite licenses on time, we may face penalties and in extreme circumstances, order\nto suspend or terminate our website and online business.\n\n \n\nFurther, due to uncertainties\nof interpretation and implementation of existing laws and the adoption of additional laws and regulations, the licenses, permits, registrations\nor filings our PRC subsidiaries or the VIEs held may be deemed insufficient by PRC governments, which may restrain our ability to expand\nour business scope and may subject us to fines or other regulatory actions. Furthermore, as we develop and expand our business scope,\nour PRC subsidiaries or the VIEs may need to obtain additional permits and licenses and they cannot assure that they will be able to\nobtain such permits on time or at all.\n\n \n\n**We\nare subject to risks relating to our leased properties.**\n\n \n\nPursuant\nto the Administrative Measures for Commodity Housing Leasing, parties to a lease agreement are required to file the lease agreements\nfor registration and obtain property leasing filing certificates for their leases. Our leasehold interests in leased properties have\nnot been registered with the relevant PRC government authorities as required by PRC law, which may expose us to potential fines if we\nfail to remediate after receiving any notice from the relevant PRC government authorities. As of the date of this annual report, we believe\nthat failure to complete the lease registration will not affect the legal effectiveness of our lease agreements according to PRC law,\nbut the real estate administrative authorities may require the parties to the lease agreements to complete lease registration within\na prescribed period of time, and the failure to do so may subject the parties to fines from RMB1,000 to RMB10,000 for each of such lease\nagreements. There can be no assurance that legal disputes or conflicts concerning such leases and tenancies will not arise in the future.\n\n \n\nAs\nof the date of this annual report, our PRC subsidiaries have a total of nine leases and have not completed filings for any of the lease\nagreements. As of the date of this annual report, we are not aware of any actions, claims or investigations threatened against us with\nrespect to the defects in our leasehold interests. However, if any of our leases is terminated as a result of challenges by third parties\nor governmental authorities for lack of title certificates or proof of authorization to lease, we do not expect to be subject to any\nfines or penalties, but we may be forced to relocate the affected offices, warehouse and stores and incur additional expenses relating\nto such relocation. Any dispute or claim in relation to the titles of the properties that our PRC subsidiaries occupy, including any\nlitigation involving allegations of illegal or unauthorized use of these properties, could require us to relocate the business operations\noccupying these properties.\n\n \n\n**Our\nfinancial and operating performance may be adversely affected by epidemics, adverse weather conditions, natural disasters and other catastrophes.**\n\n \n\nOur\nbusiness could be materially and adversely affected by epidemics, adverse weather conditions, natural disasters and other catastrophes.\nSimilarly, war (including the potential for war), terrorist activity (including threats of terrorist activity) and travel-related accidents\n(such as bed bug infestation), as well as geopolitical uncertainty and international conflict, may affect travel and may in turn have\na material adverse effect on our business and results of operations. In addition, we may not be adequately prepared in contingency planning\nor recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely affected\nand our reputation may be harmed.\n\n \n\n36\n\n \n\n \n\n**The\ncontinued and collaborative efforts of our senior management and key employees are crucial to our success, and our business may be harmed\nif we lose their services.**\n\n \n\nOur\nsuccess depends on the continued and collaborative efforts of our senior management and key employees. If our senior management cannot\nwork together effectively or efficiently, our business may be severely disrupted. If, however, one or more of our executives or other\nkey personnel are unable or unwilling to continue to provide services to us, we may not be able to find suitable replacements easily\nor at all. Competition for management and key personnel is intense and the pool of qualified candidates is limited. We may not be able\nto retain the services of our executives or key personnel, or attract and retain experienced executives or key personnel in the future.\n\n \n\nOur\nfuture success will also depend on our ability to attract and retain highly skilled technical, managerial, editorial, finance, marketing,\nsales and customer service employees. Qualified individuals are in high demand and competition for talent could cause us to offer higher\ncompensation and other benefits to attract and retain them. Even if we were to offer higher compensation, we may not be able to successfully\nattract, assimilate or retain the personnel we need to succeed.\n\n \n\nIf\nany of our executive officers or employees joins a competitor or forms a competing business, they may divulge business secrets, know-how,\ncustomer lists and other valuable resources. Our senior management and key employees have entered into employment agreements and confidentiality\nand non-competition agreements with us. However, if any dispute arises between any of them and us, we may have to incur substantial\ncosts and expenses in order to enforce such agreements in China or we may be unable to enforce such agreements at all. Any failure to\nattract or retain key management and personnel could severely disrupt our business and growth.\n\n \n\n**We\nmay from time to time become a party to litigation, legal disputes, claims or administrative proceedings that may materially and adversely\naffect us.**\n\n \n\nWe\nmay from time to time become a party to various litigation, legal disputes, claims or administrative proceedings arising in the ordinary\ncourse of our business. The outcome of any litigation, legal disputes, claims or administrative proceedings is hard to predict. If any\nverdict or award is rendered against us or if we decide to settle the disputes, we may be required to incur monetary damages or other\nliabilities. Even if we can successfully defend ourselves, we may have to incur substantial costs and spend substantial time and effort\nin these lawsuits. Negative publicity relating to such litigation, legal disputes, claims or administrative proceedings may damage our\nreputation and adversely affect the image of our brand and services. Furthermore, any litigation, legal disputes, claims or administrative\nproceedings which are not of material importance may escalate due to the various factors involved, such as the facts and circumstances\nof the cases, the likelihood of winning or losing, the monetary amount at stake, and the parties concerned continue to evolve in the\nfuture, and such factors may result in these cases becoming of material importance to us. Consequently, any ongoing or future litigation,\nlegal disputes, claims or administrative proceedings could materially and adversely affect our business, financial condition and results\nof operations.