{"url_path":"/sec/efty/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 Key Information**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/2058349/0001213900-26-056086-index.html","accession_number":"0001213900-26-056086","cik":"0002058349","ticker":"EFTY","issuer_name":"ETOILES CAPITAL GROUP CO., LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/2058349/0001213900-26-056086-index.html","primary_entity_key":"0002058349","primary_entity_name":"ETOILES CAPITAL GROUP CO., LTD"},"word_count":15342,"has_tables":true,"body_markdown":"**Item\n3. Key Information**\n\n \n\n**3.A.\n[Reserved]**\n\n \n\n**3.B.\nCapitalization and Indebtedness**\n\n \n\nNot\napplicable for annual reports on Form 20-F.\n\n \n\n**3.C.\nReasons for the Offer and Use of Proceeds**\n\n \n\nNot\napplicable for annual reports on Form 20-F.\n\n \n\n**3.D.\nRisk Factors**\n\n* *\n\n*You\nshould carefully consider the following risk factors, together with all of the other information included in this Annual Report. Investment\nin our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other\ninformation included in this Annual Report before making an investment decision. The risks and uncertainties described below represent\nour known material risks to our business. If any of the following risks actually occurs, our business, financial condition or results\nof operations could suffer. In that case, you may lose all or part of your investment.* \n\n** **\n\n**Risks\nRelated to Our Business and Operations**\n\n** **\n\n**The\nrevenue from our integrated investor relation business is non-recurring in nature and our profitability is highly unpredictable.**\n\n** **\n\nThe\nperformance of our integrated investor relation services depends, to a large extent, on our ability to leverage our business network\nand relationships to source and retain clients. A portion of our contracts are negotiated on a project-by-project basis with our clients,\nthe revenue generated from our services may fluctuate from time to time and often does not recur. The number of projects undertaken by\nus, the revenue generated from each client and the total revenue derived from our projects are affected by numerous factors such as market\nconditions, the terms of each engagement, manpower required, subcontracting arrangement, project duration and the complexity and completion\ntimeline of each project, resulting in uncertainties in relation to the sustainability of our financial performance. There is no assurance\nthat the clients which have previously sought our services will continue to retain us for future business.\n\n** **\n\nPart\nof our revenue from the provision of integrated investor relation services were project-based services. However, the extent of such project-based\nservices provided, as well as our fee levels, are subject to our clients’ demands. Accordingly, our revenue may vary from period\nto period depending upon the number, type and fee level of our services. Our future results of operations will depend upon our ability\nto maintain or increase the number of our clients and projects at acceptable fee levels. In addition, the timing of completion of our\nprojects will affect our cash flows generated from operations, and delays in the completion of our projects may defer payments from our\nclients, which would adversely affect our cash flows and results of operations. If we are not able to maintain or grow our current fee\nlevels or maintain or increase the number of our clients, both of which are dependent on various factors such as competition and economic\nconditions, our results of operations may be adversely affected. In these circumstances, our revenue and profitability may fluctuate\nfrom year to year and our future financial performance is therefore highly unpredictable.\n\n \n\n**Since\nwe do not enter into exclusive service agreements with our existing clients, it is difficult to predict our future results of operations.**\n\n** **\n\nSome\nof our Hong Kong Operating Subsidiary’s service agreements with our clients are entered into on a project basis and not through\nlong term exclusive agreements. For those service agreements over a period of time, they are generally non-exclusive. Therefore, we cannot\nassure you that a client will engage us for future services once the service agreements have been completed, or that a client will not\nreduce the scope of, or terminate, the existing projects. Since we do not have exclusive service agreements with our existing integrated\ninvestor relation clients, our client service agreements may be terminated from time to time due to various reasons beyond our control,\nmaking it difficult to predict our future results of operations.\n\n \n\n1\n\n \n\n \n\n**The\nfinancial condition of our clients may deteriorate and their fee settlement to us may be slow, which may adversely affect our cash flows,\nworking capital, financial condition and results of operations.**\n\n \n\nA\ndecline in the financial condition of our clients would hinder our ability to collect payments from our clients, and would also result\nin a decrease in demand for our services in the future. A lack of liquidity in the capital markets, or a sustained period of unfavorable\ngeneral economic conditions or conditions affecting the operations or industries of our clients may increase our exposure to credit risks\nand result in increases in our allowance for doubtful receivables. These factors may also materially and adversely affect our cash flows,\nworking capital, financial condition and results of operations. We are also subject to the risk of payment deferral by our clients as\npart of our business operations. We cannot assure you that we will be able to fully recover the outstanding amounts due from our clients,\nif at all, or that they will settle the amounts in a timely manner. If settlements by our clients are not made in full or in a timely\nmanner, our financial condition and results of operations will be adversely affected.\n\n** **\n\n**Our\nreputation may be adversely affected if third parties to whom we outsource a small portion of our integrated investor relation services\nfail to perform satisfactorily and/or there occur negative events concerning our business.**\n\n \n\nOur\nHong Kong Operating Subsidiary outsource a small portion of our services to third parties in the course of our business. We primarily\noutsource certain roadshow arrangement services and other ancillary services to public relation companies. If these third parties do\nnot perform their services satisfactorily, or if they decide not to continue to provide such services to us, our business could be adversely\naffected. If we fail to identify and secure comparable third party service providers in a timely manner and on commercially reasonable\nterms, we may experience delays in providing services to our clients, which may negatively affect our business. Any service interruptions\nexperienced by our clients could negatively impact our reputation, resulting in loss of existing clients and inability to attract new\nclients. Furthermore, we may even become subject to civil claims by our clients or other third parties. Under such circumstances, our\nbusiness, financial condition and results of operations may be materially and adversely affected. Moreover, our reputation is susceptible\nto damage in case of any negative events in relation to our operations, including, without limitation, negative publicity or media coverage,\ndevelopment of scandals, litigation and disputes, and regulatory enquiries or enforcement actions taken against us or our employees.\nWe cannot assure that such negative events will not happen in the future. If they materialize, it may have a material adverse impact\non our reputation and in turn our business activities and results of operations.\n\n** **\n\n**We\nrely on our key management and professional staff, the loss of whom may affect our operations.**\n\n \n\nOur\nGroup has an experienced and competent management team that is responsible for directing and managing our daily operations, overseeing\nour financial condition and performance, and formulating our business strategies. Leveraging on their experience and networks in the\nindustry, we have been successfully expanding our business. However, we cannot assure you that we can retain the services of our key\nmanagement and find suitable replacements if any of them terminates his or her engagement with us, given the intense competition for\nexperienced and competent personnel in the industry. Other than our key management, we also rely on our professional staff in different\nbusiness operations to implement our business strategies, provide quality services to clients, maintain relationship with clients and\nprocure new clients. Loss of our professional staff and failure to recruit replacement will materially and adversely affect our business\noperations.\n\n \n\n**We\nmay be adversely affected by changes in the laws and regulations governing the companies listed on the stock exchanges in Hong Kong\nand the U.S.**\n\n** **\n\nA\nlarge number of our clients were companies to be listed or already listed on the stock exchanges in Hong Kong, and a small number\nof our clients were companies to be listed or already listed on the stock exchanges in the U.S. Our clients are therefore subject to\nall applicable laws and regulations relating to the listing of their securities on the stock exchange in Hong Kong and the U.S.,\nincluding but not limited to, the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Nasdaq\nListing Rules. As a result, our results of operations are affected by changes in the regulatory environment in Hong Kong and the\nU.S. Any change in Hong Kong and PRC laws and regulations, such as additional restrictions or requirements on integrated investor\nrelation services providers, or new regulations that impose new restrictions on the ability of companies to list on the stock exchanges\nin Hong Kong and the U.S., or the abolishment of or amendment to disclosure requirements imposed on listed companies, may also adversely\naffect the demand for our services, which may in turn materially and adversely affect our business, financial condition and results of\noperations.\n\n** **\n\n**We\nface risks associated with pressure on the level of our service fees.