{"url_path":"/sec/febo/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1957001/0001493152-26-023280-index.html","accession_number":"0001493152-26-023280","cik":"0001957001","ticker":"FEBO","issuer_name":"Fenbo Holdings Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1957001/0001493152-26-023280-index.html","primary_entity_key":"0001957001","primary_entity_name":"Fenbo Holdings Ltd"},"word_count":24406,"has_tables":true,"body_markdown":"**ITEM\n3. KEY INFORMATION**\n\n** **\n\n**A.\nRESERVED**\n\n \n\n**B.\nCAPITALIZATION AND INDEBTEDNESS**\n\n** **\n\nNot\napplicable\n\n** **\n\n**C.\nREASONS FOR THE OFFER AND USE OF PROCEEDS.**\n\n** **\n\nNot\napplicable\n\n \n\n**D.\nRISK FACTORS**\n\n \n\nAn\ninvestment in our Ordinary Shares is highly speculative and involves a significant degree of risk. The risks discussed below could materially\nand adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay dividends and the\ntrading price of our Ordinary Shares. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial\nmay also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability\nto pay dividends, and you may lose all or a part of your investment. The realization of any of the risks described below could have a\nmaterial adverse effect on our business, results of operations and future prospects.\n\n \n\n4\n\n \n\n \n\n**Risks\nRelated to Our Business and Corporate Structure**\n\n \n\n**We\nhave continually suffered losses from operations, and we may not be able to sustain profitability.**\n\n \n\nOur\nnet loss for the for the fiscal years ended December 31, 2025, 2024 and 2023 was HK$8,785,000 (US$1,126,000), HK$13,741,000 and HK$1,462,000,\nrespectively.\n\n \n\nThe\nincrease in net loss for the fiscal year ended December 31, 2025 compared to fiscal year 2024 was primarily due to increased trade tariffs\non our hair styling products exported from China amid ongoing trade tensions between the United States and China, which adversely affected\ncustomer demand for our products manufactured in China.\n\n \n\nThe loss for the\nfiscal year ended December 31, 2024 increased compared to the fiscal year ended December 31, 2023, primarily due to an increase in general\nand administrative expenses of HK$16,090,000, **** which was mainly due to an increase in legal and professional fees (including\na marketing consultancy fee paid) and staff costs as a result of the expansion in our Group’s business during the fiscal year ended\nDecember 31, 2024.\n\n \n\nIf we fail to generate sufficient revenues to achieve profitability on a consistent basis or are unable to fund our\ncontinuing losses, our business, financial condition and results of operations may be materially and adversely affected.\n\n \n\n**We\nwill rely on dividends and other distributions on equity paid by our Operating Subsidiaries to fund our cash and financing requirements,\nand any limitation on the ability of our Operating Subsidiaries to make payments to us could have a material adverse effect on our ability\nto conduct our business.**\n\n \n\nFenbo\nHoldings Limited is a holding company, and we rely on dividends and other distributions on equity paid by our Operating Subsidiaries\nfor our cash and financing requirements. Within our direct holding structure, the cross-border transfer of funds within our corporate\ngroup is legal and compliant with the laws and regulations of the PRC, Hong Kong, and the Cayman Islands.\n\n \n\nThe\ntransfer of funds within our organization follows a specific path. Funds held by the Company may be transferred directly to our Hong\nKong Operating Subsidiaries, AIL and FIL, without being transferred to our wholly-owned British Virgin Island subsidiary, RLHL. FIL may\nthen transfer funds to our PRC subsidiary, FPPF, to support its operations. Conversely, if the Company intends to distribute dividends,\nfunds may be transferred from FPPF to FIL in accordance with PRC laws. FIL and/or AIL may then transfer funds directly to the Company\nin accordance with Hong Kong laws, without transferring the funds to RLHL. The Company will then distribute dividends to all of its shareholders\nin proportion to the Ordinary Shares they hold, in accordance with the laws and regulations of the Cayman Islands. As advised by Harney\nWestwood & Riegels, our Cayman Islands counsel, under the laws of the Cayman Islands, a company may pay a dividend out of either\nprofit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable\nto pay its debts as they fall due in the ordinary course of business.\n\n \n\nOur\nability to receive distributions is subject to various regulations. As advised by SH Wong & Co., our Hong Kong counsel, under the\nCompanies Ordinance of Hong Kong, dividends may only be paid out of distributable profits. There are no restrictions under the laws of\nHong Kong on the conversion of HK dollars into foreign currencies or the remittance of currencies out of Hong Kong. Under the current\npractice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends. Under PRC laws, our PRC subsidiary, FPPF, is required to set aside at least 10% of its after-tax profits each\nyear to fund certain statutory reserves until the aggregate amount of such fund reaches 50% of its registered capital. As of December\n31, 2025, these restricted assets totaled approximately HK$2,806,000, or US$360,000.