\n\n \n\n37\n\n \n\n \n\n**We\ndo not maintain any insurance to cover our assets, operations and any loss arising from business interruptions and we may be exposed\nto losses which may adversely affect our profitability and financial position.**\n\n \n\nWe\nface the risk of loss or damage to our equipment due to fire, theft, or other natural disasters in China. Such events may also cause\na disruption or cessation in our business operations, and thus may adversely affect our financial results. Our PRC subsidiaries and the\nVIEs do not have any insurance to cover the potential losses. They may also be liable for any liability, debt or other financial obligations\nrelated to such losses.\n\n \n\nDue to the nature of our\nand the VIEs’ operations, there is also a risk of accidents occurring either to our or the VIEs’ employees or to customers\nor third parties on our premises and/or on our franchisees’ jobsites during the course of operations. In the event that any claims\narise in respect of such occurrences and liability for such claims are attributed to us, we may be exposed to losses which may adversely\naffect our profitability and financial position.\n\n \n\n**We\nrely on a limited number of suppliers to provide us with the raw materials and ingredients we use for the products. We may not be able\nto obtain such supplies at competitive prices during times of high demand, which could have a material adverse effect on our business,\nfinancial condition and results of operations.**\n\n \n\nPark\nHa Jiangsu requires the third-party manufacturers that produce the products to purchase raw materials and ingredients from designated\nraw material suppliers. As such, we rely on a limited number of suppliers for the raw materials and ingredients used in our products.\nFor the fiscal year ended October 31, 2025, there were two suppliers who accounted for 10% or more of the Company’s total purchases\nand such suppliers accounted for approximately 26%, and 11% of our total purchases, respectively. For the fiscal year ended October 31,\n2024, there were four suppliers who accounted for 10% or more of the Company’s total purchases and such suppliers accounted for\napproximately 15%, 11%, 10% and 11% of our total purchases, respectively. For the fiscal year ended October 31, 2023, there was one supplier\nwho accounted for 10% or more of the Company’s total purchases and such supplier accounted for approximately 58% of our total purchases.\nThis reliance involves a number of significant risks. Unavailability of materials and interruptions in delivery of raw materials from\nour suppliers could result in manufacturing delays. We are also exposed to risks related to fluctuations in the quality and price of\ncomponents and raw materials.\n\n \n\nOur\nsuppliers have no obligation to continue to accept purchase orders from us. Our suppliers may stop selling their products to us on commercially\nreasonable terms or at all. We may be unable to get them to accept additional orders or engage an alternate supplier on terms that are\nacceptable to us, which may undermine our ability to deliver our products to customers in a timely manner. Identifying reliable suppliers\nis an extensive process that requires us to evaluate their quality control, technical capabilities, responsiveness and service, financial\nstability, regulatory compliance, and labor and other ethical practices and ensure they meet our standards. Even if alternate suppliers\nare available to us or our manufacturers, identifying them is often difficult and time consuming. If we or our manufacturers are unable\nto obtain an ample supply of raw materials from our existing suppliers or alternative sources of supply, we may be unable to satisfy\nour customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships\nwith our customers. Accordingly, a loss of any of our largest suppliers could have an adverse effect on our business, financial condition,\nand results of operations.\n\n \n\n38\n\n \n\n \n\n**We\nderive a significant portion of our revenue from a few major customers. Any significant decrease in the demand from our largest customers\nfor our products may materially and adversely affect our financial conditions and results of operations.**\n\n \n\nA\nsignificant portion of our revenue was derived from our five largest customers. For the fiscal years ended October 31, 2025,\n2024 and 2023, 25%, 38% and 36% of our revenue were attributable to our top five customers, respectively. Our customers’ purchases\nare made on an order-by-order basis, and our business with our customers has been, and we expect it will continue to be, conducted based\non the actual orders received from time to time. There is no assurance that our largest customers will continue placing orders with us\nat the same or increasing levels, or at all. Our customers level of demand for our products may fluctuate significantly from period to\nperiod. Such fluctuation is attributable mainly to changes in customer demand, such as interpretation of fashion and beauty trends. The\nloss of our largest customers, or if we are unable to attract new customers or if our existing customers decrease their spending on the\nproducts we offer, fail to make repeat purchases of our products, will harm our business, financial condition, results of operations,\nand growth prospects.\n\n \n\n**We\nare subject to the risk of non-payments or delayed payments by our customers, which could affect our financial condition and results\nof operations.**\n\n \n\nAs\nof October 31, 2025, 2024 and 2023, 70%,63% and 71% of our accounts receivable were attributable to our top five customers, respectively.\nOur allowance for loans receivables from franchisees increased from $55,520 as of October 31, 2024 to $232,876 as of October 31, 2025,\nwhich was primarily due to financial difficulties of franchisees. As of the date of this annual report, the payment has not been settled.\nOther than that, we did not experience significant delays or difficulties in collection from our customers. If we were to experience\nany unexpected delay or difficulty in collections from our customers in the future, our operating cash flows and financial condition\nwould be adversely affected.\n\n \n\nWe\nbelieve effective accounts receivable management is critical to maintaining our liquidity. As we continue to expand our business and\nengage new customers, our accounts receivable is anticipated to increase accordingly. However, there is no assurance that our customers\nwill settle in a timely manner. Our effort to strength our accounts receivable management system may not be effective and we cannot assure\nyou that we will be able to fully recover from our customers the outstanding amounts due in a timely manner. Any increase in uncollectible\naccounts receivable may adversely affect our business, financial condition and results of operations.