{"url_path":"/sec/ecxj/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-09-11","source_url":"https://www.sec.gov/Archives/edgar/data/1823635/0001493152-26-042301-index.html","accession_number":"0001493152-26-042301","cik":"0001823635","ticker":"ECXJ","issuer_name":"CXJ GROUP CO., Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1823635/0001493152-26-042301-index.html","primary_entity_key":"0001823635","primary_entity_name":"CXJ GROUP CO., Ltd"},"word_count":21322,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors**\n\n \n\nYou\nshould carefully consider the risks described below and elsewhere in this Annual Report, which could materially and adversely affect\nour business, results of operations or financial condition. Our business faces significant risks and the risks described below may not\nbe the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect\nour business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could\nbe decline and you may lose all or part of your investment.\n\n \n\n**1)**\n**Risks Related to\nOur Business**\n\n \n\n \n**1.1)**\n**The ability of the\nCompany to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its\nbusiness plan.**\n\n** **\n\nOur\nindependent auditors have added an explanatory paragraph to their audit opinion issued in connection with our financial statements included\nin this annual report which states that the financial statements were prepared assuming that we would continue as a going concern. As\ndiscussed in Note 3 to the consolidated financial statements included herein, we incurred a net loss $9,680 for the financial year ended\nMay 31, 2026, and had an accumulated deficit of $7,657,185 and negative net assets of $1,624,018 as of May 31, 2026. These conditions\nraise substantial doubt about our ability to continue as a going concern. With the viability of business strategy plans such as Tik Tok’s\nshort videos e-commerce sales model, and the financial support from the substantial shareholder and director (supported by a financial\nsupport letter) will generate sufficient fund to cover next 12 months cash demands. However, there can be no assurance that the business\nstrategy we will be successful and generate sufficient fund. The audited consolidated financial statements included in this report do\nnot include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n \n**1.2)**\n**We may continue to\nincur losses in the future, and may not be able to return to profitability, which may cause the market price of our shares to decline.**\n\n \n\nThe\nCompany incurred a net loss of $9,680 and $2,284,025 for the years ended May 31, 2026 and 2025, respectively. We have generated very\nlimited revenue. Our current operations are small with a short history. We may be unable to achieve our performance targets, which will\nimpact the Company’s operating results. Our ability to achieve profitability depends on the competitiveness of our products and\nservices as well as our ability to control costs and to provide new products and services to meet the market demands and attract new\ncustomers. Due to the numerous risks and uncertainties associated with the development of our business, we cannot guarantee that we will\nbe able to achieve profitability in the short-term or long-term. The Company continues to focus on increasing its revenue through the\nsale of motor oil and auto parts products on e-commerce sales model such as Tik Tok to reduce its costs of goods sold, streamlining its\noverhead costs, or obtaining financing from its stockholders or directors. Management may seek additional funds, primarily through the\nissuance of equity securities for cash and loans from potential investors and controlling stockholders, to operate our business and estimates\nthat additional capital will be necessary to support our operations and growth.\n\n \n\n \n**1.3)**\n**We have a limited\noperating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems,\nexpenses, difficulties, complications and delays frequently encountered by a small developing company.**\n\n \n\nWe\nstarted our operation in June 2019. For the years ended May 31, 2026 and 2025, we have generated $531,606 and $458,632 respectively in\nrevenues and incurred net loss of $9,680 and $2,284,025 respectively. The likelihood of our success must be considered in the light of\nthe problems, expenses, difficulties, complications and delays frequently encountered by a small company starting a new business enterprise\nand the highly competitive environment in which we are operating. We have a limited operating history upon which an evaluation of our\nfuture success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:\n\n \n\n \n●\nOur ability to market our\nproducts;\n\n \n●\nOur ability to generate\nrevenue;\n\n \n●\nOur ability to obtain higher\ngross profit products;\n\n \n●\nOur ability to obtain healthier\nand economical products; and Our ability to raise the capital necessary to continue marketing and developing our product and online\nplatform.\n\n \n\n16\n\n \n\n \n\n \n**1.4)**\n**If we are unable\nto gain any significant market acceptance for our products and services or establish a significant market presence, we may be unable\nto generate sufficient revenue to continue our business.**\n\n \n\nOur\ngrowth strategy is substantially dependent upon our ability to successfully market our products and services to prospective clients.\nHowever, our planned self-conduct or consignment products may not achieve significant acceptance. Such acceptance, if achieved, may not\nbe sustained for any significant period of time. Failure of our products to achieve or sustain market acceptance could have a material\nadverse effect on our business, financial conditions and the results of our operations.\n\n \n\n \n**1.5)**\n**Management’s\nability to implement our business strategy may be slower than expected and we may be unable to generate or sustain profits.**\n\n \n\nOur\nbusiness plans, including developing and optimizing our online platform, may not generate profit in the near term or may not become profitable\nat all, which will result in losses.\n\n \n\nWe\nmay be unable to enter into our intended markets successfully. The factors that could affect our growth strategy include our success\nin (a) developing our business plan, (b) obtaining new clients, (c) obtaining adequate financing on acceptable terms, and (d) adapting\nour internal controls and operating procedures to accommodate our future growth.\n\n \n\nOur\nsystems, procedures and controls may not be adequate to support the expansion of our business operations. Significant growth will place\nmanagerial demands on all aspects of our operations. Our future operating results will depend substantially upon our ability to manage\nchanging business conditions and to implement and improve our technical, administrative and financial controls and reporting systems.\n\n \n\n \n**1.6)**\n**Competitors may enter\nour business sector with superior products which could affect our business adversely.**\n\n \n\nWe\nbelieve that barriers to entry are low because of economies of scale, cost advantage and brand identity. Potential competitors may enter\nthis sector with superior products. This would have an adverse effect upon our business and our results of operations. In addition, a\nhigh level of support is critical for the successful marketing and recurring sales of our products. Despite having accumulated customers\nfrom the past seven years, we may still need to continue to improve our marketing strategic, products and platform in order to assist\npotential customers in using our platform, and we also need to provide effective support to future clients. If we are unable to increase\ncustomer support and improve our platform in the face of increasing competition, with the increase in competition, our ability to sell\nour products to potential customers could adversely affect our brand, which would harm our reputation.\n\n \n\n \n**1.7)**\n**We operate in a highly\ncompetitive industry, and our failure to compete effectively could adversely affect our market share, revenues and growth prospects.**\n\n \n\nThe\nautomotive aftermarket products industry in China is highly fragmented and intensely competitive. Industry participants include large\nscale and well-funded manufacturers and distributors, as well as smaller counterparts. We believe that the market is also highly sensitive\nto the introduction of new products, including the ever-growing list of engine oil products, which may rapidly capture a significant\nshare of the market. Presently most of our business operations and product distribution are concentrated in Hunan, Henan and Shangdong\nprovinces, China, and we expect to expand our product sales into broader markets and more geographic areas in China. We compete for sales\nwith provided training and after sales services to existing customers and online sales to attract new customers. Our competitors include\nChina home-grown manufacturers and distributors, foreign companies with China operations, as well as product importers and distributors\nthat carry the same categories of products as ours. We may not be able to compete effectively and our attempt to do so may require us\nto reduce our prices and result in lower margins. Failure to effectively compete could adversely affect our market share, revenues, and\ngrowth prospects.\n\n \n\n17\n\n \n\n  \n\n \n**1.8)**\n**Our failure to appropriately\nrespond to changing consumer preferences and demand for new products could significantly harm our customer relationships and product\nsales.**\n\n \n\nOur\nbusiness is particularly subject to changing consumer trends and preferences. Our continued success depends in part on our ability to\nanticipate and respond to these changes, and we may not be able to respond in a timely or commercially appropriate manner to these changes.\nIf we are unable to do so, our customer relationships and product sales could be harmed significantly.\n\n \n\nFurthermore,\nthe automotive aftermarket products industry in particular is characterized by rapid and frequent changes in demand for products and\nnew product introductions. Our failure to accurately predict these trends could negatively impact consumer opinion with respect to the\nproducts we distribute. This could harm our customer relationships and cause losses to our market share. The success of our new product\nofferings depends upon a number of factors, including our ability to accurately anticipate customer needs, identify the right suppliers,\nsuccessfully commercialize new products in a timely manner, price our products competitively, deliver our products in sufficient volumes\nand in a timely manner, and differentiate our product offerings from those of our competitors.\n\n \n\nIf\nwe do not introduce new products or make sufficient adjustments to meet the changing needs of our customers in a timely manner, some\nof our products could become obsolete in the view of consumers, which could have a material adverse effect on our revenues and operating\nresults.\n\n \n\n \n**1.9)**\n**We do not have long\nterm contractual commitments with our retail or distributor customers, and our business may be negatively affected if we are unable\nto maintain those important relationships and distribute our products.**\n\n \n\nOur\nmarketing and sales strategy depends in large part on orders, availability and performance of our retailers and distributor customers,\nsupplemented by the sales at our own store and online sales. We will continue our efforts to reinforce and expand our distribution network\nby partnering with new retailers and distributors. While we have entered written agreements with most of our customers, we currently\ndo not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments from most major\ncustomers. In addition, we may not be able to maintain our current distribution relationships or establish and maintain successful relationships\nwith distributors in new geographic distribution areas. Moreover, there is a possibility that we may have to incur additional costs to\nattract and maintain new customers. Our inability to maintain our sales network or attract additional customers would adversely affect\nour revenues and financial results.\n\n \n\n \n**1.10)**\n**Because we rely on\nour retailer customers and wholesale distributors for the majority of our sales that distribute our competitors’ products along\nwith our products, we have little control in ensuring those retailers and distributors will not prefer our competitors’ products\nover ours, which could cause our sales to suffer.**\n\n \n\nOur\nability to establish a market for our products in new geographic areas, as well as maintain and expand our existing markets, is dependent\non our ability to establish and maintain successful relationships with reliable distributors and retailers positioned to serve those\nareas. Most of our distributors and retailers sell and distribute competing products, including automobile exhaust cleaner, engine oil\nand auto parts, and our products may represent a small portion of their business. To the extent that our distributors and retailers prefer\nto sell our competitors’ products over our products or do not employ sufficient efforts in managing and selling our products, including\nre-stocking retail shelves with our products, our sales and results of operations could be adversely affected. Our ability to maintain\nour distribution network and attract additional distributors and retailers will depend on several factors, some of which are outside\nour control. Some of these factors include: the level of demand for our brands and products in a distribution area; our ability to price\nour products at levels competitive with those of competing products; and our ability to deliver products in the quantity and at the time\nordered by distributors or retailers. If any of the above factors work negatively against us, our sales will likely decline and our results\nof operations will be adversely affected.\n\n \n\n18\n\n \n\n \n\n \n**1.11)**\n**Because most of our\nretail customers and distributors are not required to place minimum orders with us, we need to manage our inventory levels, and it\nis difficult to predict the timing and amount of our sales.**\n\n** **\n\nMost\nof our customers are not required to place minimum monthly or annual orders for our products, only a small number of customers under\nan old brand name management service contract is required to place minimum monthly or annual orders. There is no assurance as to the\ntiming or quantity of purchases by any of our customers or that any of our distributors will continue to purchase products from us at\nthe same frequencies and volumes as they may have in the past. To be able to sell our products on a timely basis, we need to maintain\nadequate inventory levels of the desired products, but we cannot predict the frequency or size of orders by a substantial portion of\nour customers. If we fail to meet our shipping schedules, we could damage our relationships with distributors or retailers, increase\nour shipping costs or cause sales opportunities to be delayed or lost, which would unfavorably impact our future sales and adversely\naffect our operating results. In addition, if the inventory of our products held by our distributors or retailers is too high, they will\nnot place orders for additional products, which would also unfavorably impact our future sales and adversely affect our operating results.\n\n \n\n \n**1.12)**\n**Our business plan\nand future growth is dependent in part on our distribution arrangements with retailers and wholesale distributors. If we are unable\nto effectively implement our business plan and distribution strategy, our results of operations and financial condition could be\nadversely affected.