\n\n \n\nDespite\nthe current legal framework, there can be no assurance that the PRC or Hong Kong government will not intervene or impose restrictions\non our ability to transfer or distribute cash within our organization or to foreign investors. Such actions could result in an inability\nor prohibition on making transfers or distributions outside of China or Hong Kong. While we do not have a formal cash management policy,\nall fund transfers are subject to internal management review and approval, and we intend to conduct regular reviews for our Board of\nDirectors. In addition, if any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may\nrestrict their ability to pay dividends to us.\n\n \n\nAs\nof December 31, 2025, no dividends or distributions have been made by any of our Operating Subsidiaries to the Company.\n\n \n\nAny limitation on the ability of our\nOperating Subsidiaries to pay dividends or make other distributions to us could materially and adversely affect our business, financial\ncondition, results of operations, and the value of our Ordinary Shares.\n\n \n\n5\n\n \n\n \n\n**Our\ncorporate structure may involve unique risks and could be disallowed by Chinese regulatory authorities. Any PRC regulations pertaining\nto our corporate structure, loans to and investment in PRC entities by offshore holding companies may delay us from making loans or capital\ncontributions to our Operating Subsidiaries, which could materially and adversely affect their liquidity and their ability to fund and\nexpand their businesses, which could cause our Ordinary Shares to significantly decline in value or become worthless.**\n\n \n\nWith\nregards to our corporate structure, any funds we may transfer to our PRC Operating Subsidiary, either as a loan or as an increase in\nregistered capital, are subject to approval by or registration with relevant government authorities in China, regardless of the amount\nof the transfer. According to the relevant PRC regulations, capital contributions to our PRC Operating Subsidiary are subject to the\nsubmission of reports of changes through the enterprise registration system and registration with a local bank authorized by the State\nAdministration of Foreign Exchange (“SAFE”). In addition, any foreign loan procured by our PRC Operating Subsidiary is required\nto be registered with SAFE, and such loan also is required to be registered with the National Development and Reform Commission (“NDRC”).\nWe may not be able to complete such registrations or obtain necessary approvals on a timely basis with respect to future capital contributions\nor foreign loans by us to our PRC Operating Subsidiary. If we fail to complete such registration or other procedures, our ability to\nmaintain our corporate structure while capitalizing our PRC Operating Subsidiary’s operations may be negatively affected, which\ncould adversely affect our liquidity and our ability to fund and expand our business.\n\n \n\n**Our\nControlling Shareholders have potential conflicts of interest with our Company which may adversely affect our business.**\n\n \n\nAs\nof December 31, 2025, we had 3,062,500 Class A Ordinary Shares and 8,000,000 Class B Ordinary Shares, $0.0001 par value per share, issued\nand outstanding. LMIL owns 8,000,000 Class B Ordinary Shares, representing approximately 72.3% of our total issued and outstanding Ordinary\nShares and approximately 98.1% of our total voting power. We are a controlled company as defined under the Rule 5615(c) of The Nasdaq\nStock Market LLC (“Nasdaq”) because, Mr. Huang Hongwu, our Chief Executive Officer, chairman of the Board and executive director,\nand Ms. Wang Xuefei, our Chief Financial Officer and executive director, through their respective ownership of 60% and 40% of the outstanding\nshares of LMIL, collectively control LMIL and therefore indirectly control the voting power of the shares held by LMIL.\n\n \n\nOur\nboard of directors is comprised of a majority of independent directors. These independent directors may be in a position to deter and\ncounteract the actions of our officers or non-independent directors (including, potentially, Mr. Huang and Ms. Wang) that are against\nour interests. We cannot, however, give any assurance as to how the independent directors will act in any given circumstance. Further,\nif we or the independent directors cannot resolve any conflicts of interest between us and those of our officers and directors who are\nmanagement members of our affiliated companies in the PRC, we would have to rely on legal proceedings, which could result in the disruption\nof our business.\n\n \n\nIn the event that\nyou believe that your rights have been infringed under the securities laws or otherwise as a result of any one of the circumstances described\nabove, it may be difficult or impossible for you to bring an action against us or our officers or directors who reside within the PRC.