\n\n \n\n39\n\n \n\n \n\n**We\ncurrently contract with third-party contractors, and in some cases, a single contractor, for all aspects of the supply, packaging, logistics,\nand formulation of our cosmetics products, and expected to continue to do so to support commercial scale production of our cosmetics\nproducts. There are significant risks associated with contracting with third-party suppliers, including their ability to meet the increased\nneed that may result from our increasing any commercialization efforts. This increases the risk that we will not have sufficient quantities\nof products or be able to obtain such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization\nefforts.**\n\n \n\nWe\ncurrently outsource our product manufacturing to the third-party manufacturing partners and packaging supply partners, and specify that\nthe third-party partners shall purchase raw materials from designated raw material suppliers. We do not have sufficient control over\nthe manufacturing process and cannot guarantee that no contaminations, defects or other safety issues would happen with respect to the\nraw materials, components and ingredients or during the manufacturing process. We have required the third-party manufacturing partners\nand packaging supply partners to deliver reports evidencing the safety of the products and imposed compliance covenants on the third-party\nmanufacturing partners and packaging supply partners. However, we cannot be sure that these measures are or will be effective in preventing\nall defects or safety issues or otherwise maintaining full compliance of our products with product safety related laws, regulations and\nstandards. Our exposure to product liability risk may increase as our manufacturing and sales volume increases. The situation is further\ncomplicated by the fact that a product may be safe for the general population when used as directed but could cause an adverse reaction\nfor a person who has a health condition or allergies, or who is taking a prescription medication. While we include what we believe are\nadequate instructions and warnings, previously unknown adverse reactions could occur. If we discover that any of our products are causing\nadverse reactions, we could suffer adverse publicity or administrative sanctions. If any batch of our products contains contaminants,\nfails to meet national safety standards or otherwise has defects or safety issues, we may need to suspend the sale or, in severe cases,\norder recalls of such batch or all of the products in question.\n\n \n\n**Our\nsuccess depends on the implementation of the franchise business model. Our growth through franchising may not occur as rapidly as we\nanticipate.**\n\n \n\nWe\nwill continue to seek franchisees to operate our “Park Ha” stores. We believe that our ability to recruit, retain and contract\nwith qualified franchisees will be increasingly important to our operations as we expand. As of October 31, 2025, 2024 and 2023, we had\n22, 45and 38 franchisees in China, of which 22, 43 and 36 franchisees operate under the store name “Park Ha”. As of October\n31, 2025, 2024 and 2023, we had 0, 2 and 2 franchisees operate under a different brand name, “Geni” or “歌妮”.\nIf we fail to expand our franchise, our results of operation will be adversely impacted.\n\n \n\n**We\ncould face liability resulting from acts of our franchisees or related to our relationship with our franchisees.**\n\n \n\nUnder\nthe franchise business model, we may face claims and liabilities for the acts of our franchisees based on vicarious liability, joint-employer\nliability, or other theories or liabilities. Such legal actions could result in expensive litigation with our franchisees or third parties\nand could adversely affect both our profit and our important relations with our franchisees. Also, our franchisees may from time to time\ndisagree with us and our strategies regarding the business operations or our interpretation of our respective rights and obligations\nunder the respective franchise agreements and the terms and conditions of the franchisee/franchisor relationship. This may lead to disputes\nwith our franchisees, and we expect such disputes to occur from time to time in the future as we continue to adopt a franchise system.\nSuch disputes may result in legal action against us. To the extent we have such disputes, the attention, time and financial resources\nof our management and our franchisees will be diverted from our business, which could have a material adverse effect on our business,\nfinancial condition, results of operations and cash flows even if we have a successful outcome in the dispute. In addition, regulatory\nor legal developments could result in changes to laws or the franchisor/franchisee relationship that could negatively impact the franchise\nbusiness model and, accordingly, our profit.\n\n \n\n40\n\n \n\n \n\n**We\noffer incentives such as cash subsidies to our franchisees and the amount of such incentives could potentially have adverse impacts on\nour financial performance.**\n\n \n\nWe\noffer incentives such as cash subsidies to our regional store franchisees and skin management center franchisees within two weeks upon\nthe entry of franchise agreements/renewals and full payment of the franchise fees. The incentives suspended in the second half of 2025.We\nrequire our franchisees to use the cash subsidies for renovation and advertising purposes only. Currently, we do not experience any financial\npressure from offering such cash subsidies. However, if in the future our current subsidies are insufficient to retain our existing franchisees\nand attract new franchisees, and we may need to increase the cash subsidies we offer to attract franchisees, our business, financial\ncondition, and cash flows could be adversely affected.\n\n \n\n**We\nmay grant employee share options and other share-based compensation awards in the future. Any additional grant of employee share options\nand other share-based compensation awards in the future may have a material adverse effect on our results of operations.**\n\n \n\nWe\nmay adopt employee share option and other share-based compensation awards to our employees, officers, directors and other eligible persons\nto incentivize their performance and align their interests with ours. As a result of these grants and potential future grants, we expect\nto continue to incur significant share-based compensation expenses in the future. The amount of these expenses is based on the fair value\nof the share-based awards. We account for compensation costs for all share options using a fair-value-based method and recognize expenses\nin our combined and consolidated statements of comprehensive income and other comprehensive income in accordance with U.S. GAAP. The\nexpenses associated with share-based compensation will decrease our profitability, perhaps materially, and the additional awards issued\nunder share-based compensation plans will dilute the ownership interests of our shareholders. However, if we limit the scope of our share-based\ncompensation plan, we may not be able to attract or retain key personnel who expect to be compensated by such share-based awards.