**\n\n \n\nWe\ncurrently have sales arrangements with most of wholesale distributors and retail accounts to distribute our products directly through\ntheir venues. However, there are several risks associated with this distribution strategy. We do not have long-term agreements in place\nwith any of these customers and thus, the arrangements are terminable at any time by these retailers or us. Accordingly, we may not be\nable to maintain continuing relationships with any of these accounts. A decision by any of these retailers to decrease the amount purchased\nfrom us or to cease carrying our products could have a material adverse effect on our reputation, financial condition or results of operations.\nIn addition, our dependence on existing major retail accounts may result in pressure on us to reduce our pricing to them or allow significant\nproduct discounts. Any increase in our costs for these retailers to carry our product, reduction in price, or demand for product discounts\ncould have a material adverse effect on our profit margin.\n\n \n\n \n**1.13)**\n**We rely on independent\nsuppliers and manufacturers of our products, and such dependence could make management of our marketing and distribution efforts\ninefficient or unprofitable.**\n\n \n\nWe\ndo not own the plants or the equipment required to make and package the products we sell, and do not directly manufacture our products\nbut instead purchase our products from our independent suppliers who source the products from independent manufacturers. We do not anticipate\nbringing the manufacturing process in-house in the future. Currently, our products are sourced from approximately eight independent suppliers.\nOur ability to attract and maintain effective relationships with our suppliers, and other third parties for the production and delivery\nof our motor oil and spare parts products in a geographic distribution area is important to the success of our operations within each\ndistribution area. Our contract manufacturers may terminate their arrangements with us at any time, in which case we could experience\ndisruptions in our ability to deliver products to our customers. We may not be able to maintain our relationships with current contract\nmanufacturers or establish satisfactory relationships with new or replacement contract manufacturers, whether in existing or new geographic\ndistribution areas. The failure to establish and maintain effective relationships with contract manufacturers for a distribution area\ncould increase our manufacturing costs and thereby materially reduce profits realized from the sale of our products in that area. In\naddition, poor relations with any of our contract manufacturers could adversely affect the amount and timing of product delivered to\nour distributors for resale, which would in turn adversely affect our revenues and financial condition.\n\n \n\nAs\nis customary in the contract manufacturing industry for comparably sized companies, we are expected to arrange for our contract manufacturing\nneeds sufficiently in advance of anticipated requirements. We continually evaluate which of our contract manufacturers to utilize based\non the cost structure and forecasted demand for the geographic area where our contract manufacturers are located. To the extent demand\nfor our products exceeds available inventory or the production capacity of our contract manufacturing arrangements, or orders are not\nsubmitted on a timely basis, we will be unable to fulfill distributor orders on demand. Conversely, we may produce more product than\nwarranted by actual demand, resulting in higher storage costs and the potential accurately predict and manage our contract manufacturing\nrequirements may impair relationships with our independent distributors and key accounts, which, in turn, would likely have a material\nadverse effect on our ability to maintain effective relationships with those distributors and key accounts.\n\n \n\n19\n\n \n\n \n\n \n**1.14)**\n**We are exposed to\nrisks associated with the distribution of products manufactured by third parties.**\n\n \n\nWe\npurchase most of our engine oil from distributors of Germany and Malaysia, and contract with local suppliers to supply auto parts and\nother products. We do not have full control over the product making activities procedure of the engine oil, auto parts and other products.\nSignificant delays and defects in our products resulting from the activities of our product makers may have a material adverse effect\non our Company’s results of operations and financial condition.\n\n \n\nUnder\nthe PRC law, for the third party products that we distribute, the third party manufacturers are responsible for the quality of the products.\nWe, however, may still be liable under certain circumstances. For example, product sellers bear tort liabilities for product defects\nas a result of the seller’s negligence which has caused the consumers’ damages or if the sellers are unable to specify the\nmanufacturer of a defective product. In the event consumers suffer from damages caused by product defects, consumers may seek compensation\neither from the product manufacturer or from the seller of the products. If a product defect occurs during the manufacturing period and\nthe compensation is paid by a seller, then the seller is entitled to recover losses from the manufacturer. However, if a defect occurs\nduring the selling period and the compensation is paid by the manufacturer, then the manufacturer is entitled to recover losses from\nthe seller. In the event that product defects are caused by the manufacturers, while we have the right to seek recourse against the manufacturers\nafter we pay damages to the consumers, there can be no assurance that we could recover any of our compensation payments we will have\nmade.\n\n \n\n \n**1.15)**\n**We may be subject\nto product liability claims.**\n\n \n\nWe\nare an engine oil and auto parts distributor, and the products we sell are not made by us which may contain defects or have quality issues.\nAs a result, sales of such products could expose us to product liability claims relating to personal injury or property damage and may\nrequire product recalls or other actions. Third parties subject to such injury or damage may bring claims or legal proceedings against\nus as the distributor or retailer of the product. Although we would have legal recourse against the manufacturer of such products under\napplicable law, attempting to enforce our rights against the manufacturer may be expensive, time-consuming and ultimately futile. In\naddition, we do not currently maintain any third-party liability insurance or product liability insurance in relation to products we\nsell. As a result, any material product liability claim or litigation could have a material and adverse effect on our business, financial\ncondition and results of operations. Even unsuccessful claims could result in the expenditure of funds and managerial efforts in defending\nthem and could have a negative impact on our reputation.\n\n \n\n \n**1.16)**\n**Our business and\nfinancial results depend on the continuous supply and availability of raw materials, and rising raw material, fuel and freight costs\nas well as freight capacity issues may have an adverse impact on our sales and earnings.**\n\n \n\nThe\nprincipal raw materials for the engine oil products we sell is crude oil and other natural ingredients. The costs of the product ingredients\nare subject to fluctuation. If any supply of these raw materials is impaired or if prices increase significantly, our business would\nbe adversely affected. Prices of any raw materials or ingredients may continue to rise in the future and we would incur higher supply\ncosts which we may not be able to pass any cost increases on to our customers.\n\n \n\nMoreover,\nindustry-wide shortages of certain concentrates, supplements and sweeteners have been experienced could, from time to time in the future,\nbe experienced, which could interfere with and/or delay production and supply of certain of our products we source and could have a material\nadverse effect on our business and financial results.\n\n \n\nIn\naddition, any supply shortage or volatility in the global crude oil markets would result in unstable fuel and freight prices. Due to\nthe price sensitivity of our products, we may not be able to pass any increased costs on to our customers. At the same time, the economy\nappears to be returning to pre-pandemic levels resulting in the rise of freight volumes which is exacerbated by carrier failures to meet\ndemands and fleet reductions due to higher transportation demand in China and global logistics service industry. We may be unable to\nsecure available transportation carrier capacity at reasonable rates, which could have a material adverse effect on our operations.\n\n \n\n20\n\n \n\n \n\n \n**1.17)**\n**We rely upon our\nongoing relationships with our key suppliers. If we are unable to source our products on acceptable terms from our key suppliers,\nwe could suffer disruptions in our business.**\n\n \n\nCurrently\nwe purchase our engine oil and auto parts products from eight major suppliers, and we anticipate that we will purchase our products from\nothers with the intention of developing other sources of supply for our products. The prices of our products are determined by our suppliers\nand manufacturers and may be subject to change. Consequently, we do not have control over any price increases of the products we sell\nand may be unable to obtain those products from alternative suppliers on short notice.\n\n \n\nIn\naddition, we may not correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly\nwith new products, and may be less precise during periods of rapid growth, particularly in new markets. If we materially underestimate\ndemand for our products or are unable to secure sufficient product supplies, we might not be able to satisfy demand on a short-term basis.\nIf we must replace a product supplier, we could experience disruptions in our ability to deliver products to our customers or experience\na change in the quality or customer appeal of our products, all of which could have a material adverse effect on our results of operations.\n\n \n\n \n**1.18)**\n**Failure to manage\nour growth could strain our operational and other resources, which could materially and adversely affect our business and prospects.**\n\n \n\nSince\n2019, our business has experienced significant growths through acquisitions and product diversification. Our growth strategy includes\nincreasing market penetration of our existing products and services, identifying and developing new products, and increasing distribution\nchannels and customers we serve. Pursuing these strategies has resulted in, and will continue to result in substantial demands on our\ncapital and operating resources. In particular, the management of our growth will require, among other things:\n\n \n\n \n●\nsuccessful integration\nof our existing operations and acquired businesses;\n\n \n●\nstringent cost controls\nand adequate liquidity;\n\n \n●\nstrengthening of financial\nand risk controls;\n\n \n●\nincreased marketing, sales\nand support activities; and\n\n \n●\nretaining, training and\nhiring qualified employees and professionals.\n\n \n\nIf\nwe are not able to manage our growth successfully, our business, financial condition and operating results would be materially and adversely\naffected.\n\n \n\n \n**1.19)**\n**If we are unable\nto maintain brand image and product quality, or if we encounter other product issues such as product recalls, our business may suffer.**\n\n \n\nOur\nsuccess depends on our ability to maintain brand reputation for our existing products and effectively build up brand image for new products\nand brand extensions. There can be no assurance, however, that additional expenditures on advertising and marketing will have the desired\nimpact on our products’ brand image and on consumer preferences. Product quality issues or allegations of product contamination,\neven when false or unfounded, could tarnish the image of the affected brands and may cause consumers to choose other products. In addition,\nbecause of changing government regulations or their implementation, we may be required from time to time to recall products entirely\nor from specific markets. Product recalls could affect our profitability and could negatively affect brand image.\n\n \n\n \n**1.20)**\n**The inability to\nattract and retain key personnel would directly affect our efficiency and results of operations.**\n\n \n\nOur\nsuccess depends on our ability to attract and retain highly qualified employees in such areas as distributor, sales, marketing and finance.\nWe compete to hire new employees, and, in some cases, must train them and develop their skills and competencies. Our operating results\ncould be adversely affected by increased costs due to increased competition for employees, higher employee turnover or increased employee\nbenefit costs. Any unplanned turnover, particularly involving our key personnel, could negatively impact our operations, financial condition\nand employee morale.\n\n \n\n21\n\n \n\n \n\n \n**1.21)**\n**Our inability to\nprotect our trademarks and trade secrets may prevent us from successfully marketing our products and competing effectively.**\n\n \n\nFailure\nto protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively.\nFurther, enforcing or defending our intellectual property rights, including our trademarks, copyrights, licenses and trade secrets, could\nresult in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly our trademarks\nand trade secrets to be of considerable value and importance to our business and our success. We rely on a combination of trademark and\ntrade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. In addition, there\ncan be no assurance that other parties will not assert infringement claims against us, and we may have to pursue litigation against other\nparties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary\nrights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands\nor profitably exploit our products.\n\n \n\n \n**1.21)**\n**If we are unable\nto maintain effective disclosure controls and procedures and internal control over financial reporting, our stock price and investor\nconfidence in us could be materially and adversely affected.**\n\n \n\nWe\nare required to maintain both disclosure controls and procedures and internal control over financial reporting that are effective. Because\nof its inherent limitations, internal control over financial reporting, however well designed and operated, can only provide reasonable,\nand not absolute, assurance that the controls will prevent or detect misstatements. Because of these and other inherent limitations of\ncontrol systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential conditions.\nThe failure of controls by design deficiencies or absence of adequate controls could result in a material adverse effect on our business\nand financial results.\n\n \n\n \n**1.22)**\n**While we are not\naware of any data breach in the past, cyber-attacks, computer viruses or any future failure to adequately maintain security and prevent\nunauthorized access to electronic and other confidential information could result in a data breach which could materially adversely\naffect our reputation, financial condition and operating results.