\nEven if you are successful in bringing an action, the PRC laws may render you unable to enforce a judgment against our assets and management,\nmost of which are located in the PRC.\n\n \n\n**We\nhave identified material weaknesses in our internal control over financial reporting. If we fail to implement and maintain an effective\nsystem of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.\nAs a result, shareholders could lose confidence in our financial and other public reporting, which could harm the trading price of our\nOrdinary Shares.**\n\n \n\nEffective\ninternal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure\ncontrols and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered\nin their implementation, could cause us to fail to meet our reporting obligations. Ineffective internal control could also cause investors\nto lose confidence in our reported financial information, which could have a negative effect on the trading price of our Ordinary Shares.\n\n \n\n6\n\n \n\n \n\nWe\nhave identified material weaknesses in our internal control over financial reporting in the Company and in its subsidiaries. As defined\nin Regulation 12b-2 under the Exchange Act, a “material weakness” is a deficiency, or a combination of deficiencies, in internal\ncontrol over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated\nfinancial statements will not be prevented or detected on a timely basis. Specifically, we determined that we have the following material\nweaknesses in our internal control over financial reporting: (i) we have limited controls over information processing; (ii) we have inadequate\nsegregation of duties; and (iii) we do not have sufficient formal written policies and procedures for accounting and financial reporting\nwith respect to the requirements and application of both generally accepted accounting principles in the United States of America, or\nGAAP, and SEC guidelines. In addition, we do not have a qualified CFO, with US GAAP accounting knowledge and significant experience working\nin U.S. listed companies on financial reporting, in place to oversee our financial reporting, and we currently rely on external consultants\nregarding financial reporting functions.\n\n \n\nAlthough\nwe currently have an audit committee comprised of three independent directors, one of whom management has determined qualifies as a financial\nexpert under the applicable SEC rules, and our financial statements and footnotes are now reviewed by our management and our audit committee,\nwe do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions.\n\n \n\nEven\nif we develop effective internal controls over financial reporting, such controls may become inadequate due to changes in conditions\nor the degree of compliance with such policies or procedures may deteriorate, which could result in the discovery of additional material\nweaknesses and deficiencies. In any event, the process of determining whether our existing internal control over financial reporting\nis compliant with Section 404 of the Sarbanes-Oxley Act (“Section 404”) and is sufficiently effective requires the investment\nof substantial time and resources by our senior management. As a result, this process may divert internal resources and take a significant\namount of time and effort to complete. In addition, we cannot predict the outcome of this process and whether we will need to implement\nremedial actions in order to establish effective controls over financial reporting. The determination of whether our internal controls\nare sufficient and any remedial actions required could result in our incurring additional costs that we did not anticipate, including\nthe hiring of additional outside consultants. We may also fail to timely complete our evaluation, testing and any remediation required\nto comply with Section 404.\n\n \n\nWe\nare required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control\nover financial reporting. However, for as long as we are an “emerging growth company” or for as long as we are not an accelerated\nfiler under Rule 12b-2 under the Securities Exchange Act of 1934, our independent registered public accounting firm will not be required\nto attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. While we could be exempt from\nthe auditor attestation requirement for an indefinite amount of time even after we lose our status as an emerging growth company, an\nindependent assessment of the effectiveness of our internal control over financial reporting, if obtained, could detect problems that\nour audit committee’s assessment might not. Such undetected material weaknesses in our internal control over financial reporting\ncould lead to financial statement restatements and require us to incur the expense of remediation.\n\n \n\n**Risks\nRelated to Doing Business in the People’s Republic of China and Hong Kong**\n\n \n\n**A\ndownturn in the Hong Kong, China or global economy, or a change in economic and political policies of China, could materially and adversely\naffect our Operating Subsidiaries’ business and financial condition.