\n\n \n\n**Risks\nRelated to Our Ordinary Shares**\n\n \n\n**Our\ndual class share structure with different voting rights may adversely affect the value and liquidity of the Class A Ordinary Shares.**\n\n \n\nWe\ncannot predict whether our dual class share structure with different voting rights will result in a lower or more volatile market price\nof the Class A Ordinary Shares, in adverse publicity, or other adverse consequences. Certain index providers have announced restrictions\non including companies with multiple class share structures in certain of their indices. Because of our dual class structure, we will\nlikely be excluded from these indices and other stock indices that take similar actions. Given the sustained flow of investment funds\ninto passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by\nmany of these funds and could make the Class A Ordinary Shares less attractive to investors. In addition, several shareholder advisory\nfirms have announced their opposition to the use of a multiple class structure and our dual class structure may cause shareholder advisory\nfirms to publish negative commentary about our corporate governance, in which case, the market price and liquidity of the Class A Ordinary\nShares could be adversely affected.\n\n \n\n41\n\n \n\n \n\n**Future\nissuances of Class B Ordinary Shares may be dilutive to holders of Class A Ordinary Shares.**\n\n \n\nWe\nmay issue additional Class B Ordinary Shares in the future in connection with future financings, strategic transactions, equity incentive\nplans, or otherwise. Any such issuance could result in dilution to existing holders of our Class A Ordinary Shares.\n\n \n\nIn\naddition, since Class B Ordinary Shares carry greater voting rights than Class A Ordinary Shares, any future issuances of Class B Ordinary\nShares could have the effect of further concentrating voting power in certain shareholders. This may reduce the influence of Class A\nOrdinary Shareholders over matters requiring shareholder approval.\n\n \n\nThere\ncan be no assurance as to when or if we will issue additional Class B Ordinary Shares, or the terms of any such issuance. However, any\nsuch future issuances could materially and adversely affect the market price of our Class A Ordinary Shares and dilute the interests\nof existing Class A Ordinary Shareholders.\n\n** **\n\n**If\nwe cannot continue to satisfy the continued listing requirements and other Nasdaq rules, our securities may be delisted, which could\nnegatively impact the price of our securities and your ability to sell them.**\n\n \n\nOur\nClass A Ordinary Shares are listed on Nasdaq. In order to maintain our listing on Nasdaq, we are required to comply with applicable Nasdaq\nrules, including those regarding minimum shareholders’ equity, minimum share price, minimum market value of publicly held shares,\nand various additional requirements. We may not be able to continue to satisfy these requirements and applicable rules. If we are unable\nto satisfy the Nasdaq criteria for maintaining our listing, our securities could be subject to delisting.\n\n \n\nOn\nSeptember 2, 2025, we received a notice from the Listing Qualifications Department of Nasdaq notifying the Company that based upon the\nclosing bid price of the Class A Ordinary Shares of the Company for the last 30 consecutive business days, the Company no longer meets\nthe continued listing requirement of Nasdaq under Nasdaq Listing Rules 5550(a)(2) to maintain a minimum bid price of $1 per share. Nasdaq\nhas provided the Company with a 180 calendar days compliance period, or until March 2, 2026, in which to regain compliance with Nasdaq\ncontinued listing requirement. Our Class A Ordinary Shares began trading on an adjusted basis, reflecting the reverse stock split, on\nFebruary 20, 2026, under the existing ticker symbol “BYAH.”\n\n \n\nWe\ncannot assure you that our Class A Ordinary Shares will remain above the minimum bid price of $1 per share in the future.\n\n \n\nIf\nthe Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including:\n\n \n\n●a\nlimited availability for market quotations for our securities;\n\n \n\n●reduced\nliquidity with respect to our securities;\n\n \n\n●a\ndetermination that our Class A Ordinary Share is a “penny stock,” which will\nrequire brokers trading in our Ordinary Share to adhere to more stringent rules and possibly\nresult in a reduced level of trading activity in the secondary trading market for our Class\nA Ordinary Share;\n\n \n\n●limited\namount of news and analyst coverage; and\n\n \n\n●a\ndecreased ability to issue additional securities or obtain additional financing in the future.\n\n \n\n42\n\n \n\n \n\nThe\nCompany is currently evaluating options to regain compliance and intends to timely regain compliance with Nasdaq’s continued listing\nrequirement, including, among other things, to effect a share consolidation. As of the date of this annual report, our board of directors\nis still evaluating the ratio of the share consolidation and other options to regain compliance.\n\n \n\n**Holders\nof our Warrants will have no rights as a shareholder until they acquire our Class A Ordinary Shares.**\n\n \n\nUntil\nholders acquire our Class A Ordinary Shares upon exercise of such warrants, holders will have no rights with respect to the Class A Ordinary\nShares issuable upon exercise of Warrants. Upon exercise of the Warrants, such holders will be entitled to exercise the rights of shareholder\nonly as to matters for which the record date occurs after the exercise date.\n\n \n\n**Our\nChairperson of the Board of Directors and Chief Executive Officer, Ms. Xiaoqiu Zhang, has a significant influence over our Company and\nfuture corporate decisions. Her interests may not always be aligned with those of other shareholders.**\n\n \n\nAs\nof the date of this annual report, Ms. Xiaoqiu Zhang, our Chairperson of the Board of Directors and Chief Executive Officer, beneficially\nowns more than 50% of our outstanding Ordinary Shares. As such, Ms. Zhang could have significant influence on determining the outcome\nof any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the election\nof directors and other significant corporate actions. In cases where her interests are aligned with other shareholders, she will also\nhave the power to prevent or cause a change in control. Ms. Zhang will also have the power to prevent or cause a change in control. Without\nthe consent of Ms. Zhang, we may be prevented from entering into transactions that could be beneficial to us or our minority shareholders.\nIn addition, Ms. Zhang could violate her fiduciary duties by diverting business opportunities from us to herself or others. The interests\nof Ms. Zhang may differ from the interests of our other shareholders. Thus, there might be potential risks for conflicts of interest\nand the impact on internal controls. The concentration in the ownership of our Ordinary Shares may cause a material decline in the value\nof our Ordinary Shares.