**\n\n \n\nThe\nprotection of our customers’, business partners’, our Company’s and employees’ data is critically important to\nus. Our customers, business partners, and employees expect we will adequately safeguard and protect their sensitive personal and business\ninformation. We have become increasingly dependent upon automated information technology processes. Improper activities by third parties,\nexploitation of encryption technology, data-hacking tools and discoveries and other events or developments may result in a future compromise\nor breach of our networks, payment terminals or other settlement systems. In particular, the techniques used by criminals to obtain unauthorized\naccess to sensitive data change frequently and often are not recognized until launched against a target; accordingly, we may be unable\nto anticipate these techniques or implement adequate preventative measures. There can be no assurance that we will not suffer a criminal\ncyber-attack in the future, that unauthorized parties will not gain access to personal or business information or sensitive data, or\nthat any such incident will be discovered in a timely manner.\n\n \n\nWe\nalso face indirect technology, cybersecurity and operational risks relating to the third parties whom we work with to facilitate our\nbusiness activities, including, among others, third-party online service providers who manage accounts for our customers and external\ncloud service provider. As a result of increasing consolidation and interdependence of technology systems, a technology failure, cyber-attack\nor other information or security breach that significantly compromises the systems of one entity could have a material impact on its\ncounterparties. Any cyber-attack, computer viruses, physical or electronic break-ins or similar disruptions of such third-party service\nproviders could adversely affect our operations and could result in misappropriation of funds of our customers.\n\n \n\nSecurity\nbreaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information,\ntime-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee\nerror, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with\ncustomers and cooperation partners could be severely damaged, we could incur significant liability and our business and operations could\nbe adversely affected.\n\n \n\n22\n\n \n\n \n\n \n**1.23)**\n**We are substantially\ndependent upon our senior management and key information technology and development personnel.**\n\n \n\nWe\nare highly dependent on our senior management to manage our business and operations and our marketing and distribution personnel for\nthe sale of products. In particular, we rely substantially on members of our senior management, including Chief Executive Officer, Lixin\nCai, and Chief Financial Officer, Cuiyao Luo and executives at our key subsidiaries to manage our operations.\n\n \n\nWhile\nwe provide the legally required personal insurance for the benefit of our employees, we do not maintain key man life insurance on any\nof our senior management or key personnel. The loss of any one of them would have a material adverse effect on our business and operations.\nCompetition for senior management and our other key personnel is intense and the pool of suitable candidates is limited. We may be unable\nto locate a suitable replacement for any senior management or key personnel that we lose. In addition, if any member of our senior management\nor key personnel joins a competitor or forms a competing company, they may compete with us for customers, business partners and other\nkey professionals and staff members of our Company. Although each of our senior management and key personnel has signed a confidentiality\nagreement in connection with their employment with us, we cannot assure you that we will be able to successfully enforce these provisions\nin the event of a dispute between us and any member of our senior management or key personnel.\n\n \n\nWe\ncompete for qualified personnel with other technology companies and research institutions. Intense competition for these personnel could\ncause our compensation costs to increase, which could have a material adverse effect on our results of operations. Our future success\nand ability to grow our business will depend in part on the continued service of these individuals and our ability to identify, hire\nand retain additional qualified personnel. If we are unable to attract and retain qualified employees, we may be unable to meet our business\nand financial goals.\n\n \n\n \n**1.24)**\n**We are dependent\nupon the services of experienced personnel who possess skills that are valuable in our industry, and we may have to actively compete\nfor their services.**\n\n \n\nWe\nare heavily dependent upon our ability to attract, retain and motivate skilled personnel to serve our customers. Many of our personnel\npossess skills that would be valuable to all companies engaged in our industry. Consequently, we expect that we will have to actively\ncompete for these employees. Some of our competitors may be able to pay our employees more than we are able to pay to retain them. Our\nability to profitably operate is substantially dependent upon our ability to locate, hire, train and retain our personnel. There can\nbe no assurance that we will be able to retain our current personnel, or that we will be able to attract and assimilate other personnel\nin the future. If we are unable to effectively obtain and maintain skilled personnel, the development and quality of our services could\nbe materially impaired. See “Our Employees.”\n\n \n\n \n**1.25)**\n**If we fail to protect\nour intellectual property rights, it could harm our business and competitive position.**\n\n \n\nWe\nrely on a combination of trademark and trade secret laws and non-disclosure agreements and other methods to protect our intellectual\nproperty rights. We own a number of trademarks in China, all of which have been properly registered with regulatory agencies such as\nthe State Intellectual Property Office and Trademark Office. This intellectual property has allowed our products to earn market share\nin the current and future automotive industry.\n\n \n\nWe\nalso rely on trade secret rights to protect our business through non-disclosure agreements with certain employees. If any of our employees\nbreach their non-disclosure obligations, we may not have adequate remedies in China, and our trade secrets may become known to our competitors.\nIn accordance with Chinese intellectual property laws and regulations, we will have to renew our trademarks once the terms expire.\n\n \n\nImplementation\nof PRC intellectual property-related laws has historically been lacking, primarily because of ambiguities in the PRC laws and enforcement\ndifficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United\nStates or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we\nmay need to resort to litigation to enforce or defend our intellectual property rights, or to determine the enforceability, scope and\nvalidity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could\nresult in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.\n\n \n\n23\n\n \n\n \n\n \n**1.26)**\n**We may be exposed\nto intellectual property infringement and other claims by third parties which, if successful, could disrupt our business and have\na material adverse effect on our financial condition and results of operations.**\n\n \n\nOur\nsuccess depends, in large part, on our ability to use and develop our intellectual property without infringing third party intellectual\nproperty rights. If we sell our branded products internationally, and as litigation becomes more common in China, we face a higher risk\nof being the subject of claims for intellectual property infringement, invalidity or indemnification relating to other parties’\nproprietary rights. Our current or potential competitors, many of which have substantial resources and have made substantial investments\nin competing technologies, may have or may obtain patents that will prevent, limit or interfere with our ability to make, use or sell\nour branded products in either China or other countries, including the United States and other countries in Asia. In addition, the defense\nof intellectual property suits, including patent infringement suits, and related legal and administrative proceedings can be both costly\nand time consuming and may significantly divert the efforts and resources of our technical and management personnel. Furthermore, an\nadverse determination in any such litigation or proceedings to which we may become a party could cause us to:\n\n \n\n \n●\npay damage awards;\n\n \n●\nseek licenses from third\nparties;\n\n \n●\npay ongoing royalties;\nor\n\n \n●\nbe restricted by injunctions.\n\n \n\nEach\nof which could effectively prevent us from pursuing some or all of our business and result in our customers or potential customers deferring\nor limiting their purchase or use of our branded products, which could have a material adverse effect on our financial condition and\nresults of operations.\n\n \n\n \n**1.27)**\n**We may not maintain\nsufficient insurance coverage for the risks associated with our business operations. As a result, we may incur uninsured losses.**\n\n \n\nExcept\nfor property, accident and automobile insurance, we do not have other insurance of such as business liability or disruption insurance\ncoverage for our operations in the PRC. As a result, we may incur uninsured liabilities and losses as a result of the conduct of our\nbusiness. There can be no guarantee that we will be able to obtain additional insurance coverage in the future, and even if we are able\nto obtain additional coverage, we may not carry sufficient insurance coverage to satisfy potential claims. Should uninsured losses occur,\nit could adversely affect our business, results of operations and financial condition.\n\n \n\n**2)**\n**Risk Related to Our\nCommercial Relationship with our VIE**\n\n \n\n \n**2.1)**\n**PRC laws and regulations\ngoverning our business and the validity of certain of our contractual arrangements are uncertain. If we are found to be in violation\nof such PRC laws and regulations, our business may be negatively affected, and we may be forced to relinquish our interests in those\noperations.**\n\n \n\nPRC\nlaws and regulations prohibit or restrict foreign ownership of companies that operate Internet information and content, value added telecommunications,\nand certain other businesses in which we are engaged or could be deemed to be engaged. Consequently, we conduct certain of our operations\nand businesses in the PRC through our VIE. Our VIE Agreements give us effective control over HZ CXJ and enable us to obtain substantially\nall of the economic benefits arising from it as well as consolidate its financial results in our results of operations. Although the\nstructure we have adopted is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements\ncomply with PRC licensing, registration, or other regulatory requirements, with existing policies, or with requirements or policies that\nmay be adopted in the future.\n\n \n\n24\n\n \n\n \n\nECXJ,\nBVI CXJ, HK CXJ and SZ CXJ are considered foreign investors or foreign invested enterprises under PRC law. As a result, ECXJ, BVI CXJ,\nHK CXJ and SZ CXJ are subject to certain limitations under PRC law on foreign ownership of Chinese companies. These laws and regulations\nare relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty.\nThe effectiveness of newly enacted laws, regulations, or amendments may be delayed, resulting in detrimental reliance by foreign investors.\nNew laws and regulations that affect existing and proposed future businesses may also be applied retroactively.\n\n \n\nWe\nhave been advised by our PRC counsel that the ownership structures of our PRC subsidiary and our VIE in China do not violate any applicable\nPRC law, regulation, or rule currently in effect; and that the contractual arrangements between SZ CXJ and HZ CXJ, and its equity holders\ngoverned by PRC law are valid, binding, and enforceable in accordance with their terms and applicable PRC laws and regulations currently\nin effect. However, our PRC counsel has also advised us that there are substantial uncertainties regarding the interpretation and application\nof current PRC laws, rules, and regulations. Moreover, the binding rights over the VIE’s subsidiaries in the contractual arrangements\nbetween SZ CXJ and HZ CXJ are implicit and indirect and the company laws and regulations in the PRC governing the business operations\nof the VIE’s subsidiaries are uncertain. Accordingly, the PRC regulatory authorities and PRC courts may in the future take a view\nthat is contrary to the opinion of our PRC legal counsel.\n\n \n\nThe\nPRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and\nother licenses, and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant\ngovernmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of\nexisting or new PRC laws or regulations on our business. We cannot assure you that our current ownership and operating structure would\nnot be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines,\nand could be required to restructure our operations or cease to provide certain services. In addition, any litigation in China may be\nprotracted and result in substantial costs and diversion of resources and management attention. If the imposition of any of these government\nactions causes us to lose our right to direct the activities of our VIE or to otherwise separate from them and if we are not able to\nrestructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial\nresults of our VIE in our consolidated financial statements. Any of these or similar actions could significantly disrupt our business\noperations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect\nour business, financial condition, and results of operations.\n\n \n\n \n**2.2)**\n**We conduct substantially\nall of our operations in China through our PRC subsidiary, SZ CXJ and our VIE, with which SZ CXJ maintains contractual arrangements.\nThere are risks associated with this structure as the PRC has not yet ruled on its legality.**\n\n \n\nWe\nare not a Chinese operating company but rather a Nevada holding company with substantially all of our operations in the PRC conducted\nby our PRC subsidiary, SZ CXJ, through contractual agreements with HZ CXJ, our VIE. Investors have not purchased an equity interest in\nthe VIE but have purchased equity interests in a holding company incorporated in the State of Nevada, and will never directly hold equity\ninterests in any of our subsidiaries or in our VIE in China.\n\n \n\nA\nseries of contractual agreements, including the Consulting Service Agreement, the Business Operation Agreement, the Proxy Agreement,\nthe Equity Disposal Agreement, and the Equity Pledge Agreement, have been entered into with our VIE. We have been advised by our PRC\ncounsel that the ownership structure of our VIE in China does not violate any applicable and explicit PRC laws and regulations currently\nin effect, and each of the contractual agreements governed by PRC law is valid, binding, and enforceable in accordance with its terms,\nsubject to enforceability to applicable laws and the discretion of relevant government authorities in exercising their authority in connection\nwith the interpretation and implementation thereof. As a result of the contractual agreements, the Company is the primary beneficiary\nof the VIE for accounting purposes, and the Company has consolidated the results of operations, financial position, and cash flows of\nthe VIE in its consolidated financial statements under U.S. GAAP. The contractual arrangements with the VIE provide us with a “controlling\nfinancial interest” in the VIE by granting us: (i) the power to direct activities of the VIE that most significantly affect its\neconomic performance; and (ii) the right to receive economic benefits from the VIE.\n\n \n\n25\n\n \n\n \n\nHowever,\nthere are risks associated with this structure as the PRC has not yet ruled on its legality. As such, the VIE structure involves unique\nrisks to our investors in the Nevada holding company, including:\n\n \n\n(i)\nOur contractual arrangements may not be as effective in providing us with operational control, and shareholders of the VIE may fail to\nperform their obligations under the contractual arrangements.