**\n\n \n\nSince\nthe determination of service fees is primarily based on demand for our services, cost of services, and the service fees charged by our\ncompetitors for the same or similar services, we cannot assure you that we will be able to maintain the level of the service fees that\nwe currently charge. In the event that the demand for our services decreases, or the level of the service fees decreases in the future\ndue to existing or new competition or any other factors beyond our control, we may have to reduce the current level of fees charged for\nour services, which may materially and adversely affect our business, financial condition and results of operations.\n\n** **\n\n**We\nmay be subject to litigation, arbitration or other legal proceeding risk.**\n\n \n\nWe\nmay be subject to arbitration claims and lawsuits in the ordinary course of our business. As of the date of this annual report, we are\nnot a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a\nmaterial adverse effect on our business, financial condition or operations. Actions brought against us may result in settlements, awards,\ninjunctions, fines, penalties and other results adverse to us. A substantial judgment, settlement, fine or penalty could be material\nto our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant\nreputational harm, which could harm our business prospects.\n\n \n\n2\n\n \n\n** **\n\n**If\nwe fail to keep clients’ information confidential or if we handle information improperly or make misstatements of such information,\nour business and reputation could be materially and adversely affected.**\n\n \n\nWe\nmanage private and confidential information and documentation relating to our clients’ finances and transactions, often prior to\npublic dissemination. The use of insider or price sensitive information is highly regulated in Hong Kong and overseas, and any violation\nof the relevant securities laws and regulations may result in civil and criminal penalties. There is no assurance that we can completely\neliminate the risk of any misstatement or leakage of confidential information and customer data. If we fail to keep clients’ proprietary\ninformation and documentation confidential, or if we handle the information improperly or make misstatements of such information, our\nreputation may be adversely affected or even lost. At the same time, we may expose our clients to a significant loss of revenue as a\nresult of any premature release or misstatements of confidential information. As such, we may also become subject to civil claims by\nour clients or other third parties or investigations by relevant authorities.\n\n** **\n\n**We\nmay be unable to successfully implement our future business plans.**\n\n \n\nOur\nsuccess is dependent on, among other things, our proper and timely execution of our future business plans. Our future business plans\nmay be hindered by factors beyond our control, such as competition within the industry we operate, our ability to cope with high exposure\nto financial risk, operational risk, market risk and credit risk as our business and client base expands and our ability to provide,\nmaintain and improve the level of human and other resources in servicing our clients. As such, we cannot assure that our future business\nplans will materialize, or that our objectives will be accomplished fully or partially, or our business strategies will generate the\nintended benefits to us as initially contemplated. If we fail to implement our business development strategies successfully, our business\nperformance, financial condition and future prospects and growth could be materially and adversely affected.\n\n \n\nWe\nmay in the future pursue acquisitions and joint ventures as part of our growth strategy. Although no acquisitions nor joint ventures\nare anticipated at the date of this document, any future acquisition or joint venture may result in exposure to potential liabilities\nof the acquired companies and significant transaction costs, and also may present new risks associated with entering additional markets\nor offering new services and integrating the acquired companies or newly established joint ventures. Moreover, we may not have sufficient\nmanagement, financial and other resources to integrate companies we acquire or to successfully operate joint ventures, and we may be\nunable to profitably operate our expanded company structure. Additionally, any new business that we may acquire or joint ventures we\nmay form, once integrated with our existing operations, may not produce expected or intended results.\n\n** **\n\n**We\nface risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.**\n\n \n\nWe\nare vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures,\nbreak-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology\nplatform failures or Internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well\nas adversely affect our ability to operate, including communicating with clients and the relevant listing authorities. Moreover, besides\nCOVID-19, our business and ability to operate could also be adversely affected by Ebola virus disease, Zika virus disease, H1N1 flu,\nH7N9 flu, avian flu, SARS or other epidemics. Our headquarters are located in Hong Kong, where our directors and management and\na majority of our employees currently reside. In addition, our system hardware and back-up systems are hosted in leased facilities located\nin Hong Kong. Consequently, we are highly susceptible to factors such as these that may adversely affect Hong Kong. If any\nof the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Hong Kong, our operation may experience\nmaterial disruptions, such as temporary closure of our offices and suspension of services, which may materially and adversely affect\nour business, financial condition and results of operations.\n\n** **\n\n3\n\n \n\n \n\n**The\nwars in Ukraine and in the Middle East could materially and adversely affect our business and results of operations.**\n\n \n\nThe\noutbreak of wars in Ukraine and the Middle East has already affected global economic markets, including a dramatic increase in the price\nof oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy.\nRussia’s military incursion and the conflict in the Middle East and the resulting sanctions could adversely affect global energy\nand financial markets and thus could affect the global markets, our customers’ businesses and potentially our business. As at the\ndate of this annual report, to the best knowledge of the Company, we and our Hong Kong subsidiaries (i) do not have any direct\nbusiness or contracts with any Russian, Ukraine, or Middle East entity as a supplier or customer, (ii) do not have any knowledge\nwhether any our clients or suppliers have any direct business or contracts with any Russian entity, (iii) our business lines of\nservice, projects, or operations were not materially impacted by disruptions caused the war in Ukraine and in the Middle East and (iv) have\nnot been financially affected by the wars in Ukraine and the Middle East. The extent and duration of the military action, sanctions and\nresulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action\nor resulting sanctions or further escalation for the war in the Middle East may magnify the impact of other risks described in this section.\nWe cannot predict the progress or outcome of the situation in Ukraine and in the Middle East, as the conflict and governmental reactions\nare rapidly developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting\nthe region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on\nour business, financial condition, results of operations, and prospects.\n\n \n\nWe\ndo not anticipate any new or heightened risk of potential cyberattacks by state actors or others since Russia’s invasion of Ukraine\nand the war in the Middle East, and we have not taken any actions to mitigate such potential risks. Our board of directors will continue\nto monitor any potential risks that might arise due to the war in Ukraine and in the Middle East which are specific to the Company, including\nbut not limited to risks related to cybersecurity, sanctions, and supply chain, suppliers, or service providers in affected regions as\nwell as risks connected with ongoing or halted operations or investments in affected regions.\n\n \n\n**Our\nresults of operation may be materially and adversely affected by a downturn in Hong Kong, mainland China or the global economy.**\n\n \n\nAll\nof our operations are currently located in Hong Kong. We currently do not have any operation outside Hong Kong. Nevertheless, our\nbusiness, prospects, financial condition and results of operations may be influenced to a significant degree by the political, economic\nand social conditions in Hong Kong and mainland China generally and by the continued economic growth in Hong Kong and mainland\nChina as a whole. While the mainland China economy has experienced significant growth over the past decades, growth has been uneven,\nboth geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic\ngrowth and guide the allocation of resources. Some of these measures may benefit the overall mainland China economy, but may have a negative\neffect on us.\n\n \n\nThe\nrapid growth of the mainland China economy has decelerated gradually over the years and may continue. There exists also uncertainty\nover the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of\nsome of the world’s leading economies, including the United States and the PRC, before 2020. Unrest, terrorist threats and\nthe potential for war in the Middle East and elsewhere may increase market volatility across the globe. Any prolonged slowdown in the\nglobal or the Chinese economy may affect potential customers’ confidence in the financial market as a whole and have a negative\nimpact on our financial condition. Further, recent global economic conditions including inflationary pressures and high interest rate,\nhave affected our profitability in Hong Kong and mainland China. Our Hong Kong Operating Subsidiary and Etoiles Financial constantly\nface (i) increase in labor cost due to rising wage; and (ii) increase in rental cost of office; (iii) increase in service fee charged\nby our vendors, resulting in increase in cost of revenue and selling expense and decrease in gross profit. Continued pressure from global\neconomic conditions may affect the Hong Kong and mainland China markets in the future and in turn, may affect our operations.\n\n \n\nThe\ncontinued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.\nWe cannot assure that there will not be any unfavorable changes in the Hong Kong and mainland China economies that could impact\nthe industries in which we operate, which could in turn diminish the demand for our services.