\n\n \n\n**The\ntrading price of the Ordinary Shares is likely to be volatile, which could result in substantial losses to investors.**\n\n \n\nThe\ntrading price of the Ordinary Shares is likely to be volatile and could fluctuate widely due to factors beyond our control. This may\nhappen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies\nwith business operations located mainly in China that have listed their securities in the United States. In addition to market and\nindustry factors, the price and trading volume for the Ordinary Shares may be highly volatile for factors specific to our own operations,\nincluding the following:\n\n \n\n \n●\nvariations in our revenues,\nearnings, cash flow;\n\n \n\n \n●\nfluctuations in operating\nmetrics;\n\n \n\n \n●\nannouncements of new investments,\nacquisitions, strategic partnerships or joint ventures by us or our competitors;\n\n \n\n \n●\nannouncements of new products\nand services and expansions by us or our competitors;\n\n \n\n \n●\ntermination or non-renewal of\ncontracts or any other material adverse change in our relationship with our key customers or suppliers;\n\n \n\n \n●\nchanges in financial estimates\nby securities analysts;\n\n \n\n \n●\ndetrimental negative publicity\nabout us, our competitors or our industry;\n\n \n\n \n●\nadditions or departures\nof key personnel;\n\n \n\n \n●\nrelease of lockup or other\ntransfer restrictions on our outstanding equity securities or sales of additional equity securities;\n\n \n\n \n●\nregulatory developments\naffecting us or our industry; and\n\n \n\n \n●\npotential litigation or\nregulatory investigations.\n\n \n\n43\n\n \n\n \n\nAny\nof these factors may result in large and sudden changes in the volume and price at which the Ordinary Shares will trade.\n\n \n\nIn\nthe past, shareholders of public companies have often brought securities class-action suits against those companies following periods\nof instability in the market price of their securities. If we were involved in a class- action suit, it could divert a significant amount\nof our management’s attention and other resources from our business and operations and require us to incur significant expenses\nto defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our\nreputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be\nrequired to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.\n\n \n\n**You\nmay face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited,\nbecause we are incorporated in the Cayman Islands.**\n\n \n\nWe\nare an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed\nby our memorandum and articles of association, as amended from time to time, the Companies Act and the common law of the Cayman Islands.\nThe rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our\ndirectors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the\nCayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law\nof England and Wales, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands.\nThe rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law may be narrower in scope or less developed\nthan they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands\nhas a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and\njudicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to\ninitiate a shareholder derivative action in a federal court of the United States. In addition, while under Delaware law, controlling\nshareholders owe fiduciary duties to the companies they control and their minority shareholders, under Cayman Islands law, our controlling\nshareholders do not owe any such fiduciary duties to our company or to our minority shareholders. Accordingly, our controlling shareholders\nmay exercise their powers as shareholders, including the exercise of voting rights in respect of their shares, in such manner as they\nthink fit, subject only to very limited equitable constraints. One of the examples of such constraint is that the exercise of voting\nrights to amend the memorandum or articles of association of a Cayman Islands company must be exercised in good faith for the benefit\nof the Company as a whole.\n\n \n\nShareholders\nof Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than\nthe memorandum and articles of association, special resolutions which have been passed by shareholders, register of mortgages and charges,\nand a list of current directors) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under\nour articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders,\nbut are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed\nto establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.\n\n \n\nCertain\ncorporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies\nincorporated in other jurisdictions such as the United States. If we choose to follow home country practice, our shareholders may be\nafforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.\n\n \n\nAs\na result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken\nby our management, members of the Board of Directors or controlling shareholders than they would as public shareholders of a company\nincorporated in the United States.\n\n \n\n44\n\n \n\n \n\n**Our\nmanagement will have considerable discretion as to the use of the net proceeds from any future financings and you may not agree with\nour management on these uses.**\n\n \n\nOur\nmanagement will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity,\nas part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds may be used for corporate\npurposes that do not improve our efforts to achieve or maintain profitability or increase the price of our Ordinary Shares. The net proceeds\nfrom our initial public offering in December 2024 may be placed in investments that do not produce income or that lose value.\n\n \n\n**We\nare an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.**\n\n \n\nAs\na company with less than US$1.235 billion in revenues for our last fiscal year, we qualify as an “emerging growth company”\npursuant to the JOBS Act. Therefore, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable\ngenerally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of\nthe Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting.\nAs a result, if we elect not to comply with such reporting and other requirements, in particular the auditor attestation requirements,\nour investors may not have access to certain information they may deem important.\n\n \n\nThe\nJOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards\nuntil such date that a private company is otherwise required to comply with such new or revised accounting standards. We have elected\nto opt in such exemptions afforded to an emerging growth company. Specifically, we have elected to comply with any new or revised financial\naccounting standards until such date that a private company is otherwise required to comply under Section 102(b)(1) of the Sarbanes-Oxley\nAct of 2002. This election may result in our financial statements not being comparable to companies that comply with public company effective\ndates.