\n\n \n\n(ii)\nWe may incur substantial costs to enforce the terms of the arrangements with the VIE.\n\n \n\n(iii)\nThe legality and enforceability of the contractual arrangements by and among our PRC subsidiaries and the VIE have not been tested in\na court of law in China.\n\n \n\n(iv)\nThe equity holders, directors and executive officers of the VIE as well as our employees who execute other strategic initiatives may\nhave potential conflicts of interest with our company\n\n \n\n(v)\nThere are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules\nregarding the status of our Nevada holding company with respect to the contractual arrangements with the VIE.\n\n \n\n(vi)\nIt is uncertain whether any new PRC laws or regulations relating to VIE structures will be adopted or, if adopted, what they would provide.\n\n \n\n(vii)\nIf we or our VIE is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of\nthe required licenses, permits, registrations, or approvals, the relevant PRC regulatory authorities would have broad discretion to take\naction in dealing with such violations or failures.\n\n \n\n(viii)\nIf the PRC government finds that the agreements that establish the VIE structure for operating our business do not comply with PRC laws\nand regulations, or if these regulations or their interpretations change in the future, we would be subject to severe penalties or be\nforced to relinquish our interest in those operations.\n\n \n\n(ix)\nIf the PRC government deems that our contractual arrangements with the VIE do not comply with PRC regulatory restrictions on foreign\ninvestment in the relevant industries, or if these regulations or the interpretation of existing regulations change or any interpreted\ndifferently in the future, we could be subject to severe penalties or be forced to relinquish our interests in these operations.\n\n \n\n(x)\nThe Company, SZ CXJ, HZ CXJ VIE, and our investors face uncertainty with respect to potential future actions by the PRC government that\ncould affect the enforceability of the contractual arrangements with the VIE and consequently significantly affect the financial performance\nof the VIE and our Company as a whole.\n\n \n\n(xi)\nThe PRC regulatory authorities could disallow the VIE structure, which would likely result in a material change in our operations and\ncause the value of our securities, including those we have or may in the future register for sale, to significantly decline or become\nworthless.\n\n \n\nIf\nthe PRC government determines that our agreements with HZ CXJ VIE or our VIE structure do not comply with PRC regulations, or if these\nregulations change or are interpreted differently in the future, our securities may decline in value or become worthless if the determinations,\nchanges, or interpretations result in our inability to assert contractual control over the assets of HZ CXJ VIE, as HZ CXJ VIE and its\nsubsidiary conduct all or substantially all of our operations.\n\n \n\n26\n\n \n\n \n\n \n**2.3)**\n**Our arrangements\nwith our VIE and its shareholders may be subject to scrutiny by the PRC tax authorities. Any adjustment of related party transaction\npricing could lead to additional taxes, and therefore could have an adverse effect on our income and expenses.**\n\n \n\nThe\ntax regime in China is rapidly evolving and there is significant uncertainty for taxpayers in China as PRC tax laws may be interpreted\nin significantly different ways. The PRC tax authorities may assert that we or our subsidiaries or VIE, or its equity holders, owe and/or\nare required to pay additional taxes on previous or future revenue or income. In particular, under applicable PRC laws, rules, and regulations,\narrangements and transactions among related parties, such as the contractual arrangements with our VIE, may be subject to audit or challenge\nby the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that our agreements\nwith our VIE and its shareholders were not entered into based on arm’s length negotiations. As a result, they may adjust our income\nand expenses for PRC tax purposes in the form of a transfer pricing adjustment. Such an adjustment may require that we pay additional\nPRC taxes plus applicable penalties and interest, if any.\n\n \n\n \n**2.4)**\n**Our current corporate\nstructure and business operations may be substantially affected by the newly enacted Foreign Investment Law.**\n\n \n\nOn\nMarch 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, which took effect on January 1, 2020. Since\nit is relatively new, substantial uncertainties exist in relation to its interpretation and implementation. The Foreign Investment Law\ndoes not explicitly classify variable interest entities that are controlled through contractual arrangements as foreign invested enterprises\neven if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under the definition\nof “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws,\nadministrative regulations, or the State Council. Therefore, it still leaves leeway for future laws, administrative regulations, or provisions\nof the State Council to provide for contractual arrangements as a form of foreign investment, at which time it will be uncertain whether\nour contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment in the PRC, and\nif they are deemed to be in violation, how our contractual arrangements should be dealt with.\n\n \n\nThe\nForeign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate\nin industries specified as either “restricted” or “prohibited” from foreign investment in the Special Administrative\nMeasures (Negative List) for Foreign Investment Access jointly promulgated by MOFCOM and the NDRC that took effect in July 2020. The\nForeign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries\nwill require market entry clearance and other approvals from relevant PRC government authorities. If our control over our VIE through\ncontractual arrangements is deemed to be foreign investment in the future, and if any business of our VIE is “restricted”\nor “prohibited” from foreign investment under the “negative list” effective at the time, we may be deemed to\nbe in violation of the Foreign Investment Law, the contractual arrangements that allow us to have control over our VIE may be deemed\nto be invalid and illegal, and we may be required to unwind such contractual arrangements and/or restructure our business operations,\nany of which may have a material adverse effect on our business operations.\n\n \n\nFurthermore,\nif future laws, administrative regulations, or provisions mandate further actions to be taken by companies with respect to existing contractual\narrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure\nto take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely\naffect our current corporate structure and business operations.\n\n** **\n\n****\n\n27\n\n \n\n** **\n\n \n**2.5)**\n**Our contractual arrangements\nmay not be as effective in providing control over our variable interest entity as direct ownership.**\n\n \n\nWe\nrely on contractual arrangements with our VIE to operate our electronic platform in China and other businesses in which foreign investment\nis restricted or prohibited. These contractual arrangements may not be as effective as direct ownership in providing us with control\nover our VIE.\n\n \n\nIf\nwe had direct ownership of the VIE, we would be able to exercise our rights as an equity holder directly to effect changes in the Board\nof Directors of the entity, which could effect changes at the management and operational level. Under our contractual arrangements, we\nwould be able to change the members of the Board of Directors of the entity exclusively by influencing the equity holders’ votes,\nand we would have to rely on the variable interest entity and the variable interest entity equity holders to perform their obligations\nunder the contractual arrangements in order to exercise our control over the variable interest entity. The variable interest entity equity\nholders may have conflicts of interest with us or our shareholders, and they may not act in the best interests of our Company or may\nnot perform their obligations under these contracts. For example, our VIE, our VIE’s subsidiaries, and our VIE’s equity holders\ncould breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining\nour website and using our domain names and trademarks, which the variable interest entity has the exclusive right to use, in an acceptable\nmanner, or taking other actions that are detrimental to our interests. Pursuant to the call option, we may replace the equity holders\nof the VIE at any time pursuant to the contractual arrangements. However, if any equity holder is uncooperative and any dispute relating\nto these contracts or to the replacement of the equity holder were to remain unresolved, we would have to enforce our rights under the\ncontractual arrangements through the operation of PRC law and arbitral or judicial agencies, which may be costly and time-consuming and\nwould be subject to uncertainties in the PRC legal system. Additionally, the binding rights over the VIE’s subsidiaries in the\ncontractual arrangements between SZ CXJ and HZ CXJ are implicit and indirect and the company laws and regulations in the PRC governing\nthe business operations of the VIE’s subsidiaries are uncertain. Consequently, the contractual arrangements may not be as effective\nas direct ownership in ensuring our control over the relevant portion of our business operations.\n\n \n\n \n**2.6)**\n**Any failure by our\nVIE, our VIE’s subsidiaries, or our VIE’s equity holders to perform their obligations under the contractual arrangements\nwould have a material adverse effect on our business, financial condition, and results of operations.**\n\n \n\nIf\nour VIE, our VIE’s subsidiaries, or our VIE’s equity holders fail to perform their respective obligations under the contractual\narrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. Although we have entered\ninto an option agreement in relation to our variable interest entity, which provides that we may exercise an option to acquire, or nominate\na person to acquire, ownership of the equity in that entity or, in some cases, its assets, to the extent permitted by applicable PRC\nlaws, rules, and regulations, the exercise of the option is subject to the review and approval of the relevant PRC governmental authorities.\nWe have also entered into an equity interest pledge agreement with respect to the variable interest entity to secure certain obligations\nof such VIE or its equity holders to us under the contractual arrangements. However, the enforcement of such agreement through arbitral\nor judicial agencies may be costly and time-consuming and would be subject to uncertainties in the PRC legal system. Moreover, our remedies\nunder the equity pledge agreement are primarily intended to help us collect debts owed to us by the variable interest entity equity holders\nunder the contractual arrangements and may not help us in acquiring the assets or equity of the variable interest entity.\n\n \n\nThe\ncontractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration or court proceedings\nin China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance\nwith PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States.\nMoreover, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest\nentity should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel or court\nwould view such contractual arrangements. As a result, uncertainties in the PRC legal system could limit our ability to enforce the contractual\narrangements. Under PRC law, if the losing parties fail to carry out the arbitration awards or court judgments within a prescribed time\nlimit, the prevailing parties may only enforce the arbitration awards or court judgments in PRC courts, which would require additional\nexpense and delay. In the event we are unable to enforce the contractual arrangements, we may not be able to exert effective control\nover our variable interest entity, and our ability to conduct our business, as well as our financial condition and results of operations,\nmay be materially and adversely affected.\n\n \n\n28\n\n \n\n \n\n**3)**\n**Risks Related to\nDoing Business in China**\n\n \n\n \n**3.1)**\n**Changes in international\ntrade or investment policies and barriers to trade or investment and the ongoing geopolitical conflict may have an adverse effect\non our business and expansion plans and could lead to the delisting of our securities from U.S. exchanges and/or other restrictions\nor prohibitions on investing in our securities.**\n\n \n\nIn\nrecent years, international market conditions and the international regulatory environment have been increasingly affected by competition\namong countries and geopolitical frictions. In particular, the U.S. administration has advocated for and taken steps toward restricting\ntrade in certain goods, particularly from China. From 2018 to late 2019, the United States announced several tariffs increases that applied\nto products imported from China, totalling over US$550 billion. By the end of 2019, the two countries had reached a phase one trade deal\nto roll back tariffs and suspend certain tariff increases by the United States that were scheduled to take effect from December 2019,\nand in January 2020, the two sides entered into a formal phase one agreement on trade. The progress of trade talks between China and\nthe United States is subject to uncertainties, and there can be no assurance as to whether the United States will maintain or reduce\ntariffs or impose additional tariffs on Chinese products in the near future. Furthermore, in August 2019, the U.S. Treasury Department\nlabelled China as a currency manipulator, which label was officially dropped by the U.S. Treasury Department in January 2020. However,\nit is uncertain whether the U.S. government may issue any similar announcements in the future. As a result of such announcement, the\nUnited States may take further actions to eliminate perceived unfair competitive advantages created by alleged manipulating actions.\nChanges to national trade or investment policies, treaties and tariffs, fluctuations in exchange rates, or the perception that these\nchanges could occur could adversely affect the financial and economic conditions in China, as well as our future international and cross-border\noperations, our financial condition, and our results of operations.\n\n \n\nIn\naddition, the United States is considering ways to limit U.S. investment portfolio flows into China. For example, in May 2020, under\npressure from U.S. administration officials, the independent Federal Retirement Thrift Investment Board suspended its implementation\nof plans to change the benchmark of one of its retirement asset funds to an international index that includes companies in emerging markets,\nincluding China. China-based companies, including us, may become subject to executive orders or other regulatory actions that may, among\nother things, prohibit U.S. investors from investing in these companies and delist the securities of these companies from U.S. exchanges.\nAs a result, U.S. and certain other persons may be prohibited from investing in the securities of our Company, whether or not they are\nlisted on U.S. exchanges. For example, in November 2020, the U.S. administration issued U.S. Executive Order 13959, prohibiting investments\nby any U.S. person in publicly traded securities of certain Chinese companies that are deemed owned or controlled by the Chinese military.