\n\n** **\n\n4\n\n \n\n \n\n**Our\nmanagement team lacks experience in managing a U.S. public company and complying with laws applicable to such company, the failure\nof which may adversely affect our business, financial condition and results of operations.**\n\n \n\nOur current management team lacks experience in managing a U.S. publicly\ntraded company, interacting with public company investors and complying with the increasingly complex laws pertaining to U.S. public\ncompanies. Prior to the completion of our initial public offering, we were a private company mainly operating our businesses in Hong Kong\nand mainland China. As a result of our initial public offering, our Company becomes subject to significant regulatory oversight and reporting\nobligations under the federal securities laws and the scrutiny of securities analysts and investors, and our management currently has\nno experience in complying with such laws, regulations and obligations. Our management team may not successfully or efficiently manage\nour transition to becoming a U.S. public company. These new obligations and constituents will require significant attention from\nour senior management and could divert their attention away from the day-to-day management of our business, which could adversely\naffect our business, financial condition and results of operations.\n\n \n\n**We\nare a holding company and our ability to pay dividends is primarily dependent upon the earnings of, and distributions by, our Hong Kong\nsubsidiaries.**\n\n \n\nThe\nClass A Ordinary Shares offered in this annual report are those of Etoiles Cayman. Etoiles Cayman is an exempted company incorporated\nunder the laws of the Cayman Islands with limited liability. A substantial part of our business operations are conducted through our\nHong Kong Operating Subsidiary, and hence, our revenues are contributed by our Hong Kong Operating Subsidiary. We intend to\nretain all available funds and future earnings, if any, for operation and business development, however, we may pay dividends on our\nClass A Ordinary Shares in the foreseeable future. See “Dividend Policy”.\n\n \n\nOur\nability to pay dividends to our shareholders is primarily dependent upon the earnings of our Hong Kong Operating Subsidiary and their\ndistribution of funds to us, primarily in the form of dividends. The ability of our Hong Kong subsidiary to make distributions to\nus depends upon, among others, its distributable earnings. Under Hong Kong law, dividends may only be paid out of distributable\nprofits (that is, accumulated realized profits less accumulated realized losses) or other distributable reserves. Dividends cannot be\npaid out of share capital. There are no restrictions or limitations under the laws of Hong Kong imposed on the conversion of HK\ndollars into foreign currencies and the remittance of currencies out of Hong Kong, nor is there any restriction on foreign exchange\nto transfer cash between the Company and its subsidiaries, across borders and to U.S. investors, nor are there any restrictions\nor limitations on distributing earnings from our business and subsidiaries to the Company and U.S. investors. Under the current\npractice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us.\n\n \n\nThere\nis no assurance that we will be able to declare or distribute any dividend in the future.\n\n \n\n**Risks\nRelated to Doing Business in Hong Kong**\n\n** **\n\n**The\nHong Kong legal system embodies uncertainties which could limit the availability of legal protections.**\n\n \n\nHong Kong\nis a Special Administrative Region of the PRC and enjoys a high degree of autonomy under the “one country, two systems” principle.\nThe Hong Kong Special Administrative Region’s constitutional document, the Basic Law, ensures that the current political situation\nwill remain in effect for 50 years. Hong Kong has enjoyed the freedom to function in a high degree of autonomy for its affairs,\nincluding currencies, immigration and custom, independent judiciary system and parliamentary system. However, we cannot guarantee that\nthe implementation of the “one country, two systems” principle and the level of autonomy as currently in place will continue\nin the future. Any changes in the state of political environment in Hong Kong may materially and adversely affect our business and\noperation. We cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new\nlaws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.\nThese uncertainties could limit the legal protections available to us.\n\n \n\n5\n\n \n\n \n\n**You\nmay experience difficulties in effecting service of process, enforcing foreign judgments or bringing actions in Hong Kong against\nus or our management named in this annual report based on foreign laws.**\n\n \n\nEtoiles\nCayman is incorporated under the laws of the Cayman Islands, but all of our operations and assets are held by our Hong Kong Operating\nSubsidiary and Etoiles Financial in Hong Kong. In addition, a majority of our senior executive officers and directors, including\nMr. Kit Shing, CHEUNG, Mr. Hon Fai, TAM, Mr. Zhihan, LOU, Ms. Qi, DING and Mr. Yeung Tak, CHEN, reside within Hong Kong for a significant\nportion of the time. As a result, it may be difficult or impossible for investors to effect service of process on us inside Hong Kong.\nIt may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions\nof the U.S. federal securities laws against us and our officers and directors. Moreover, there is uncertainty as to whether the\ncourts of the Hong Kong would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the\ncivil liability provisions of the securities laws of the United States or any state.\n\n \n\nThere is currently no arrangement providing for\nthe reciprocal enforcement of judgements between Hong Kong and the United States, as such judgments of United States courts\nwill not be directly enforced in Hong Kong. However, under common law, a foreign judgment (including one from federal or state court\nin the United States) obtained against the Company may generally be treated by the courts of Hong Kong as a cause of action\nin itself and sued upon as a debt between the parties. In a common law action for enforcement of a foreign judgment, the judgment creditor\nhas to prove that (i) the judgment is *in personal*; (ii) the judgment is in the nature of a monetary award; (iii) the\njudgment is final and conclusive on the merits and has not been stayed or satisfied in full; and (iv) the judgement is from a court\nof competent jurisdiction. The defenses available to the defendant in a common law action for enforcement of a foreign judgment include\nbreach of natural justice, fraud and contrary to public policy of Hong Kong. In order to enforce the foreign judgment at common\nlaw, fresh proceedings must be initiated in Hong Kong, which involves issuing a Writ of Summons and Statement of Claim attaching\nthe foreign judgment as proof of the debt.\n\n \n\n**Recent\njoint statements by the SEC and PCAOB, Nasdaq’s proposed rule changes and the HFCA Act all call for additional and more stringent\ncriteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors\nwho are not inspected by the PCAOB.**\n\n \n\nThe\nAHFCA Act was enacted on December 23, 2022. On December 29, 2022, the Consolidated Appropriations Act was signed into law by\nthe former President of the U.S., Mr. Joe Biden, which contained, among other things, an identical provision to the AHFCA Act and\namended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on a national securities exchange or\nin the over-the-counter market in the United States if its auditor is not subject to PCAOB inspections for two consecutive years\ninstead of three years. The AHFCA Act states that if the SEC determines that an issuer has filed audit reports issued by a registered\npublic accounting firm that has not been subject to inspection by the PCAOB for two consecutive years, the SEC shall prohibit the\nsecurities of the issuer from being traded on a national securities exchange or in the over-the-counter trading market in the United States\n(the applicable period under the HFCA Act prior to the enactment of the AHFCA Act had been two years).\n\n \n\nOn\nMarch 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements\nof the HFCA Act. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection”\nyear under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the\nHFCA Act, including the listing and trading prohibition requirements described above. On December 2, 2021, the SEC adopted final\namendments implementing the disclosure and submission requirements of the HFCA Act.\n\n \n\nOn\nJune 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law,\nwould reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years\nto two years.\n\n \n\nOn\nNovember 5, 2021, the PCAOB approved a new rule, PCAOB Rule 6100, Board Determinations Under the HFCA Act to provide a framework\nfor its determinations under the HFCA Act that the PCAOB is unable to inspect or investigate completely registered public accounting\nfirms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. The rule establishes\nthe manner of the PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information the PCAOB will\nconsider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations;\nand the process by which the Board will reaffirm, modify, or vacate any such determinations.\n\n \n\n6\n\n \n\n \n\nIn\nDecember 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA\nAct. Also, on December 16, 2021, pursuant to the HFCA Act, the PCAOB issued a Determination Report which determined that the PCAOB\nis unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and in Hong Kong,\na Special Administrative Region of PRC, because of positions taken by PRC authorities in those jurisdictions. In addition, the PCAOB’s\nreport identified the specific registered public accounting firms which are subject to these determinations.\n\n \n\nOn\nAugust 26, 2022, the CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol, or the Protocol, governing\ninspections and investigations of audit firms based in China and Hong Kong. Pursuant to the Protocol, the PCAOB shall have independent\ndiscretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the\nSEC.\n\n \n\nOn\nDecember 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public\naccounting firms headquartered in mainland China and Hong Kong in 2022, and the PCAOB Board vacated its previous determinations\nthat the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and\nHong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public\naccounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out\nof our, and our auditor’s, control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward\nand resumed regular inspections since March 2023. The PCAOB is continuingly pursuing ongoing investigations and may initiate new\ninvestigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with\nthe HFCA Act if needed.