\n\n \n\n**As\na company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance\nmatters that differ significantly from the Nasdaq Listing Rules.**\n\n \n\nAs\nan exempted company with limited liability incorporated in the Cayman Islands and listed on the Nasdaq, we are subject to corporate governance\nlisting standards of Nasdaq. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices\nof its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly\nfrom the Nasdaq corporate governance listing standards. We currently intend to follow Cayman Islands corporate governance practices in\nlieu of the corporate governance requirements of the Nasdaq that listed companies must have: (i) a majority of independent directors;\n(ii) a nominating/corporate governance committee composed entirely of independent directors; and (iii) a majority of independent directors\nand that the audit committee consist of at least three members. To the extent that we choose to follow home country practice in the future,\nour shareholders may be afforded less protection than they otherwise would enjoy under Nasdaq corporate governance listing standards\napplicable to U.S. domestic issuers.\n\n \n\n45\n\n \n\n \n\n**We\nare a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions\napplicable to U.S. domestic public companies.**\n\n \n\nBecause\nwe qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and\nregulations in the United States that are applicable to U.S. domestic issuers, including:\n\n \n\n \n●\nthe rules under the Exchange Act\nrequiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;\n\n \n\n \n●\nthe sections of the Exchange Act\nregulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;\n\n \n\n \n●\nthe sections of the Exchange Act\nrequiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from\ntrades made in a short period of time; and\n\n \n\n \n●\nthe selective disclosure\nrules by issuers of material nonpublic information under Regulation FD.\n\n \n\n \n●\ncertain audit committee\nindependence requirements in Rule 10A-3 of the Exchange Act.\n\n \n\nAs\na result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic\nissuer.\n\n \n\n**We\nmay lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.**\n\n \n\nWe\nare a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting\nrequirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an\nissuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than\n50% of our Ordinary Shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements\nnecessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required\nto file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive\nthan the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and\nour officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of\nSection 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain Corporate Governance Rules\nof the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting\nand other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain\na listing on a U.S. securities exchange.\n\n \n\n46\n\n \n\n \n\n**We\nare a “controlled company” as defined under the Nasdaq Stock Market corporate governance rules. As a result, we will qualify\nfor, and intend to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to shareholders\nof other companies.**\n\n \n\nWe\nare a “controlled company” as defined under the Nasdaq corporate governance rules because Ms. Xiaoqiu Zhang, our Chairperson\nof the Board of Directors and chief executive officer, beneficially owns more than 50% of our total voting power. For so long as we remain\na controlled company, we are permitted to elect to rely, and may rely, on certain exemptions from the corporate governance rules, including\nthe rule that we have to establish a nominating and corporate governance committee composed entirely of independent directors. As a result,\nyou will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.\nEven if we cease to be a controlled company, we may still rely on exemptions available to foreign private issuers, including being able\nto adopt home country practices in relation to corporate governance matters.\n\n \n\n**If\nsecurities or industry analysts cease to publish research or reports about our business, or if they adversely change their recommendations\nregarding the Ordinary Shares, the market price for the Ordinary Shares and trading volume could decline.**\n\n \n\nThe\ntrading market for our Ordinary Shares will be influenced by research or reports that industry or securities analysts publish about our\nbusiness. If one or more analysts who cover us downgrade the Ordinary Shares, the market price for the Ordinary Shares would likely decline.\nIf one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial\nmarkets, which, in turn, could cause the market price or trading volume for the Ordinary Shares to decline.\n\n \n\n**Certain\njudgments obtained against us by our shareholders may not be enforceable.**\n\n \n\nWe\nare an exempted company limited by shares incorporated under the laws of the Cayman Islands and substantially all of our assets are located\noutside of the United States. All of our current operations are conducted in China. In addition, all of our current directors and officers\nare nationals and residents of countries other than the United States. All of the assets of these persons are located outside the United\nStates. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United\nStates in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if\nyou are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a\njudgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman\nIslands and China. However, the deposit agreement gives you the right to submit claims against us to binding arbitration, and arbitration\nawards may be enforceable against us and our assets in China even when court judgments are not.\n\n \n\n47\n\n \n\n \n\n**The\nsale or availability for sale of substantial amounts of Ordinary Shares could adversely affect their market price.**\n\n \n\nSales\nof substantial amounts of Ordinary Shares in the public market, or the perception that these sales could occur, could adversely affect\nthe market price of the Ordinary Shares and could materially impair our ability to raise capital through equity offerings in the future.\nThe Ordinary Shares sold in our initial public offering in December 2024 are freely tradable without restriction or further registration\nunder the Securities Act, and shares held by our shareholders may also be sold in the public market in the future, subject to the restrictions\nin Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements (if any). We cannot predict what effect, if any,\nmarket sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for\nfuture sale will have on the market price of the Ordinary Shares.\n\n \n\n**You\nmay need to rely on a price appreciation of the Ordinary Shares for a return on your investment.