\nIn May 2021, the American depositary shares of China Telecom, China Mobile, and China Unicom were delisted from the NYSE to comply with\nthis executive order. In June 2021, the U.S. administration expanded the scope of the executive order to Chinese defence and surveillance\ntechnology companies. Geopolitical tensions between China and the United States may intensify and the United States may adopt even more\ndrastic Measures in the future. China and other countries have retaliated and may further retaliate in response to new trade policies,\ntreaties and tariffs implemented by the United States. For instance, in response to the tariffs announced by the United States, in 2018\nand 2019, China announced it would stop buying U.S. agricultural products and imposed tariffs on over US$185 billion worth of U.S. goods.\nAlthough China subsequently granted China and tariff exemptions for certain U.S. products as a result of trade talks and the phase one\ntrade deal with the United States, it is uncertain whether there will be any further material changes to China’s tariff policies.\nAny further actions to increase existing tariffs or impose additional tariffs could result in an escalation of tariff exemptions for\ncertain U.S. products of the trade conflict, which would have an adverse effect on manufacturing, trade, and a wide range of industries\nthat rely on trade, including logistics, retail sales, and other businesses and services, which could adversely affect our business operations\nand financial results.\n\n \n\n29\n\n \n\n \n\nAdditionally,\nChina has issued regulations to give itself the ability to unilaterally nullify the effects of certain foreign restrictions that are\ndeemed to be unjustified to Chinese individuals and entities. The Rules on Counteracting Unjustified Extra-territorial Application of\nForeign Legislation and Other Measures promulgated by the Ministry of Commerce (“MOFCOM”) on January 9, 2021 with immediate\neffect, provide that, among other things, Chinese individuals or entities are required to report to the MOFCOM within 30 days if they\nare prohibited or restricted from engaging in normal business activities with third-party countries or their nationals or entities due\nto non-Chinese laws or measures; and the MOFCOM, following the decision of the relevant Chinese authorities, may issue prohibition orders\ncontravening such non-Chinese laws or measures. Furthermore, on June 10, 2021, the Standing Committee of the National People’s\nCongress of China promulgated the Anti-foreign Sanctions Law, which came into effect on the same day. The Anti-foreign Sanctions Law\nprohibits any organization or individual from implementing or providing assistance in implementation of discriminatory restrictive measures\ntaken by any foreign state against the citizens or organizations of China. In addition, all organizations and individuals in China are\nrequired to implement the retaliatory measures taken by relevant departments of the State Council. Since the aforesaid laws and rules\nwere newly promulgated, there exist high uncertainties as to how such regulations will be interpreted and implemented and how they would\naffect our business and results of operations or the trading prices of our Shares.\n\n \n\nThe\ninstitution of trade tariffs both globally and between the U.S. and China specifically carries the risk of negatively affecting China’s\noverall economic condition, which could have a negative impact on us.\n\n \n\nTrade\ntensions and policy changes have also led to measures that could have adverse effects on China-based issuers, including proposed legislation\nin the United States that would require listed companies whose audit reports and/or auditors who are subject to review by PCAOB to be\nsubject to enhanced disclosure obligations and be subject to delisting if they do not comply with the requirements.\n\n \n\n \n**3.2)**\n**The enactment of\nthe Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong National\nSecurity Law”) could impact our Hong Kong subsidiaries, and the market price for our shares could be adversely affected by\nincreased tensions between the United States and China.**\n\n \n\nRecently\nthere have been heightened tensions in the economic and political relations between the United States and China. On June 30, 2020, the\nStanding Committee of the PRC National People’s Congress issued the Law of the People’s Republic of China on Safeguarding\nNational Security in the Hong Kong Special Administrative Region (HKSAR). This law defines the duties and government bodies of the HKSAR\nfor safeguarding national security and four categories of offences-secession, subversion, terrorist activities, and collusion with a\nforeign country or external elements to endanger national security-and their corresponding penalties. On July 14, 2020, U.S. President\nDonald Trump signed the Hong Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against\nindividuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7,\n2020, the U.S. government imposed HKAA-authorized sanctions on eleven individuals, including HKSAR chief executive Carrie Lam. On October\n14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under the HKAA, identifying persons\nmaterially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic\nLaw.” The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial\ninstitutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of\nsanctions such as those provided in the HKAA is in practice discretionary and highly political, especially in a relationship as extensive\nand complex as that between the United States and China. It is difficult to predict the full impact of the Hong Kong National Security\nLaw and HKAA on Hong Kong and companies located in Hong Kong like our Hong Kong subsidiaries. If we or our Hong Kong or PRC subsidiaries\nare determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our business operations,\nfinancial position, and results of operations could be materially and adversely affected. Furthermore, legislative or administrative\nactions in respect of Sino-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price of\nour shares could be adversely affected.\n\n \n\n30\n\n \n\n \n\n \n**3.3)**\n**The Chinese government\nmay choose to exercise significant oversight and discretion over the conduct of our and our VIE’s business operations in China.**\n\n \n\nThe\nChinese government may choose to exercise significant oversight and discretion over the conduct of our and our VIE’s business operations\nin China. Such governmental actions:\n\n \n\n \n●\ncould result in a material\nchange in our VIE’s operations;\n\n \n●\ncould significantly limit\nor completely hinder our and our VIE’s ability to continue our operations in China;\n\n \n●\ncould significantly limit\nor completely hinder our ability to offer or continue to offer our shares to investors; and\n\n \n●\nmay cause our shares to\nsignificantly decline in value or become worthless.\n\n \n\nRecently,\nthe PRC government initiated a series of regulatory actions and new policies to regulate business operations in certain areas in China\nwith little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based\ncompanies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the\nefforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon the legislative\nor administrative regulation-making bodies will respond and what existing or new laws or regulations or detailed implementations and\ninterpretations will be modified or promulgated, if any. It is also highly uncertain what the potential impact of any such modified or\nnew laws and regulations will be on our daily business operations, our ability to accept foreign investments, and the continued listing\nof our shares in the U.S. markets. These actions could result in a material change in our operations and/could cause the value of our\nshares to significantly decline or become worthless.\n\n \n\nThe\nChinese government has also exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy\nthrough regulation and state ownership, including those relating to regulation of the health product industry, taxation, import and export\ntariffs, environmental regulations, land use rights, property ownership and other matters. We believe that the business operations of\nour VIE and its subsidiaries in China are in material compliance with all applicable legal and regulatory requirements. However, the\ncentral or local governments of the jurisdictions in which it operates may impose new, stricter regulations or interpretations of existing\nregulations that would require additional expenditures and efforts on our VIE’s part to ensure its compliance with such regulations\nor interpretations. Accordingly, government actions in the future could have a significant effect on our VIE and our VIE’s subsidiaries\nand on their businesses which, in turn, could have a negative effect on the value of our shares.\n\n \n\n \n**3.4)**\n**The new Overseas\nListing Rules and other relevant rules promulgated by the CSRC may subject us to additional compliance requirements in the future.**\n\n \n\nOn\nFebruary 17, 2023, the China Securities Regulatory Commission (the “CSRC”) released the Trial Administrative Measures of\nOverseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, which came into effect on March 31, 2023. On the\nsame date as the issuance of the Trial Measures, the CSRC circulated No. 1 to No. 5 Supporting Guidance Rules, the Notes on the Trial\nMeasures, the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises, and the relevant CSRC\nAnswers to Reporter Questions on the official website of the CSRC, or collectively, the Guidance Rules and Notice. The Trial Measures,\ntogether with the Guidance Rules and Notice, reiterate the basic supervision principles as reflected in the Overseas Listing Regulations\nby providing substantially the same requirements for filings of overseas offering and listing by domestic companies, yet made the following\nupdates compared to the Overseas Listing Regulations: (a) further clarification of the circumstances prohibiting overseas issuance and\nlisting; (b) further clarification of the standard of indirect overseas listing under the principle of substance over form, and (c) adding\nmore details on filing procedures and requirements by setting different filing requirements for different types of overseas offering\nand listing.\n\n \n\n31\n\n \n\n \n\nPursuant\nto the Trial Measures and the Guidance Rules and Notice, a domestic company that seeks to offer or list securities overseas, either directly\nor indirectly, should fulfill the filing procedure and report relevant information to the CSRC within three working days following its\nsubmission of an initial public offering or listing application. Companies that have already been listed on overseas stock exchanges\nor that have obtained approval from overseas securities regulators or stock exchanges for their offering and listing and that complete\ntheir overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for their listing, yet need\nto make filings for subsequent offerings in accordance with the Trial Measures. Companies that have already submitted an application\nfor an initial public offering to overseas securities regulators prior to the effective date of the Trial Measures but have not yet obtained\napproval from overseas securities regulators or stock exchanges for the offering and listing may arrange for the filing within a reasonable\ntime period and should complete the filing procedure before such companies’ overseas issuance and listing.\n\n \n\nAccording\nto the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises, domestic companies that have\nalready been listed overseas before the effective date of the Trial Measures, March 31, 2023, shall be deemed Existing Issuers, and Existing\nIssuers are not required to complete the filing procedures immediately, but they will be required to file with the CSRC for any subsequent\nofferings. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content\nin its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, and\nfines, and its controlling shareholders, actual controllers, the person directly in charge, and other directly liable persons may also\nbe subject to administrative penalties, such as warnings and fines.\n\n \n\nOn\nFebruary 24, 2023, the CSRC, together with the Ministry of Finance, the National Administration of State Secrets Protection and National\nArchives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities\nOffering and Listing, which were issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration\nof China in 2009, or the Provisions. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality\nand Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31,\n2023, together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover\nindirect overseas offerings and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things,\n(a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide\nto relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents\nand materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities\naccording to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either\ndirectly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including\nsecurities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will\nbe detrimental to national security or public interest, shall strictly fulfil relevant procedures stipulated by applicable national regulations.\nAny failure or perceived failure by the Company and its subsidiaries to comply with the above confidentiality and archives administration\nrequirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable\nby competent authorities and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.\n\n \n\nAlthough,\nas of the date of this Annual Report, the Company is not considering any offerings of its securities, if we should seek to affect an\noverseas follow-on offering in the future, we may be required to comply with the Trial Measures and the revised Provisions, which would\nsubject us to additional compliance requirements in the future. There are still uncertainties regarding the interpretation and implementation\nof such regulatory guidance, and we cannot assure you that we will be able to comply with all the new regulatory requirements of the\nTrial Measures, the revised Provisions, or any future implementing rules on a timely basis, or at all. Any failure by us to fully comply\nwith the new regulatory requirements, including but not limited to the failure to complete the filing procedures with the CSRC, if required,\nmay significantly limit or completely hinder our ability to offer or continue to offer our common stock on a US exchange, cause significant\ndisruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial\ncondition and results of operations and cause our securities to significantly decline in value or become worthless.\n\n \n\n32\n\n \n\n \n\n \n**3.5)**\n**Changes in the policies,\nregulations and rules, and the enforcement of laws of the PRC government may be implemented quickly with little advance notice and\ncould have a significant impact upon our VIE’s and our VIE’s subsidiaries’ ability to operate profitably in the\nPRC. The PRC legal system also embodies uncertainties, which could limit law enforcement availability. Therefore, our assertions\nand beliefs of the risk imposed by the PRC legal and regulatory system cannot be certain.**\n\n \n\nThe\nPRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence.\nIn 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.\nThe overall effect of legislation over the past several decades has significantly enhanced the protections afforded to various forms\nof foreign investment in China. The Company’s PRC subsidiaries, its VIE, and its VIE’s subsidiary are subject to PRC laws\nand regulations. However, these laws and regulations change frequently, and the interpretation and enforcement thereof involve uncertainties.