\n\n \n\nOn\nDecember 23, 2022, the AHFCA Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities\nfrom trading on a national securities exchange or in the over-the-counter market in the United States if its auditor is not subject\nto PCAOB inspections for two consecutive years instead of three. As a result, the time period before the Company’s securities\nmay be prohibited from trading or delisted has been decreased accordingly.\n\n \n\nOn\nDecember 29, 2022, the Consolidated Appropriations Act was signed into law by the former President of the U.S., Mr. Joe Biden,\nwhich contained, among other things, an identical provision to the AHFCA Act and amended the HFCA Act by requiring the SEC to prohibit\nan issuer’s securities from trading on a national securities exchange or in the over-the-counter market in the United States\nif its auditor is not subject to PCAOB inspections for two consecutive years instead of three years.\n\n \n\nOur\nauditor, SRCO, C.P.A., Professional Corporation, is an independent registered public accounting firm that issues the audit report included\nelsewhere in this annual report, which is headquartered in New York and has been inspected by the PCAOB on a regular basis, with the\nlast inspection in 2023 as an auditor of companies that are traded publicly in the United States and a firm registered with the\nPCAOB, it is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance\nwith the applicable professional standards. Our auditor is currently subject to PCAOB inspections and PCAOB is able to inspect our auditor\nin relation to our U.S. listing. However, there is no assurance that future audit reports will be prepared by auditors able to be\ninspected by the PCAOB and therefore, in the future, you may be deprived of the benefits of such inspection. As such, trading in our\nsecurities may be prohibited under the HFCA Act if the PCAOB determines that it cannot inspect or investigate completely our auditor,\nand as a result our securities may be delisted. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s\naccess in the future which would prevent the PCAOB from continuing to inspect or investigate completely accounting firms headquartered\nin mainland China or Hong Kong, the PCAOB Board will consider the need to issue a new determination. Our securities may be delisted\nor prohibited from trading if the PCAOB determines that it cannot inspect or investigate completely our auditor under the HFCA Act.\n\n** **\n\n7\n\n \n\n** **\n\n**Uncertainties\nwith respect to the PRC legal system, including risks and uncertainties regarding the enforcement of laws, and sudden or unexpected changes\nin laws and regulations in the PRC with little advance notice could result in a material change in our operations and/or the value of\nthe securities we are registering for sale.**\n\n \n\nThere\nare substantial uncertainties regarding the interpretation and application of PRC laws and regulations. The PRC legal system is based\non written statutes and their legal interpretations by the Standing Committee of the National People’s Congress, or NPCSC. Previous\ncourt decisions may be cited for reference but have limited precedential value. Since 1979, the PRC government has been developing a\ncomprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic\nmatters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, as these laws and regulations\nare relatively new, and due to the limited volume of published cases and their non-binding nature, interpretation and enforcement of\nthese laws and regulations involve uncertainties. These laws and regulations are sometimes vague and may be subject to future changes,\nand their official interpretation and enforcement could be unpredictable, with little advance notice which could result in a material\nchange in our operations and/or the value of our Class A Ordinary Shares. It is also uncertain whether having a majority of our directors\nand officers located in Hong Kong will subject us to the oversight of the Chinese authorities in the future.\n\n \n\nFurthermore,\nthe PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or\nat all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until\nsometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial\ncosts and diversion of resources and management attention.\n\n \n\n**The\nPRC government may intervene or influence our operations at any time, which could result in a material change in our operations and/or\nthe value of the securities we are registering for sale.**\n\n \n\nEtoiles\nCayman is a holding company and we conduct our operations through our Hong Kong Operating Subsidiary in Hong Kong. Etoiles\nFinancial, our other Hong Kong subsidiary, has no operation on its own. The PRC government may choose to exercise significant oversight\nand discretion, and the regulations to which we are subject may change rapidly and with little notice to us or our shareholders. As a\nresult, the application, interpretation, and enforcement of new and existing laws and regulations in mainland China are often uncertain.\nIn addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently\nwith our current policies and practices. New laws, regulations, and other government directives in mainland China may also be costly\nto comply with, and such compliance or any associated inquiries or investigations or any other government actions may:\n\n \n\n●delay\nor impede our development;\n\n \n\n●result\nin negative publicity or increase our operating costs;\n\n \n\n●require\nsignificant management time and attention; and\n\n \n\n●subject\nus to remedies, administrative penalties and even criminal liabilities that may harm our\nbusiness, including fines assessed for our current or historical operations, or demands or\norders that we modify or even cease our business practices.\n\n \n\nThe\npromulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise\nunfavorably impact the ability or manner in which we conduct our business could require us to change certain aspects of our business\nto ensure compliance, which could decrease demand for our products, increase costs, require us to obtain more licenses, permits, approvals\nor certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented\nand if the PRC government chooses to exercise such significant oversight and discretion over the conduct of our business and may intervene\nor influence or control our operations at any time. Such government actions could result in a material change in our operations and/or\nthe value of the securities we are registering for sale; could significantly limit or completely hinder our ability to continue our operations;\ncould significantly limit or completely hinder our ability to offer or continue to offer our securities to investors; and may cause the\nvalue of our securities to significantly decline or be worthless.\n\n \n\n8\n\n \n\n \n\n**Any\nactions by the PRC government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment\nin China-based issuers, such actions could significantly limit or completely hinder our ability to offer or continue to offer securities\nto investors and cause the value of such securities to significantly decline or become worthless.**\n\n \n\nPrevious\nstatements by the PRC government have indicated an intent to exert more exert oversight and control over offerings that are conducted\noverseas and/or foreign investments in China based issuers. On December 28, 2021, the CAC, the NDRC and several other administrations\njointly adopted and published the New Measures for Cybersecurity Review (2021 version) (“New Measures”), which came into\neffect on February 15, 2022. According to the New Measures, if an “operator of critical information infrastructure”\nor “network platform operator” that is in possession of personal data of more than one million users intends to list in a\nforeign country, it must apply for a cybersecurity review. Our business belongs to the electronic components/sensors industry, which\ndoes not involve the collection of user data, implicate cybersecurity, or involve any other type of restricted industry. As a result,\nthe likelihood of us being subject to the review of the CAC is remote.\n\n \n\nOn February 17, 2023, the CSRC issued the Trial Administrative\nMeasures of Overseas Securities Offering and Listing by Domestic Enterprises, or the Trial Measures, which became effective on March 31,\n2023. On the same date of the issuance of the Trial Measures, the CSRC circulated No.1 to No.5 Supporting Guidance Rules, the Notes on\nthe Trial Measures, the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and the relevant\nCSRC Answers to Reporter Questions on the official website of the CSRC, or collectively, the Guidance Rules and Notice. According to the\nTrial Measures, together with the Guidance Rules and Notice, a domestic company in the PRC that seeks to offer and list securities on\noverseas markets shall fulfill the filing procedures with the CSRC as per requirement of the Trial Measures within 3 working days\nafter the relevant application is submitted overseas. The Trial Measures also provides that only if the issuer meets both of the following\ncriteria at the same time, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering\nby PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets\nas documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies;\nand (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business\nare located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC\ncitizens or have their usual place(s) of residence located in mainland China. In light of the foregoing, we believe that the listing\nof our Class A Ordinary Shares on Nasdaq does not constitute an “indirect overseas offering and listing by PRC domestic companies”\nand that we are not required to complete the filing procedures as stipulated by the Trial Measures because the Company did not obtain\nany operating revenue, total profit, total assets and net assets in mainland China, the main parts of the Company’s business activities\nare neither carried out in mainland China, nor is its main place of business located in mainland China, and none of the members of the\nsenior management team in charge of our business operation and management are Chinese citizens or domiciled in mainland China, we do not\nmeet both of the above criteria simultaneously.