**\n\n \n\nOur\nBoard of Directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition,\nour shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. In\neither case, all dividends are subject to certain restrictions under Cayman Islands law, namely that our Company may pay a dividend out\nof either profit or a share premium account, provided always that in no circumstances may a dividend be paid if this would result in\nus being unable to pay our debts as they fall due in the ordinary course of business.\n\n \n\nEven\nif our Board of Directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend\non our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received\nby us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our Board of Directors.\nAccordingly, the return on your investment in the Ordinary Shares will likely need to rely on future price appreciation of the Ordinary\nShares. There is no guarantee that the Ordinary Shares will appreciate in value or even maintain the price at which you purchased the\nOrdinary Shares. You may not realize a return on your investment in the Ordinary Shares and you may even lose your entire investment\nin the Ordinary Shares.\n\n \n\n**There\ncan be no assurance that we will not be a passive foreign investment company for U.S. federal income tax purposes for any taxable\nyear, which could result in adverse U.S. federal income tax consequences to U.S. holders of the Ordinary Shares.**\n\n \n\nA\nnon-U.S. corporation, such as our company, will be considered a passive foreign investment company, or “PFIC,” for any\ntaxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets\n(generally determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive\nincome.\n\n \n\nBased\nupon our current and projected income and assets and projections as to the value of our assets, we do not expect to be a PFIC for the\ncurrent taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether\nwe will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and\nassets. Fluctuations in the market price of the Ordinary Shares may cause us to be a PFIC for the current or future taxable years\nbecause the value of our assets for purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be\ndetermined by reference to the market price of the Ordinary Shares from time to time (which may be volatile). If our market capitalization\nsubsequently declines, we may be or become a PFIC for the current taxable year or future taxable years. Furthermore, the composition\nof our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in any future offering.\nUnder circumstances where our revenue from activities that produce passive income significantly increases relative to our revenue from\nactivities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes,\nour risk of being or becoming a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules,\nthere can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.\n\n \n\n48\n\n \n\n \n\nIf\nwe were treated as a PFIC for any taxable year during which a U.S. investor held an ordinary share or an ordinary share, certain\nadverse U.S. federal income tax consequences could apply to the U.S. investor.\n\n \n\n**We\nwill incur additional costs as a result of being a public company.**\n\n \n\nWe\nare a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company.\nThese additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating\nto corporate governance and public disclosure, including regulations implemented by the Nasdaq, may increase legal and financial compliance\ncosts and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and,\nas a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend\nto invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and\nadministrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.\nIf, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate\nlegal proceedings against us and our business may be harmed.\n\n \n\n**If\nwe fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial\nresults or prevent fraud.**\n\n \n\nSection\n404 of the Sarbanes-Oxley Act of 2002 requires that we maintain effective internal control over financial reporting and disclosure controls\nand procedures. In particular, we must perform system and process evaluations, document our controls and perform testing of our key controls\nover financial reporting to allow for management and our independent registered public accounting firm to report on the effectiveness\nof the company’s internal control over financial reporting.\n\n \n\nOur\nmanagement concluded that our internal control over financial reporting as of October 31, 2025 was not effective. We cannot assure you\nthat in the future our management or our independent registered public accounting firm will not identify material weaknesses in evaluating\nthe effectiveness of the company’s internal control over financial reporting. In addition, because of the inherent limitations\nof internal control over financial reporting, including the possibility of collusion or improper management override of controls, material\nmisstatements due to error or fraud may not be prevented or detected on a timely basis. If we fail to achieve and maintain an effective\ninternal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations,\nwhich would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital\nmarkets, harm our results of operations, and lead to a decline in the trading price of the Ordinary Shares. Additionally, ineffective\ninternal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to\npotential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. Furthermore,\nwe have incurred and expect to continue to incur considerable costs and to use significant management time and the other resources in\nan effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.\n\n \n\n**Risks Related to Our Corporate Structure**\n\n \n\n**Our business is\nsubject to extensive regulation in the PRC. If the PRC government finds that the contractual arrangement does not comply with applicable\nPRC laws and regulations, we could be subject to severe penalties.**\n\n \n\nOur business is subject to\nextensive regulations in the PRC. The laws and regulations applicable to the beauty sector are subject to change from time to time, and\nnew laws and regulations may be adopted, some of which may have a negative effect on our business and financial condition.\n\n \n\nAs we are a Cayman Islands\nholding company with no direct ownership of the VIEs’ business or assets, our investors are not purchasing any ownership interest\nin the VIEs but instead are purchasing equity interest in a Cayman Islands holding company. If the PRC government deems that our contractual\narrangements with the VIEs and its registered operator do not comply with applicable PRC laws, or if these regulations or their interpretation\nchange in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding\ncompany in the Cayman Islands, the VIEs, the registered operator of the VIEs, and our investors face uncertainty about potential future\nactions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly\naffect the financial performance of the VIEs and our Company as a group.