\nFor instance, we may have to resort to administrative and court proceedings to enforce the legal protections to which we are entitled\nto by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting statutory\nand contractual terms, it may be difficult to evaluate the outcome of administrative court proceedings and the level of law enforcement\nthat we would receive in more developed legal systems. Such uncertainties, including the inability of our PRC subsidiaries to enforce\ntheir contracts, could affect our business and operation. In addition, confidentiality protections in China may not be as effective as\nin the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly\nwith regard to our business, including the promulgation of new laws. This may include changes to existing laws or the interpretation\nor enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the availability of\nlaw enforcement.\n\n \n\nThe\nlegal system in China, it laws and regulation changing frequently and the uncertainty in interpretation and enforcement of those laws\ncould result in a material change in our operations, and further 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 be worthless.\n\n** **\n\n \n**3.6)**\n**Changes in China’s\neconomic, political, or social conditions or government policies could have a material adverse effect on our business and results\nof operations and could 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 be worthless.**\n\n \n\nSubstantially\nall of our operations are conducted in the PRC. Accordingly, our financial condition and results of operations are affected to a significant\nextent by economic, political, and legal developments in the PRC or changes in government relations between China and the United States\nor other governments. There is significant uncertainty about the future relationship between the United States and China with respect\nto trade policies, treaties, government regulations and tariffs.\n\n \n\nThe\nPRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement,\nlevel of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented\nmeasures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and\nthe establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still\nowned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing\nindustrial policies.\n\n \n\nThe\nPRC government also exercises significant control over China’s economic growth by allocating resources, controlling payment of\nforeign currency-denominated obligations, setting monetary policy, regulating financial services and institutions, and providing preferential\ntreatment to particular industries or companies.\n\n \n\n33\n\n \n\n \n\nWhile\nthe PRC economy has experienced significant growth in the past four decades, growth has been uneven, both geographically and among various\nsectors of the economy. Since 2020 due to the global pandemic, growth of the Chinese economy has slowed down. The PRC government has\nimplemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the\noverall PRC economy but may also have a negative effect on us. Our financial condition and results of operation could be materially and\nadversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition,\nthe PRC government has implemented in the past certain measures, including interest rate increases, to control the pace of economic growth.\nThese measures may cause decreased economic activity.\n\n \n\nWe\ncannot assure you that the PRC’s economy will continue to grow, or that if there is growth, such growth will be steady and uniform,\nor that if there is a slowdown, such slowdown will not have a negative effect on its business and results of operations.\n\n \n\nIn\nJuly 2021, the Chinese government provided new guidance on China-based companies raising capital outside of China, including through\nVIE arrangements. In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies seeking\nto register securities with the SEC. As substantially all of our operations are based in China, any future Chinese, U.S., or other rules\nand regulations that place restrictions on capital raising or other activities by China based companies could adversely affect our business\nand results of operations. If the business environment in China deteriorates from the perspective of domestic or international investment,\nor if relations between China and the United States or other governments deteriorate, the Chinese government may intervene with our operations\nand our business in China and in the United States.\n\n \n\n \n**3.7)**\n**Our business is subject\nto complex and evolving laws and regulations regarding privacy and data protection. These laws and regulations can be complex and\nstringent, and many are subject to change and uncertain interpretation, which could result in claims, changes to our data and other\nbusiness practices, regulatory investigations, penalties, increased cost of operations, or declines in user growth or engagement,\nor otherwise affect our business. Although we believe we currently are not required to obtain clearance from the Cyberspace Administration\nof China under the recently enacted or proposed regulations or rules, we face uncertainties as to the interpretation or implementation\nof such regulations or rules, and if required, whether such clearance can be timely obtained, or at all.**\n\n \n\nRegulatory\nauthorities in China have implemented and are considering further legislative and regulatory proposals concerning data protection. New\nlaws and regulations that govern new areas of data protection or impose more stringent requirements may be introduced in China. In addition,\nthe interpretation and application of consumer and data protection laws in China are often uncertain, in flux, and complicated, including\ndifferentiated requirements for different groups of people or different types of data.\n\n \n\nThe\nPRC regulatory and enforcement regime with regard to privacy and data security is evolving. The PRC government is increasingly focused\non data security, recently launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies\nand prohibiting these apps from registering new users during the review period. Although we believe that we are compliant with the regulations\nand policies that have been issued to date and we do not believe that we are required to obtain any permissions and approvals under the\nregulations discussed below, if we have inadvertently concluded that such permissions or approvals are not required or if applicable\nlaws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, the Company or\nits VIE could be subject to increased compliance costs, as well as, among other things, administrative penalties, rectification orders,\nfines, suspension of relevant business, or revocation of business permits or licenses, and the Company’s securities could become\nineligible for listing on a US exchange.\n\n \n\nThe\nPRC Cybersecurity Law, which took effect in June 2017, provides that personal information and important data collected and generated\nby operators of critical information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the\nlaw imposes heightened regulation and additional security obligations on operators of critical information infrastructure.\n\n \n\n34\n\n \n\n \n\nIn\nJanuary 2022, the Cyberspace Administration of China and several other administrations jointly promulgated amended Cybersecurity Review\nMeasures, which became effective on February 15, 2022. Pursuant to the Cybersecurity Review Measures, a “critical information infrastructure\noperator,” or a CIIO, that purchases network products and services or conducts data processing activities that affect or may affect\nnational security will be subject to cybersecurity review. The Cybersecurity Review Measures also expands the cybersecurity review to\n“internet platform operators” in possession of personal information of over one million users if such operators intend to\nlist their securities in a foreign country. Alternatively, relevant governmental authorities in the PRC may initiate cybersecurity review\nif they determine an operator’s network products or services or data processing activities affect or may affect national security.\nWe do not believe that our Company constitutes a critical information infrastructure operator and we have less than one million registered\nusers on our digital platform. The PRC National Security Law defines various types of national security, including technology security\nand information security.\n\n \n\nOn\nNovember 14, 2021, the Cyberspace Administration of China released the Regulations on Network Data Security. The Regulations on Network\nData Security provide that data processors refers to individuals or organizations that autonomously determine the purpose and the manner\nof processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall\napply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an\nannual data security assessment on their own or by engaging a data security services institution, and the data security assessment report\nfor the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year.\n\n \n\nWe\ncurrently have less than one million registered users on our digital platform and only require and obtain user information after users\nregister with it. Given that we sell and service products through our digital platform, we may constitute a “data processor,”\nbut the number of our online registered users is far less than one million. As a result, we would not be required to apply for a cybersecurity\nreview under the Measures for Cybersecurity Review or the Regulations on Network Data Security. Nevertheless, the Measures for Cybersecurity\nReview or the Regulations on Network Data Security may be subject to further changes Although we believe we currently are not required\nto obtain clearance from the Cyberspace Administration of China under the Measures for Cybersecurity Review, the Regulations on Network\nData Security, or the Opinions on Strictly Cracking Down on Illegal Securities Activities, we face uncertainties as to the interpretation\nor implementation of such regulations or rules and we may in the future be required to perform a data security assessment annually either\nby ourselves or by retaining a third party data security service provider and submitting such data security assessment report to the\nlocal agency every year under the draft Regulations on Network Data Security\n\n \n\nOn\nJune 10, 2021, the Standing Committee of the National People’s Congress of China promulgated the Data Security Law which took effect\non September 1, 2021. The Data Security Law provides for data security and privacy obligations of entities and individuals carrying out\ndata activities, prohibits entities and individuals in China from providing any foreign judicial or law enforcement authority with any\ndata stored in China without approval from a competent PRC authority, and sets forth the legal liabilities of entities and individuals\nfound to be in violation of their data protection obligations, including rectification order, warning, fines of up to RMB10 million,\nsuspension of relevant business, and revocation of business permits or licenses.\n\n \n\nOn\nAugust 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection\nLaw which took effect on November 1, 2021. In addition to other rules and principles of personal information processing, the Personal\nInformation Protection Law specifically provides rules for processing sensitive personal information. Sensitive personal information\nrefers to personal information that, once leaked or illegally used, could easily lead to the infringement of human dignity or harm to\nthe personal or property safety of an individual, including biometric recognition, religious belief, specific identity, medical and health,\nfinancial account, personal whereabouts, and other information of an individual, as well as any personal information of a minor under\nthe age of 14. Only where there is a specific purpose and sufficient necessity, and under circumstances where strict protection measures\nare taken, may personal information processors process sensitive personal information. A personal information processor shall inform\nthe individual of the necessity of processing such sensitive personal information and the impact thereof on the individual’s rights\nand interests. As uncertainties remain regarding the interpretation and implementation of the Personal Information Protection Law, we\ncannot assure you that we will comply with the Personal Information Protection Law in all respects and regulatory authorities may order\nus to rectify or terminate our current practice of collecting and processing sensitive personal information.\n\n \n\n35\n\n \n\n \n\nCompliance\nwith the PRC Cybersecurity Law, the PRC National Security Law, the Data Security Law, the Cybersecurity Review Measures, and the Personal\nInformation Protection Law, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, may result\nin additional expenses to us and subject us to negative publicity, which could harm our reputation among users and negatively affect\nthe trading price of our common stock in the future. PRC regulators, including the Department of Public Security, the Ministry of Industry\nand Information Technology, the State Administration for Market Regulation, and the CAC, have been increasingly focused on regulation\nin the areas of data security and data protection, and are enhancing the protection of privacy and data security by rulemaking and enforcement\nactions at central and local levels. We expect that these areas will receive greater and continued attention and scrutiny from regulators\nand the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated\nwith data security and protection. If we are unable to manage these risks, we could become subject to penalties, including fines, suspension\nof business, prohibition against new user registration (even for a short period of time) and revocation of required licenses, and our\nreputation and results of operations could be materially and adversely affected.\n\n \n\nAny\nfailure, or perceived failure, by us to comply with the above and other regulatory requirements or privacy protection-related laws, rules\nand regulations could result in reputational damages or proceedings or actions against us by governmental entities, consumers, or others.\nThese proceedings or actions could subject us to significant penalties and negative publicity, require us to change our data and other\nbusiness practices, increase our costs and severely disrupt our business, or negatively affect the trading price of our common stock.\n\n \n\n \n**3.8）**\n**You may have difficulty\nenforcing judgments against us.**\n\n \n\nMost\nof our assets are located outside of the United States and most of our current operations are conducted in the PRC. In addition, all\nof our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets\nof these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the\nUnited States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions\nof the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and\nthe substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the\ncourts of the PRC would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law has advised us that the recognition\nand enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in China may recognize and enforce foreign\njudgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the\njudgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the\nreciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures\nLaw, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment\nviolates basic principles of PRC law or national sovereignty, security, or the public interest. So, it is uncertain whether a PRC court\nwould enforce a judgment rendered by a court in the United States.\n\n \n\n \n**3.9）**\n**To the extent that\nour independent registered public accounting firm’s audit documentation related to their audit reports for the Company may,\nin the future, be located in China or in Hong Kong, our securities could be delisted and prohibited from trading on a U.S. exchange.