\n\n \n\nBased on our management’s internal assessment, the Company and\nits subsidiaries currently have no operations in the mainland China, our management understands that as of the date of this annual report, the Company is not required to obtain any permissions or approvals from PRC authorities before listing in the U.S. and to issue our\nOrdinary Shares to foreign investors, including the CAC or the CSRC because (i) the CSRC currently has not issued any definitive rule\nor interpretation concerning whether offerings like ours under this annual report are subject to this regulation; and (ii) we operate\nin Hong Kong and is not included in the categories of industries and companies whose foreign securities offerings are subject to review\nby the CSRC or the CAC. We also understand that Etoiles Financial and Etoiles Consultancy are not required to obtain any permissions or\napprovals from any Chinese authorities to operate their businesses as of the date of this annual report. No permissions or approvals\nhave been applied for by the Company or denied by any relevant authorities. However, uncertainties still exist, due to the possibility\nthat laws, regulations, or policies in the PRC could change rapidly in the future. The promulgation of new laws or regulations, or the\nnew interpretation of existing laws and regulations may restrict or otherwise unfavorably impact our ability or way to conduct business\nand may require us to change certain aspects of our business to ensure compliance, which could decrease demand for our services, reduce\nrevenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities.\n\n \n\nIn\nthe event that (i) the PRC government expands the categories of industries and companies whose foreign securities offerings are\nsubject to review by the CSRC or the CAC that we are required to obtain such permissions or approvals; or (ii) we inadvertently\nconcluded that relevant permissions or approvals were not required or that we did not receive or maintain relevant permissions or approvals\nrequired, any action taken by the PRC government could significantly limit or completely hinder our operations, significantly limit or\ncompletely hinder our ability to offer our Class A Ordinary Shares to investors and cause the value of such Class A Ordinary Shares\nto significantly decline or become worthless.\n\n** **\n\n9\n\n \n\n** **\n\n**In\nlight of recent events indicating greater oversight by the Cyberspace Administration of China over data security, particularly for companies\nseeking to list on a foreign exchange, we may be subject to a variety of PRC laws and other obligations regarding data protection and\nany other rules, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business\nand the Offering.**\n\n \n\nOur\noperations are located in Hong Kong. Our Hong Kong Operating Subsidiary and Etoiles Financial may collect and store certain data\n(including certain personal information) from our clients for “Know Your Customers” purposes, who may be PRC individuals.\nAs such, we may be subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and\nprivate information, such as personal information and other data. These laws apply not only to third party transactions, but also other\nparties with which we have commercial relations. These laws continue to develop, and the PRC government may adopt other rules and restrictions\nin the future. Non-compliance could result in penalties or other significant legal liabilities.\n\n \n\nThe\nPRC regulatory requirements regarding cybersecurity are evolving. For instance, various regulatory bodies in the PRC, including the CAC,\nthe Ministry of Public Security, and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving\nstandards and interpretations. The Cybersecurity Law, which was adopted by the National People’s Congress on November 7, 2016,\nand the New Measures, which came into effect on February 15, 2022, provide that personal information and important data collected\nand generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and\nif a critical information infrastructure operator purchases internet products and services that affect or may affect national security,\nit will be subject to cybersecurity review by the CAC. On June 10, 2021, the NPCSC promulgated the Data Security Law, which\ntook effect on September 1, 2021. The Data Security Law requires that data shall not be collected by theft or other illegal means,\nand also provides for a data classification and hierarchical protection system. The data classification and hierarchical protection system\nputs data into different groups according to its importance in economic and social development, and the damages it may cause to national\nsecurity, public interests, or the legitimate rights and interests of individuals and organizations in case the data is falsified, damaged,\ndisclosed, illegally obtained or illegally used. If any of our data processing activities conducted after the Data Security Law became\neffective were found to be not in compliance with this law, we could be ordered to make corrections, and under certain serious circumstances,\nsuch as severe data divulgence, we could be subject to penalties, including the revocation of our business licenses or other permits.\nFurthermore, the recently issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law require\n(i) speeding up the revision of the provisions on strengthening the confidentiality and archives management relating to overseas\nissuance and listing of securities and (ii) improving the laws and regulations relating to data security, cross-border data flow,\nand management of confidential information. As there remain uncertainties regarding the further interpretation and implementation of\nthose laws and regulations, we cannot assure you that we will be compliant such new regulations in all respects, and we may be ordered\nto rectify and terminate any actions that are deemed illegal by the regulatory authorities and become subject to fines and other sanctions.\n\n \n\nThe Management understands that as of the date of this annual report, we are not required to obtain any permissions or approvals by including the CSRC, CAC or any other PRC authorities for our operations\nor issue our Class A Ordinary Shares including the Class A Ordinary Shares being registered for sale to foreign investors under\nexisting PRC laws and regulations, and have not received any requirement or were denied such permissions or approvals by any PRC authorities.\nAccording to the New Measures, if an “operator of critical information infrastructure” or “network platform operator”\nthat is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity\nreview. The New Measures further elaborates the factors to be considered when assessing the national security risks of the relevant activities,\nincluding, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked,\ndestroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important\ndata or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad.\nAs of the date of this annual report, neither the Company nor its Hong Kong Operating Subsidiary and Etoiles Financial possess a large\namount of personal information in their business operations or is recognized as an “operator of critical information infrastructure”\nby any authentic authority. Therefore, we do not believe that our Hong Kong Operating Subsidiary and Etoiles Financial are deemed to be\nan “operator of critical information infrastructure,” or “network platform operator” controlling personal information\nof no less than one million users. We are required to collect and retain some basic information furnished by our clients, suppliers and\nemployees in accordance with prevailing business practices, but we do not handle a large amount of personal and confidential data in the\nordinary course of business. As of the date of this annual report, we have not been involved in any investigations on cybersecurity or\ndata security initiated by related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction\nin such respect. Our management believes that our Hong Kong Operating Subsidiary and Etoiles Financial are not required to receive any\nnecessary permissions from PRC authorities to operate its current business in Hong Kong or issue shares to foreign investors.\n\n \n\n10\n\n \n\n \n\nHowever, given the recent events indicating greater oversight by the\nCAC over data security, particularly for companies seeking to list on a foreign exchange, it remains uncertain as to how the New Measures\nwill be interpreted or implemented. There remains significant uncertainty as to the enactment, interpretation and implementation of regulatory\nrequirements related to current and future PRC laws, overseas securities offerings and other capital markets activities. PRC regulatory\nagencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the New\nMeasures. They may also take actions requiring us, or making it advisable for us, to halt future offering before the settlement and delivery\nof the Class A Ordinary Shares that we may be offering. If any such new laws, regulations, rules, or implementation and interpretation\ncome into effect, we expect to take all reasonable measures and actions to comply therewith. In the event of a failure to comply, we may\nbe required to suspend our relevant businesses and become subject to fines and other penalties. If the CAC or other PRC regulatory agencies\nlater promulgate new rules or explanations requiring that we obtain their approvals for any follow-on offering, we may be unable to obtain\nsuch approvals, which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors.\n\n** **\n\n**We\nmay be required to obtain approval from PRC authorities to list on overseas stock exchanges in the future.