**\n\n \n\nOur\nOperating Subsidiaries’ business, prospects, financial condition and results of operations may be influenced to a significant degree\nby political, economic and social conditions in Hong Kong and China generally. The Chinese economy differs from the economies of most\ndeveloped countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign\nexchange and allocation of resources. While the Chinese economy has experienced significant growth over the past decades, growth has\nbeen uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to\nencourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy but may\nhave a negative effect on our PRC Operating Subsidiary, FPPF.\n\n \n\n7\n\n \n\n \n\nEconomic\nconditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy\nmay affect our current customer’s and potential customers’ businesses and have a negative impact on our Operating Subsidiaries’\nbusinesses, results of operations and financial condition. Additionally, continued turbulence in the international markets may adversely\naffect our ability to access the capital markets to meet liquidity needs.\n\n \n\n**Changes\nin the policies, regulations and rules, and the enforcement of laws of the PRC government may be implemented quickly with little advance\nnotice and could have a significant impact upon our Operating Subsidiaries’ ability to operate profitably in the PRC. The PRC legal\nsystem also embodies uncertainties, which could limit law enforcement availability. Therefore, our assertions and beliefs of the risk\nimposed by the PRC legal and regulatory system cannot be certain.**\n\n \n\nThe\nPRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence.\nIn 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.\nThe overall effect of legislation over the past several decades has significantly enhanced the protections afforded to various forms\nof foreign investment in China. Our Operating Subsidiaries are subject to PRC laws and regulations. However, these laws and regulations\nchange frequently, and the interpretation and enforcement thereof involve uncertainties. For instance, we may have to resort to administrative\nand court proceedings to enforce the legal protections to which we are entitled to by law or contract. However, since PRC administrative\nand court authorities have significant discretion in interpreting statutory and contractual terms, it may be difficult to evaluate the\noutcome of administrative court proceedings and the level of law enforcement that we would receive in more developed legal systems. Such\nuncertainties, including the inability of our Operating Subsidiaries to enforce their contracts, could affect our business and operation.\nIn addition, confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, we\ncannot predict the effect of future developments in the PRC legal system, particularly with regard to our business, including the promulgation\nof new laws. This may include changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations\nby national laws. These uncertainties could limit the availability of law enforcement.\n\n \n\n**The\nPRC government may exercise significant oversight and discretion over the conduct of our Operating Subsidiaries’ business and may\nintervene in or influence their operations at any time, which could result in a material change in their operations and/or the value\nof our Ordinary Shares. Changes in the policies, regulations, rules and enforcement of laws of the Chinese government may also be implemented\nquickly with little advance notice. Therefore, our assertions and beliefs concerning the risk imposed by the PRC legal and regulatory\nsystem cannot be certain.**\n\n \n\nOur\nCompany is a holding company, and we conduct our operations through our Operating Subsidiaries in Hong Kong and the PRC. The PRC government\nmay choose to exercise significant oversight and discretion, and the regulations to which our Operating Subsidiaries are subject may\nchange rapidly and with little notice to them or our shareholders. As a result, the application, interpretation and enforcement of new\nand existing laws and regulations in China are often uncertain. In addition, these laws and regulations may be interpreted and applied\ninconsistently by different agencies or authorities, and inconsistently with our Operating Subsidiaries’ current policies and practices.\nCompliance with new laws, regulations and other government directives in China may also be costly, and such compliance or any associated\ninquiries or investigations or any other government actions may:\n\n \n\n●\ndelay\nor impede our Operating Subsidiaries’ development;\n\n \n \n\n●\nresult\nin negative publicity or increase our Operating Subsidiaries’ operating costs;\n\n \n \n\n●\nrequire\nsignificant management time and attention; and\n\n \n \n\n●\nsubject\nus to remedies, administrative penalties and even criminal liabilities that may harm our Operating Subsidiaries’ business,\nincluding fines assessed for our Operating Subsidiaries current or historical operations, or demands or orders that our Operating\nSubsidiaries modify or even cease their business practices.