**\n\n \n\nThe\nHolding Foreign Companies Accountable Act (the “HFCAA”), as originally passed, prohibited foreign companies from listing\ntheir securities on U.S. exchanges if the company’s auditor has been unavailable for PCAOB inspection or investigation for three\nconsecutive years beginning in 2021. On December 29, 2022, as part of the Consolidated Appropriations Act, 2023, the time period for\nthe delisting of foreign companies under the HFCAA was reduced from three consecutive years to two consecutive years.\n\n \n\n36\n\n \n\n \n\nOn\nDecember 16, 2021, the PCAOB issued the Determination Report, which found that the PCAOB is unable to inspect or investigate completely\nregistered public accounting firms headquartered in (i) mainland China of the People’s Republic of China because of a position\ntaken by one or more authorities in mainland China; and (ii) Hong Kong, a Special Administrative Region and dependency of the PRC, because\nof a position taken by one or more authorities in Hong Kong. In addition, the Determination Report identified specific registered public\naccounting firms subject to these determinations.\n\n \n\nOn\nAugust 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance\nof the PRC (the “SOP”). Pursuant to the SOP, the PCAOB has independent discretion to select any issuer audits for inspection\nor investigation and has the unfettered ability to transfer information to the SEC. The determinations as to mainland China and Hong\nKong were vacated by the PCAOB as of December 15, 2022 as a result of the PCAOB’s having been able to conduct extensive and thorough\ninspections and investigations of mainland China and Hong Kong firms in 2022 under the SOP; however, if the PCAOB encounters any impediment,\nin the future, to conducting an inspection or investigation of auditors in mainland China or Hong Kong as a result of a position taken\nby an authority in either jurisdiction, it may issue new determinations consistent with the HFCAA.\n\n \n\nBecause\nour independent registered public accounting firm, J&S Associate PLT (F.K.A: J&S Associate) (“J&S”), is headquartered\nin Kuala Lumpur, Malaysia, it would not be subject to any determinations that may be announced by the PCAOB in the future with respect\nto auditors located in China or Hong Kong. We believe that the PCAOB’s inspectors and investigators have consistent access to the\naudit work performed by J&S for us. Therefore, we do not expect to be affected by the HFCAA at this time.\n\n \n\nHowever,\nto the extent that our auditor’s work papers may, in the future, become located in mainland China or in Hong Kong, such work papers\nmay not be available for inspection by the PCAOB if authorities in the PRC or Hong Kong were to take a position at that time that would\nprevent the PCAOB from continuing to inspect or investigate completely registered public accounting firms headquartered in mainland China\nor Hong Kong. If such lack of inspection were to extend for the requisite period of time under the HFCAA, and if the PCAOB were then\nto issue new determinations based on its inability to inspect or investigate completely registered public accounting firms headquartered\nin mainland China or Hong Kong because of a position taken by an authority in those jurisdictions, our shares could be delisted and prohibited\nfrom trading on a U.S. exchange. In addition, if our auditor’s work papers were to become located in China or Hong Kong in the\nfuture, and thereby not be available for PCAOB inspection, our investors would be deprived of the benefits of the PCAOB’s oversight\nof our auditor through such inspections, and they may lose confidence in our reported financial information and procedures and the quality\nof our financial statements. Also, we cannot assure you that U.S. regulatory authorities will not apply additional or more stringent\ncriteria to us. Such uncertainty could cause the market price of our shares to be materially and adversely affected.\n\n \n\n \n**3.10)**\n**A downturn in the\nChinese or global economy, or a change in economic and political policies of China, could materially and adversely affect our VIE’s\nbusiness and financial condition.**\n\n \n\nOur\nVIE’s business, prospects, financial condition, and results of operations may be influenced to a significant degree by political,\neconomic, and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many\nrespects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation\nof resources. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically\nand among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide\nthe allocation of resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on our VIE.\n\n \n\nEconomic\nconditions in China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy may affect our\ncurrent customers’ and potential customers’ businesses and have a negative impact on our VIE’s business, results of\noperations, and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability\nto access the capital markets to meet liquidity needs.\n\n \n\n \n**3.11)**\n**There are political\nrisks associated with conducting business in China.**\n\n \n\nAny\nadverse economic, social, and/or political conditions, material social unrest, strike, riot, civil disturbance, or disobedience, as well\nas significant natural disasters, may affect the market and adversely affect our business operations as the operations of our VIE and\nits subsidiaries are based in China. Any negative event may pose an immediate threat to the stability of the economy in China, thereby\ndirectly and adversely affecting our VIE’s and our VIE’s subsidiaries’ results of operations and financial position.\nFurthermore, legislative or administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers,\nincluding us, and the market price of our shares could be adversely affected.\n\n \n\n37\n\n \n\n \n\n \n**3.12)**\n**Restrictions on currency\nexchange may limit our ability to receive and use our sales effectively.**\n\n \n\nCurrently,\nall of our revenues are settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue generated\nin RMB to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese\ngovernment introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions\nstill remain, including primarily the restriction that FIEs may only buy, sell or remit foreign currencies after providing valid commercial\ndocuments, at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account\nitems, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain\nseparate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose\nmore stringent restrictions on the convertibility of the RMB.\n\n \n\n \n**3.13)**\n**Fluctuations in exchange\nrates could adversely affect our business and the value of our securities.**\n\n \n\nThe\nvalue of our shares will be indirectly affected by the foreign exchange rate between the U.S. dollar and RMB and between those currencies\nand other currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RMB relative to the U.S.\ndollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business\nor results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be\nexchanged into U.S. dollars, as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.\n\n \n\nSince\nJuly 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the\nforeign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly\nin value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions\non fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.\n\n \n\nVery\nlimited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered\ninto any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these\ntransactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange\nlosses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.\n\n \n\n \n**3.15)**\n**The PRC government may issue further restrictive\nmeasures in the future**.\n\n \n\nWe\ncannot assure you that the PRC’s government will not issue further restrictive measures in the future. The PRC government’s\nrestrictive regulations and measures could increase our operating costs in adapting to these regulations and measures, limit our access\nto capital resources or even restrict our business operations, which could further adversely affect our business and prospects.\n\n \n\n38\n\n \n\n \n\n \n**3.16)**\n**If our PRC subsidiary\nor consolidated affiliated entity are found incompliant with the employment and social security, taxation, marketing, tele-communication,\nor other rules of China, they may face penalties imposed by the PRC government.**\n\n \n\nOur\nPRC subsidiary and consolidated affiliated entity failed to strictly comply with PRC laws and regulations to contribute towards social\ninsurance premium and housing fund on behalf of their employees, as required by the applicable laws and regulations. We may be required\nby relevant authorities to make up the shortfall of social insurance premium and housing fund. Although we have made efforts to settle\ntax payables and take compliance measures, if any PRC government authority takes the position that there is non-compliance with the taxation,\nmarketing, tele-communication, or other rules by our PRC subsidiary or consolidated affiliated entity, they may be exposed to penalties\nfrom PRC government authorities, in which case the operation and financial conditions of our PRC subsidiary or consolidated affiliated\nentity may be adversely affected.\n\n \n\n \n**3.17)**\n**We face uncertainty\nwith respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.**\n\n \n\nOn\nFebruary 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties\nby Non-Tax Resident Enterprises, or SAT Bulletin 7, which came into effect on the same day, revised in October 2017 and December 2017.\nSAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign\nintermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase\nand sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee\n(or other person who is obligated to pay for the transfer) of taxable assets, as such persons need to determine whether their transactions\nare subject to these rules and whether any withholding obligation applies.\n\n \n\nOn\nOctober 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-Resident\nEnterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017, and revised in June 2018. The SAT Bulletin\n37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.\n\n \n\nWhere\na non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which\nis an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable\nassets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC\ntax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established\nfor the purpose of reducing, avoiding, or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to\nPRC enterprise income tax, and the transferee or other person who pays for the transfer is obligated to withhold the applicable taxes\ncurrently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee\nmay be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.\n\n \n\nWe\nface uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved,\nsuch as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing\nobligations or may be taxed if our company is transferor in such transactions and may be subject to withholding obligations if our company\nis transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfers of shares of our company by investors\nwho are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin\n37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the\nrelevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not\nbe taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.\n\n \n\n39\n\n \n\n \n\n \n**3.19)**\n**Failure to comply\nwith the individual foreign exchange rules relating to the overseas direct investment or the engagement in the issuance or trading\nof securities overseas by our PRC resident stockholders may subject such stockholders to fines or other liabilities.**\n\n \n\nOther\nthan Notice 37, our ability to conduct foreign exchange activities in the PRC may be subject to the interpretation and enforcement of\nthe implementation rules of the administrative measures for individual foreign exchange promulgated by SAFE in January 2007 (as amended\nand supplemented, the “Individual Foreign Exchange Rules”). Under the individual foreign exchange rules, any PRC individual\nseeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must\nmake the appropriate registrations in accordance with SAFE provisions. PRC individuals who fail to make such registrations may be subject\nto warnings, fines or other liabilities.\n\n \n\nWe\nmay not be fully informed of the identities of all our beneficial owners who are PRC residents. For example, because the investment in\nor trading of our shares will happen in an overseas public or secondary market where shares are often held with brokers in brokerage\naccounts, it is unlikely that we will know the identity of all of our beneficial owners who are PRC residents. Furthermore, we have no\ncontrol over any of our future beneficial owners and we cannot assure you that such PRC residents will be able to complete the necessary\napproval and registration procedures required by the individual foreign exchange rules.\n\n \n\nIt\nis uncertain how the individual foreign exchange rules will be interpreted or enforced and whether such interpretation or enforcement\nwill affect our ability to conduct foreign exchange transactions. Because of this uncertainty, we cannot be sure whether the failure\nby any of our PRC resident stockholders to make the required registration will subject our PRC subsidiaries to fines or legal sanctions\non their operations, delay or restriction on repatriation of proceeds of this offering into the PRC, restriction on remittance of dividends\nor other punitive actions that would have a material adverse effect on our business, results of operations and financial condition.\n\n \n\n \n**3.20)**\n**We may be exposed\nto liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these\nlaws could have a material adverse effect on our business.**\n\n \n\nWe\nare subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign\ngovernments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining\nor retaining business. We have operations, agreements with third parties, and make most of our sales in China. The PRC also strictly\nprohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by\nthe employees, consultants, sales agents, or distributors of our Company, even though they may not always be subject to our control.\nIt is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future\nimprovements may prove to be less than effective, and the employees, consultants, sales agents, or distributors of our Company may engage\nin conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal\nor civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results, and financial\ncondition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by\ncompanies in which we invest or that we acquire.\n\n \n\n \n**3.21)**\n**If we become directly\nsubject to the recent scrutiny, criticism and negative publicity involving U.S.- listed Chinese companies, we may have to expend\nsignificant resources to investigate and resolve the matter, which could harm our business operations, stock price, and reputation\nand could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.**\n\n \n\nRecently,\nU.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed so-called\nreverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators\nand regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting\nirregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies\nor a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity,\nthe publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually\nworthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and\nexternal investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity\nwill have on our Company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations\nare proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company.