**\n\n \n\nThe\nRegulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory\nagencies in 2006 and amended in 2009, require CSRC approval for a listing involving offshore special purchase vehicles that are controlled\nby PRC entities or individuals and that have been formed for overseas listing purposes through acquisitions of PRC domestic interests\nheld by such PRC entities or individuals with shares of the offshore special purchase vehicles. Based on our understanding of the current\nPRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of the Offering and trading of\nour Class A Ordinary Shares under the M&A Rules because (i) our Hong Kong Operating Subsidiary and Etoiles Financial were\nnot established through a merger or requisition of the equity or assets of a “PRC domestic company” as such term is defined\nunder the M&A Rules, (ii) our Hong Kong Operating Subsidiary and Etoiles Financial are non-mainland China entities, and they\nhave not been controlled by a non-PRC persons since its incorporation, and (iii) the CSRC currently has not issued any definitive\nrule or interpretation concerning whether an offering like ours under this document is subject to this regulation. However, uncertainties\nstill exist as to how the M&A Rules will be interpreted or implemented, and is subject to any new laws, rules, and regulations or\ndetailed implementations and interpretations in any form relating to the M&A Rules. We may be required to obtain approval from PRC\nauthorities in order to continue our listing on Nasdaq or to add new listings on other overseas stock exchanges in the future but cannot\nprovide assurance that we will be able to obtain such approval.\n\n \n\nOn\nJuly 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in\nAccordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the\nsupervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction\nof relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, on\nFebruary 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises,\nor the Trial Measures, which became effective on March 31, 2023. On the same date of the issuance of the Trial Measures, the CSRC\ncirculated No.1 to No.5 Supporting Guidance Rules, the Notes on the Trial Measures, the Notice on Administration Arrangements for the\nFiling of Overseas Listings by Domestic Enterprises and the relevant CSRC Answers to Reporter Questions on the official website of the\nCSRC, or collectively, the Guidance Rules and Notice. According to the Trial Measures, together with the Guidance Rules and Notice, a\ndomestic company in the PRC that seeks to offer and list securities on overseas markets shall fulfill the filing procedures with the\nCSRC as per requirement of the Trial Measures within 3 working days after the relevant application is submitted overseas. The Trial\nMeasures also provides that only if the issuer meets both of the following criteria at the same time, the overseas securities offering\nand listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of\nany of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial\nstatements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s\nbusiness activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority\nof senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of\nresidence located in mainland China.\n\n \n\n11\n\n \n\n \n\nThe management understand that the listing of our Class A Ordinary Shares on Nasdaq does not\nconstitute an “indirect overseas offering and listing by PRC domestic companies” and that we are not required to complete\nthe filing procedures as stipulated by the Trial Measures the Company did not obtain any operating revenue, total profit, total assets\nand net assets in mainland China, the main parts of the Company’s business activities are neither carried out in mainland China,\nnor is its main place of business located in mainland China, and none of the members of the senior management team in charge of our business\noperation and management are Chinese citizens or domiciled in mainland China, we do not meet both of the above criteria simultaneously.\nIf CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain\nsuch CSRC approval, such CSRC approval could be rescinded. We cannot assure you that relevant PRC government authorities, including the\nCSRC, would reach the same conclusion as us.\n\n** **\n\n**Changes\nin international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China.**\n\n \n\nPolitical events, international trade disputes, and other business\ninterruptions could harm or disrupt international commerce and the global economy, and could have a material adverse effect on us and\nour customers, material vendors, and other partners. International trade disputes could result in tariffs and other protectionist measures\nwhich may materially and adversely affect our business.\n\n \n\nThere\nhave also been concerns about the relationship between the PRC and other countries, including the surrounding Asian countries, which\nmay potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States\nand the PRC with respect to trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive\nto global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic\ngrowth rate in China.\n\n \n\nPolitical\nuncertainty surrounding international trade disputes and the potential of the escalation to trade war and global recession could have\na negative effect on customer confidence. We may have also access to fewer business opportunities, and our operations may be negatively\nimpacted as a result. In addition, the current and future actions or escalations by either the United States or the PRC that affect\ntrade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results\nof operations, as well as the financial condition of our clients, and we cannot provide any assurances as to whether such actions will\noccur or the form that they may take.\n\n** **\n\n**Changes\nin mainland China political, economic and governmental policies may have an adverse impact on our business.**\n\n \n\nWe\nexpect that revenue received from mainland China will continue to supplement our overall operations. Accordingly, our business, financial\ncondition and results of operations are subject to political, economic and legal developments in China to a significant degree. The Chinese\neconomy differs from the economies of most developed countries in many aspects, including the extent of government involvement, growth\nrate, control of the foreign exchange, allocation of resources and capital investment. We cannot assure there will not be any unfavorable\nchanges in the political, economic and governmental policies and measures promulgated by the PRC government that could impact the industries\nin which we operate, which could in turn diminish the demand for our services.\n\n** **\n\n**If\nwe are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable\ntax consequences to us and our non-PRC shareholders.**\n\n \n\nUnder\nthe PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its “de facto\nmanagement body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income\ntax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body\nthat exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties\nof an enterprise. In 2009, the SAT issued a circular, known as SAT Circular 82, partially abolished on December 29, 2017, which\nprovides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise\nthat is incorporated offshore is located in China. Although this circular applies only to offshore enterprises controlled by PRC enterprises\nor PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the\nSAT’s general position on how the “de facto management body” text should be applied in determining the tax resident\nstatus of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise\nor a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China,\nand will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary\nlocation of the day-to-day operational management is in China; (ii) decisions relating to the enterprise’s financial\nand human resource matters are made or are subject to approval by organizations or personnel in China; (iii) the enterprise’s\nprimary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in China;\nand (iv) at least 50% of voting board members or senior executives habitually reside in China.\n\n \n\n12\n\n \n\n \n\nWe\nbelieve that, as a Cayman Islands exempted company, Etoiles Cayman is not a PRC resident enterprise for PRC tax purposes. However, the\ntax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to\nthe interpretation of the term “de facto management body.” If the PRC tax authorities determine that our company is a PRC\nresident enterprise for enterprise income tax purposes, we would be subject to PRC enterprise income on our worldwide income at the rate\nof 25%. Furthermore, we would be required to withhold a 10% tax from dividends we pay to our shareholders that are non-resident enterprises,\nincluding the holders of our Class A Ordinary Shares. In addition, non-resident enterprise shareholders may be subject to PRC tax\non gains realized on the sale or other disposition of the Class A Ordinary Shares, if such income is treated as sourced from within\nthe PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders and any\ngain realized on the transfer of the Class A Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% (which,\nin the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear\nwhether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence\nand the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in\nour Class A Ordinary Shares.\n\n \n\n**We\nface uncertainty with 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. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer\nof taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe\nharbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also\nbrings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets,\nas such persons need to determine whether their transactions are 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\nNon-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37\nfurther 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 Class A Ordinary Shares in our offshore subsidiaries and investments. Our company may\nbe subject to filing obligations or may be taxed if our company is a transferor in such transactions, and may be subject to withholding\nobligations if our company is a transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfers of Class A\nOrdinary Shares of our company by investors who are non-PRC resident enterprises, our Hong Kong Operating Subsidiary and Etoiles Financial\nwill not be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. However, if our assessment on the filing under\nSAT Bulletin 7 and/or SAT Bulletin 37 is incorrect, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or\nSAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish\nthat our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results\nof operations.\n\n \n\n13\n\n \n\n** **\n\n**Risks\nRelated to Our Class A Ordinary Shares**\n\n \n\n**If\nwe fail to meet applicable listing requirements, Nasdaq may delist our Class A Ordinary Shares from trading, in which case the liquidity\nand market price of our Class A Ordinary Shares could decline.