\n\n \n\n49\n\n \n\n \n\nIf our ownership structure\nand contractual arrangements are found to violate any PRC laws or regulations, or if we are found to be required but failed to obtain\nany of the permits or approvals for our business, the relevant PRC regulatory authorities would have broad discretion in imposing fines\nor punishments upon us for such violations, including:\n\n \n\n●revoking the business and\noperating licenses of our PRC subsidiaries and/or the VIEs;\n\n   \n\n●discontinuing or restricting\nany related-party transactions between us and the VIEs;\n\n   \n\n●imposing fines and penalties,\nor additional requirements for our operations which we, or the VIEs may not be able to comply\nwith;\n\n   \n\n●requiring us to restructure\nthe ownership and control structure; or\n\n   \n\n●restricting the use of financing\nsources by us or the VIEs or otherwise restricting our or their ability to conduct business.\n\n \n\nHowever, we cannot assure\nyou that such fines or punishments will not be imposed on us or any other companies in the future. If any of the above fines or punishments\nis imposed on us, our business, financial condition and results of operations could be materially and adversely affected. If any of these\npenalties results in our inability to direct the activities of VIEs, and/or our failure to receive the economic benefits from VIEs, we\nmay not be able to consolidate VIEs in our financial statements in accordance with U.S. GAAP.\n\n \n\n**Substantial uncertainties\nexist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of the\ncurrent corporate structure, corporate governance and business operations of us and the VIEs.**\n\n \n\nOn March 15, 2019, the Foreign\nInvestment Law was formally adopted by the National People’s Congress, which became effective from January 1, 2020. However, the\nForeign Investment Law does not explicitly stipulate the contractual arrangements as a form of foreign investment. The Foreign Investment\nLaw is formulated to establish regulatory principles to foreign investment within the PRC, aiming to further expand opening-up, vigorously\npromote foreign investment and protect the legitimate rights and interests of foreign investors. Much detailed laws, regulations and\nrules relating to foreign investments are to be enacted by relevant regulatory authorities. As such, there are uncertainties regarding\nthe evolution of the regulatory regime and the interpretation and implementation of current and any future PRC laws and regulations applicable\nto the foreign investment.\n\n \n\nConducting operations through\ncontractual arrangements has been adopted by many PRC-based companies. The Foreign Investment Law stipulates that foreign investment\nincludes foreign investors investing in China through any other methods under laws, administrative regulations, or provisions prescribed\nby the State Council. Therefore, there are possibilities that future laws, administrative regulations, or provisions of the State Council\nmay stipulate contractual arrangements as a way of foreign investments, and then whether our contractual arrangements will be recognized\nas foreign investment, whether our contractual arrangements will be deemed to be in violation of the foreign investment access requirements\nand how our contractual arrangements will be handled are uncertain. In the extreme case-scenario, we and the VIE may be required to unwind\nthe contractual arrangements and/or dispose of the VIEs, which could have a material and adverse effect on our and the VIEs’ business,\nfinancial condition and result of operations.\n\n \n\n**Any failure by\nthe VIEs or its registered operators to perform their obligations under our contractual arrangements would have an adverse effect on\nour business and results of operations.**\n\n** **\n\nIf the VIEs or their registered\noperators fail to perform their obligations under the contractual arrangements with us, we may have to incur substantial costs and expend\nadditional resources to enforce such arrangements. We may also have to rely on legal remedies under the PRC laws, including seeking specific\nperformance or injunctive relief, and claiming damages, which we cannot assure you will be effective.\n\n \n\n50\n\n \n\n \n\nAll the agreements under our\ncontractual arrangements are governed by PRC laws. Accordingly, these contracts would be interpreted in accordance with PRC laws and\nany disputes would be resolved in accordance with PRC legal procedures. Uncertainties in the PRC legal system could limit our ability\nto enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to\nexert effective financial control over VIEs, and our ability to conduct our business may be negatively affected.\n\n \n\nUnder\nthe current contractual arrangements, we rely on the performance by the VIEs and their registered operators of their obligations under\nthe contracts to exercise control over the VIEs. Meanwhile, there are very few precedents as to whether contractual arrangements with\nthe individually-owned business would be judged to form effective control over that business, or how such contractual arrangements should\nbe interpreted or enforced by PRC courts. Should legal actions become necessary, we cannot guarantee that the court will rule in favor\nof the enforceability of the VIE contractual arrangements. In the event we are unable to enforce these contractual arrangements, or if\nwe suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert\neffective control over the VIEs, and our ability to conduct our business may be materially adversely affected. Therefore, our contractual\narrangements with the VIEs and their registered operators may not be as effective in ensuring our control over the relevant portion of\nour business operations as direct ownership would be.\n\n \n\n**We rely on contractual\narrangements with the VIEs and their registered operators for our operations in the PRC, which may not be as effective in providing control\nas direct ownership.**\n\n** **\n\nWe have relied and expect\nto continue to rely on the contractual arrangements with the VIEs and their registered operators to operate our business. For a description\nof these contractual arrangements, see “Item 4. Information on the Company — A. History and Development of the Company.”\n\n \n\nHowever, contractual arrangements\nmay not be as effective as direct equity ownership in providing us with control over the VIEs. Any failure by the VIEs or their registered\noperators to perform their obligations under the contractual arrangements would have a material adverse effect on our financial position\nand performance. In addition, if the legal structure and the contractual arrangements were found to violate any existing or future PRC\nlaws and regulations, we may be subject to fines or other legal or administrative sanctions.\n\n \n\nIf the imposition of government\nactions causes us to lose our right to direct the activities of the VIEs or our right to receive substantially all the economic benefits\nand residual returns from the VIEs and we are not able to restructure our ownership structure and operations in a satisfactory manner,\nwe would no longer be able to consolidate the financial results of the VIEs.\n\n \n\n51"}