\nThis situation will be costly and time consuming and distract our management from growing our Company.\n\n \n\n40\n\n \n\n \n\n \n**3.22)**\n**Fund flows between\nCXJ Group Co., Limited, its subsidiaries and the consolidated VIE**\n\n \n\nUnder\nPRC law, we may provide funding to our PRC subsidiaries only through capital contributions or loans, and to the consolidated VIE only\nthrough loans, subject to the satisfaction of applicable government registration and approval requirements. We rely on dividends and\nother distribution from our PRC subsidiaries to satisfy part of our liquidity requirements. However, to the extent that cash is in our\nHong Kong or PRC subsidiaries, there is a possibility that the funds may not be available to fund our operations or for other\nuses outside of the PRC or Hong Kong due to interventions or the imposition of restrictions and limitations by the PRC or the Hong Kong\ngovernment on the ability to transfer cash. In addition, if any of our subsidiaries incurs debt on its own behalf in\nthe future, the instruments governing such debt may restrict its ability to pay dividends to us.\n\n \n\nUnder\nthe Contractual Agreements, SZ CXJ is entitled to substantially all of the economic benefits of the consolidation VIE and its subsidiaries\nin the form of consulting service fee. The Contractual Agreements provide that for any fiscal quarter where the consolidated VIE records\npre-tax profit, the consolidated VIE shall pay to SZ CXJ a consulting service fee at an amount equivalent to its pre-tax profit excluding\nconsulting service fees under U.S. GAAP after making up the accumulated losses under U.S. GAAP from prior years, subject to compliance\nwith applicable PRC laws. Notwithstanding the foregoing, pursuant to the Contractual Arrangements, SZ CXJ is entitled to adjust the consulting\nservice fee based on the operating status and needs for business development of the consolidated VIE, and by considering among other\nthings, the complexity of the services, the actual costs that may be incurred to provide the consulting services, as well as the value\nand comparable price on the market of such services.\n\n \n\nFor\nthe years ended May 31, 2026 and 2025, the consolidated VIE was in an accumulated deficit position. The consolidated VIE had accumulated\ndeficits of $2,213,665 and $2,015,260 as of May 31, 2026 and 2025 respectively. In light of that, SZ CXJ did not charge the consolidated\nVIE for any consulting service fees, and consequently, the consolidated VIE had not paid any consulting service fees to SZ CXJ as of\nMay 31, 2026. SZ CXJ intends to charge the consolidated VIE for consulting service fees after the pre-tax profit under U.S. GAAP of the\nconsolidated VIE exceeds its accumulated losses under U.S. GAAP, pursuant to the Contractual Agreements. For the years ended May 31,\n2026 and 2025, ECXJ did not receive any cash dividends from its PRC subsidiaries.\n\n \n\nECXJ\ndid not make any capital contribution or provide any loan to our PRC subsidiaries or the consolidated VIE. Neither the subsidiaries nor\nthe consolidated VIE is obligated to make dividends or distributions to the ECXJ under the Contractual Agreements. As of the date of\nthis annual report, no dividend has been made to the ECXJ by the subsidiaries.\n\n \n\n**4）**\n**Risks Related to\nour Common Stock**\n\n \n\n \n**4.1)**\n**Our shares may not\ndevelop an active trading market and the price and trading volume of our shares may fluctuate significantly.**\n\n \n\nShares\nof common stock are currently quoted on the OTC marketplace. We cannot predict whether investor interest in us will lead to the development\nof an active and liquid trading market. If an active trading market does not develop, holders of our shares of common stock may have\ndifficulty selling our shares that may now be owned or may be purchased later. In addition, until we are able to be listed on a national\nexchange, the number of investors willing to hold or acquire our shares may be reduced, we may receive decreased news and analyst coverage,\nand we may be limited in our ability to issue additional securities or obtain additional financing in the future on terms acceptable\nto us, or at all. Even if an active trading market develops for our shares, the market price of our shares may be highly volatile and\ncould be subject to wide fluctuations. In addition, the trading volume of our shares may fluctuate and cause significant price variations\nto occur.\n\n \n\n41\n\n \n\n \n\n \n**4.2)**\n**Future sales of substantial\namounts of the shares of our Common Stock by existing shareholders could adversely affect the price of our Common Stock.**\n\n \n\nIf\nour existing shareholders sell substantial amounts of the shares, then the market price of our Common Stock could fall. Such sales by\nour existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at a time\nand place we deem appropriate. If any existing shareholders sell substantial amounts of shares, the prevailing market price for our shares\ncould be adversely affected.\n\n \n\n \n**4.3)**\n**The market price\nof our shares is likely to be highly volatile and subject to wide fluctuations in response to factors such as:**\n\n \n\n \n●\nVariation in our actual\nand perceived operating results’\n\n \n●\nNews regarding gains or\nlosses of customers or partners by us or our competitors’\n\n \n●\nNews regarding gains or\nlosses of key personnel by us or our competitors’\n\n \n●\nAnnouncements of competitive\ndevelopments, acquisitions or strategic alliances in our industry by us or our competitors;\n\n \n●\nChanges in earnings estimates\nor buy/sell recommendations by financial analysts;\n\n \n●\nPotential litigation;\n\n \n●\nGeneral market conditions\nor other developments affecting us or our industry; and\n\n \n●\nThe operating and stock\nprice performance of other companies, other industries and other events or factors beyond our control.\n\n \n\nIn\naddition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to\nthe operating performance of certain companies. These market fluctuations may also materially and adversely affect the market price of\nthe shares.\n\n \n\n \n**4.4)**\n**In case that our\nshares trade under $5.00 per share they will be considered penny stock. Trading in penny stocks has many restrictions and these restrictions\ncould severely affect the price and liquidity of our shares.**\n\n \n\nIf\nour stock trades below $5.00 per share, our stock would be known as a “penny stock”, which is subject to various regulations\ninvolving disclosures to be given to you prior to the purchase of any penny stock. The U.S. Securities and Exchange Commission (the “SEC”)\nhas adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less\nthan $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our Common Stock would be considered as a “penny\nstock”. A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities\nto persons other than established Members and accredited investors. For transactions covered by these rules, the broker/dealer must make\na special suitability determination for the purchase of these securities. In addition, he must receive the purchaser’s written\nconsent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the\n“penny stock” rules may restrict the ability of broker/dealers to sell our securities and may negatively affect the ability\nof holders of shares of our Common Stock to resell them. These disclosures require you to acknowledge that you understand the risks associated\nwith buying penny stocks and that you can absorb the loss of your entire investment. Penny stocks are low priced securities that do not\nhave a very high trading volume. Consequently, the price of the stocks is often volatile, and you may not be able to buy or sell the\nstock when you want to.\n\n \n\n \n**4.5)**\n**We do not anticipate\npaying cash dividends on our Common Stock in the foreseeable future.**\n\n \n\nWe\ndo not anticipate paying cash dividends in the foreseeable future. Presently, we intend to retain all our earnings, if any, to finance\ndevelopment and expansion of our business. Consequently, your only opportunity to achieve a positive return on your investment in us\nwill be if the market price of our Common Stock appreciates.\n\n \n\n42\n\n \n\n \n\n \n**4.6)**\n**Together, our Director\nMr. Xinrui Wang, Ms. Cuiyao Luo and Mr. Wenbin Mao, own a large percentage of our outstanding stock and could significantly influence\nthe outcome of our corporate matters.**\n\n \n\nMr.\nXinrui Wang, our Chairman direct and indirect beneficially owns 55.30% of our outstanding shares of Common Stock, our CFO Ms. Cuiyao\nLuo, direct beneficially owns 5.83% and Mr. Wenbin Mao direct and indirect beneficially owns 8.69% of our outstanding shares of Common\nStock. As a result, Messrs. Xinrui Wang, Ms. Cuiyao Luo and Wenbin Mao are collectively able to exercise significant influence over all\nmatters that require us to obtain shareholder approval, including the election of directors to our board and approval of significant\ncorporate transactions that we may consider, such as a merger or other sale of our company or its assets. This concentration of ownership\nin our shares by executive officers will limit other shareholders’ ability to influence corporate matters and may have the effect\nof delaying or preventing a third party from acquiring control over us.\n\n \n\n \n**4.7)**\n**The price of our\ncommon stock may be volatile or may decline regardless of our operating performance, and stockholders may not be able to resell their\nshares.**\n\n \n\nThe\nmarket price of our stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:\n\n \n\n \n●\nactual or anticipated fluctuations\nin our revenue and other operating results;\n\n \n●\nthe financial projections\nwe may provide to the public, any changes in these projections or our failure to meet these projections;\n\n \n●\nactions of securities analysts\nwho initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our\nfailure to meet these estimates or the expectations of investors;\n\n \n●\nannouncements by us or\nour competitors of significant products, acquisitions, strategic partnerships, joint ventures, or capital commitments;\n\n \n●\nprice and volume fluctuations\nin the overall stock market, including as a result of trends in the economy as a whole;\n\n \n●\nlawsuits threatened or\nfiled against us; and\n\n \n●\nother events or factors,\nincluding those resulting from health pandemics, war or incidents of terrorism, or responses to these events.\n\n \n\nIn\naddition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market\nprices of securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the\noperating performance of those companies.\n\n \n\n \n**4.8)**\n**Provisions in the\nNevada Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors\nor officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers\nin any such actions.**\n\n \n\nMembers\nof our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer,\nexcept in limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised\nStatutes. Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable\nto the company or its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a\ndirector or officer unless it is proven that (1) the director’s or officer’s act or failure to act constituted a breach of\nhis or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud\nor a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their potential\nliability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly, you\nmay be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty of care.\nIn addition, we are allowed to indemnify our directors and officers from and against any and all costs, charges and expenses resulting\nfrom their acting in such capacities with us. If you were able to enforce an action against our directors or officers, in all likelihood,\nwe would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be\nrequired to pay. Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business,\nfinancial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock.\n\n \n\n43\n\n \n\n \n\n \n**4.9)**\n**If we continue to\nbe unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence\nin the accuracy and completeness of our financial reports and investors may lose the value of their investment.**\n\n \n\nAs\na public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such\ninternal control. In addition, we have been required to furnish a report by management on the effectiveness of our internal control over\nfinancial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. If we continue to identify material weaknesses in our internal\ncontrol over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our\ninternal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express\nan opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the\naccuracy and completeness of our financial reports and the price of our stock could be negatively affected, and we could become subject\nto investigations by the SEC, FINRA or other regulatory authorities, which could require additional financial and management resources.\n\n \n\n \n**4.10)**\n**The requirements\nof being a public company may strain our resources and divert management’s attention.**\n\n \n\nAs\na public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act,\nthe Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable\nsecurities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will\nnonetheless increase our management, legal and financial compliance costs, make some activities more difficult, time-consuming or costly\nand increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange\nAct requires, among other things, that we file annual, semi-annual, and current reports with respect to our business and operating results.\n\n \n\nAs\na result of disclosure of information in this annual report, periodic reports, current reports and in other filings required of a public\ncompany, our business and financial condition are more visible, which we believe may result in threatened or actual litigation, including\nby competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if\nthe claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them,\ncould divert the resources of our management and adversely affect our business, brand and reputation and results of operations.\n\n \n\nWe\nalso expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and\nofficer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.\nThese factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly\nto serve on our audit committee and compensation committee, and qualified executive officers.\n\n \n\n \n**4.11)**\n**We incur increased\ncosts as a result of being a public company.**\n\n \n\nAs\na public company, we incur legal, accounting and other expenses that we did not incur as a private company. For example, we must now\nengage U.S. securities law counsel and PCAOB auditors that we did not require as a private company, and we will have annual payments\nfor listing on a stock exchange if we are so listed. In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented\nby the SEC and NASDAQ, has required changes in corporate governance practices of public companies. We expect these new rules and regulations\nto increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly.\nIn addition, we incur additional costs associated with our public company reporting requirements. While it is impossible to determine\nthe amounts of such expenses in advance, we expect that we will incur additional expenses of between $500,000 and $1 million per year\nthat we did not experience as a private company.\n\n \n\n44"}