**\n\n \n\nAssuming\nour Class A Ordinary Shares are listed on Nasdaq, we cannot assure you that we will be able to meet the continued listing standards\nof Nasdaq in the future. If we fail to comply with the applicable listing standards and Nasdaq delists our Class A Ordinary Shares,\nwe and our shareholders could face significant material adverse consequences, including:\n\n \n\n●a\nlimited availability of market quotations for our Class A Ordinary Shares;\n\n \n\n●reduced\nliquidity for our Class A Ordinary Shares;\n\n \n\n●a\ndetermination that our Class A Ordinary Shares are “penny stock”, which\nwould require brokers trading in our Class A Ordinary Shares to adhere to more stringent\nrules and possibly result in a reduced level of trading activity in the secondary trading\nmarket for our Class A Ordinary Shares;\n\n \n\n●a\nlimited amount of news about us and analyst coverage of us; and\n\n \n\n●a\ndecreased ability for us to issue additional equity securities or obtain additional equity\nor debt financing in the future.\n\n \n\nThe\nNational Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating\nthe sale of certain securities, which are referred to as “covered securities.” Because we expect that our Class A Ordinary\nShares will be listed on Nasdaq, such securities will be covered securities. Although the states are preempted from regulating the sale\nof our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there\nis a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further,\nif we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulations in each\nstate in which we offer our securities.\n\n** **\n\n14\n\n \n\n** **\n\n**Our\nControlling Shareholder has significant voting power and may take actions that may not be in the best interests of our other shareholders.**\n\n \n\nAs of the date of this annual report, our Controlling Shareholder holds\nan aggregate of 10,287,000 Class A Ordinary Shares and 5,000,000 Class B Ordinary Shares, respectively, which will represent\nan aggregate of 92.59% of the total voting power. As a result, the shareholder will be able to control the management and affairs of our\nCompany and most matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions.\nThe interests of these shareholders may not be the same as or may even conflict with your interests. For example, the shareholder could\nattempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could\ndeprive our shareholders of an opportunity to receive a premium for their Class A Ordinary Shares as part of a sale of us or our\nassets, and might affect the prevailing market price of our Class A Ordinary Shares due to investors’ perceptions that conflicts\nof interest may exist or arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.\n\n** **\n\n**Nasdaq\nmay apply additional and more stringent criteria for our initial and continued listing because we plan to have a small public offering\nand our insiders will hold a large portion of our listed securities.**\n\n \n\nUnder\nListing Rule 5101, Nasdaq has discretionary authority to deny initial listing, apply additional or more stringent criteria for the\ninitial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance\nthat exists or occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of\nNasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq.\n\n \n\nAdditionally,\nNasdaq has used its discretion to deny initial or continued listing or to apply additional and more stringent criteria in the instances,\nincluding but not limited to: (i) where the company engaged an auditor that has not been subject to an inspection by PCAOB, an auditor\nthat PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately\nperform the company’s audit; (ii) where the company planned a small public offering, which would result in insiders holding\na large portion of the company’s listed securities. Nasdaq was concerned that the offering size was insufficient to establish the\ncompany’s initial valuation, and there would not be sufficient liquidity to support a public market for the company; and (iii) where\nthe company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S. shareholders, operations,\nor members of the board of directors or management. Our initial public offering will be relatively small and the insiders of our company\nwill hold a large portion of the company’s listed securities following the consummation of the Offering. Therefore, we may be subject\nto the additional and more stringent criteria of Nasdaq for our initial and continued listing.\n\n \n\n**We\nhave no immediate plans to pay dividends.**\n\n \n\nWe\nplan to reinvest all of our future earnings, to the extent we have earnings, in order to expand our product offering and to cover operating\ncosts, finance operations and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our\nsecurities in the foreseeable future. As we are a company with a limited operating history, we may not be able to generate, at any time,\nsufficient surplus cash that would be available for distribution to the holders of our Class A Ordinary Shares as a dividend. Therefore,\nyou should not expect to receive immediate cash dividends on the Class A Ordinary Shares we are offering. Consequently, investors\nmay need to rely on sales of their Class A Ordinary Shares after price appreciation, which may never occur, as the only way to realize\nany future gains on their investment. In addition, the laws of the Cayman Islands require that certain criteria must be satisfied before\nwe are able to declare and pay dividends.\n\n \n\n15\n\n \n\n \n\n**Securities\nanalysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our\nShare price or trading volume to decline.**\n\n \n\nIf\na trading market for our Class A Ordinary Shares develops, the trading market will be influenced to some extent by the research\nand reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public\ncompany, we may be slow to attract research coverage and the analysts who publish information about our Class A Ordinary Shares\nwill have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results\nand could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if\nany of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our Share price, our\nShare price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we\ncould lose visibility in the market, which in turn could cause our Share price or trading volume to decline and result in the loss of\nall or a part of your investment in us.\n\n** **\n\n**Investors\nmay have difficulty enforcing judgments against us, our directors and management.**\n\n \n\nEtoiles\nCayman is incorporated under the laws of the Cayman Islands and a majority of our directors and officers reside outside the United States.\nMoreover, many of these persons do not have significant assets in the United States. As a result, it may be difficult or impossible\nto effect service of process within the United States upon these persons, or to recover against us or them on judgments of U.S. courts,\nincluding judgments predicated upon the civil liability provisions of the U.S. federal securities laws.\n\n \n\nThere\nis uncertainty as to whether the courts of the Cayman Islands would recognize or enforce judgments of U.S. courts obtained in actions\nagainst us or our directors and officers predicated upon the civil liability provisions of the U.S. federal securities laws or any\nsecurities laws of any state in the United States, or entertain original actions brought in the Cayman Islands against us or our directors\nand officers predicated solely upon U.S. federal securities laws or any securities laws of any state of the United States. Further,\nthere is no treaty in effect between the United States and the Cayman Islands providing for the enforcement of judgments of U.S. courts\nin civil and commercial matters, and there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States.\nSome remedies available under the laws of U.S. jurisdictions, including remedies available under the U.S. federal securities\nlaws, may not be allowed in the Cayman Islands courts if contrary to public policy in the Cayman Islands. As a result of all of the above,\nit may be difficult for you to recover against us or our directors and officers based upon such judgments.\n\n \n\n**The\nlaws of the Cayman Islands relating to the protection of the interest of minority shareholders are different from those in the United States.**\n\n \n\nOur\ncorporate affairs are governed by the Amended Memorandum and Articles (as may be amended from time to time), and by the Cayman Islands\nCompanies Act (Revised) and common law of Cayman Islands. The rights of shareholders to take action against our directors, action by\nminority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed\nby the common law of the Cayman Islands and the Amended Articles (as may be amended from time to time). The common law of the Cayman\nIslands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the\ndecisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands.\n\n \n\nThe\nlaws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in certain respects from those\nestablished under statutes or judicial precedent in existence in the United States and other jurisdictions. Such differences may\nmean that the remedies available to our minority shareholders may be different from those they would have under the laws of other jurisdictions,\nincluding the United States. Potential investors should be aware that there is a risk that provisions of the Companies Act may not\noffer the same protection as the relevant laws and regulations in the United States may offer, and should consider obtaining independent\nlegal advice on the implications of investing in foreign-incorporated companies.\n\n \n\n16\n\n \n\n \n\n**We\nare a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions\napplicable to U.S. domestic public companies.**\n\n** **\n\nBecause\nwe qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and\nregulations in the United States that are applicable to U.S. domestic issuers, including:\n\n \n\n \n●\nthe rules under the Exchange Act\nrequiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;\n\n \n \n \n\n \n●\nthe sections of the Exchange Act\nregulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;\n\n \n \n \n\n \n●\nthe sections of the Exchange Act\nrequiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from\ntrades made in a short period of time; and\n\n \n \n \n\n \n●\nthe selective disclosure\nrules by issuers of material nonpublic information under Regulation FD.\n\n \n\nWe\nare required to file an annual report on Form 20-F within four months of the end of each fiscal year. Press releases relating\nto financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required\nto file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic\nissuers. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery\nprovisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and\nsales of our securities. As a result, you may not be afforded the same protections or information that would be made available to you\nwere you investing in a U.S. domestic issuer.\n\n \n\n**As\na foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ\nsignificantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they\nwould enjoy if we complied fully with corporate governance listing standards.**\n\n** **\n\nAs\na foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home\ncountry law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ\nsignificantly from corporate governance listing standards. Currently, we do not plan to rely on some home country practices with respect\nto our corporate governance. However, if we choose to follow home country practices in the future, our shareholders may be afforded less\nprotection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.\n\n \n\n**We\nmay lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.**\n\n** **\n\nWe\nare a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting\nrequirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day\nof an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example,\nmore than 50% of our outstanding voting securities become directly or indirectly held by residents of the United States and we fail\nto meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status\non this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms,\nwhich are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with\nU.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit\ndisclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions\nfrom certain corporate governance requirements under the Nasdaq rules. As a U.S. listed public company that is not a foreign private\nissuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer,\nand accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.\n\n \n\n17\n\n \n\n \n\n**We\nare an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions\nfrom disclosure requirements available to emerging growth companies, this could make it more difficult to compare our performance with\nother public companies.**\n\n \n\nWe\nare an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart Our Business Startups\n(“JOBS”) Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with\nnew or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration\nstatement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the\nnew or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period\nand comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have\nelected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different\napplication dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time\nprivate companies adopt the new or revised standard. This may make comparison of our financial statements with another public company\nwhich is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period\ndifficult or impossible because of the potential differences in accountant standards used.\n\n \n\n**As\nan “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements. Such reduced disclosure\nmay make our Ordinary Shares less attractive to investors.**\n\n \n\nFor\nas long as we remain an “emerging growth company,” as defined in the JOBS Act, we will elect to take advantage of certain\nexemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”,\nincluding, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley\nAct, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from\nthe requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments\nnot previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights\navailable to shareholders of more mature companies. If some investors find our Ordinary Shares less attractive as a result, there may\nbe a less active trading market for our Ordinary Shares and our share price may be more volatile.\n\n \n\n**We\nwill incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth\ncompany.”**\n\n \n\nWe\nwill incur significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley\nAct of 2002, as well as rules subsequently implemented by the SEC, Nasdaq, impose various requirements on the corporate governance practices\nof public companies.\n\n \n\nCompliance\nwith these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming\nand costly. After we are no longer an “emerging growth company,” or until five years following the completion of our initial\npublic offering, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring\ncompliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company,\nwe have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls\nand procedures. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be\nmore difficult or costly for us to find qualified persons to serve on our board of directors or as executive officers as a public company.\nWe are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate\nwith any degree of certainty the amount of additional costs we may incur or the timing of such costs.\n\n \n\n18\n\n \n\n \n\n**There\ncan be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for\nany taxable year, which could result in adverse U.S. federal income tax consequences for U.S. Holders of our Class A Ordinary\nShares.**\n\n \n\nIn general, we will be treated as a passive foreign investment company\n(“PFIC”) for any taxable year in which either (1) at least 75% of our gross income (looking through certain 25% or more-owned\nsubsidiaries) is passive income or (2) at least 50% of the average value of our assets (looking through certain 25% or more-owned\nsubsidiaries) is attributable to assets that produce, or are held for the production of, passive income. Passive income generally includes,\nwithout limitation, dividends, interest, rents, royalties, and gains from the disposition of passive assets. If we are determined to be\na PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in the Section\nof this annual report captioned “Material United States Federal Income Tax Considerations”) of our securities, the U.S. Holder\nmay be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements. The determination\nof whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some\ncircumstances are unclear and subject to varying interpretation. Our actual PFIC status for any taxable year will not be determinable\nuntil after the end of such taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for our current\ntaxable year or any subsequent taxable year. We urge U.S. Holders to consult their own tax advisors regarding the possible application\nof the PFIC rules in light of their individual circumstances.\n\n \n\nFor\na more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to\nbe a PFIC, see “Item 10. Additional Information — 10.E. Taxation — United States Federal Income Tax Considerations\n— Passive Foreign Investment Company Considerations.”\n\n** **\n\n**Our\ndual-class voting structure may render our Class A Ordinary Shares ineligible for inclusion in certain stock market indices, and\nthus adversely affect the trading price and liquidity of our Class A Ordinary Shares.**\n\n \n\nCertain\nshareholder advisory firms have announced changes to their eligibility criteria for inclusion of shares of public companies on certain\nindices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold\nno more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced\ntheir opposition to the use of multiple class structures. As a result, the dual class structure of our Ordinary Shares may prevent the\ninclusion of our Class A Ordinary Shares in such indices and may cause shareholder advisory firms to publish negative commentary\nabout our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices\ncould result in a less active trading market for our Class A Ordinary Shares. Any actions or publications by shareholder advisory\nfirms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Ordinary\nShares.\n\n** **\n\n**Our\ndual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change\nof control transactions that holders of our Class A Ordinary Shares may view as beneficial.**\n\n \n\nWe\nhave a dual class ordinary share structure. Our Ordinary Shares will be divided into Class A Ordinary Shares and Class B Ordinary\nShares. Holders of our Class A Ordinary Shares are entitled to one (1) vote per share and holders of our Class B Ordinary\nShares are entitled to ten (10) votes per share. In no event shall Class A Ordinary Shares be convertible into Class B\nOrdinary Shares. Each Class B Ordinary Share is convertible into one fully paid Class A Ordinary Share at the option of the\nholder, at any time after issue and without the payment of any additional sum.\n\n \n\nEtoiles Zeneo Investment Limited continues to beneficially own all\nof our issued and outstanding Class B Ordinary Shares. As of the date of this annual report, these Class B Ordinary Shares represent approximately\n24.86% of our total issued and outstanding share capital and approximately 76.79% of the aggregate voting power of our total issued and\noutstanding share capital due to the disparate voting rights associated with our dual-class share structure. In addition, as of the date\nof this annual report, Etoiles Zeneo Investment Limited beneficially owns 10,287,000 Class A Ordinary Shares and 5,000,000 Class B Ordinary\nShares, representing approximately 76.02% of our total issued and outstanding share capital and approximately 92.59% of the aggregate\nvoting power of our total issued and outstanding share capital. As a result of our dual-class share structure and the concentration of\nownership, Etoiles Zeneo Investment Limited has considerable influence over matters such as mergers and consolidations, the election of\ndirectors and other significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control\nof our company, which could deprive our other shareholders of the opportunity to receive a premium for their shares as part of a sale\nof our company and may adversely affect the trading price of our Class A Ordinary Shares.\n\n \n\n**You\nare strongly urged to consult your tax advisors regarding the impact of our being a PFIC in any taxable year on your investment in our\nClass A Ordinary Shares as well as the application of the PFIC rules.**\n\n** **\n\n19"}