\n\n \n\n8\n\n \n\n \n\nWe\nare aware that, recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations\nin certain areas in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing\nsupervision over China-based companies listed overseas using a variable interest entity (“VIE”) structure, adopting new measures\nto extend the scope of cybersecurity reviews and expanding the efforts in anti-monopoly enforcement. These regulatory actions and statements\nemphasize the need to strengthen the administration over illegal securities activities and the supervision of China-based companies seeking\noverseas listings. Additionally, companies are required to undergo a cybersecurity review if they hold large amounts of data related\nto issues of national security, economic development or public interest before carrying out mergers, restructuring or splits that affect\nor may affect national security. These statements were recently issued, and their official guidance and interpretation remain unclear\nat this time. While we believe that our Operating Subsidiaries’ operations are not currently being affected, they may be subject\nto additional and stricter compliance requirements in the near term. Compliance with new regulatory requirements or any future implementation\nrules may present a range of new challenges which may create uncertainties and increase our Operating Subsidiaries’ cost of operations.\n\n \n\nThe\nChinese government may intervene or influence our Operating Subsidiaries’ operations at any time and may exert more control over\nofferings conducted overseas and foreign investment in China-based issuers, which may result in a material change in our Operating Subsidiaries’\noperations and/or the value of our Ordinary Shares. Any legal or regulatory changes that restrict or otherwise unfavorably impact our\nOperating Subsidiaries’ ability to conduct their operations could decrease demand for their services, reduce revenues, increase\ncosts, require them to obtain more licenses, permits, approvals or certificates or subject them to additional liabilities. To the extent\nthat any new or more stringent measures are implemented, our business, financial condition and results of operations could be adversely\naffected, and our Ordinary Shares could decrease in value or become worthless.\n\n \n\n**Although\nwe are based in Hong Kong and conduct operations in China and Hong Kong, if we should become subject to the recent scrutiny, criticism\nand negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate and/or\ndefend the allegations, which could harm our Operating Subsidiaries’ business operations and our reputation and could result in\na loss of investment in our Ordinary Shares if such allegations cannot be addressed and resolved favorably.**\n\n \n\nDuring\nthe last several years, U.S. listed public companies that have substantially all of their operations in China have been the subject of\nintense scrutiny by investors, financial commentators and regulatory agencies. Much of the scrutiny has centered on financial and accounting\nirregularities and mistakes, lack of effective internal controls over financial reporting and, in many cases, allegations of fraud. The\nChinese government also may exercise significant oversight and discretion over the conduct of our business in China and Hong Kong and\nmay intervene or influence our Operating Subsidiaries’ operations at any time, which could result in a material change in their\noperations and/or the value of our Ordinary Shares. Moreover, as a result of this scrutiny, the publicly traded stock of many U.S.-listed\nChinese companies that have been the subject of such scrutiny has sharply decreased in value. Many of these companies are now subject\nto shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations into the allegations.\n\n \n\nAlthough\nwe are based in Hong Kong, if we should become the subject of any such scrutiny, whether any allegations are true or not, we may have\nto expend significant resources to investigate such allegations and/or defend the Company. Such investigations or allegations would be\ncostly and time-consuming, likely would distract our management from our normal business and could result in our reputation being harmed.\nThe price of our Ordinary Shares could decline because of such allegations, even if the allegations are false.\n\n \n\n**There\nare political risks associated with conducting business in Hong Kong.**\n\n****\n\n \n\nWe are based in Hong Kong and conduct operations in China and Hong Kong. Any adverse economic, social and/or political\nconditions, material social unrest, strike, riot, civil disturbance, or disobedience, as well as significant natural disasters, may affect\nthe market and adversely affect the business operations of the Company. Hong Kong is a special administrative region of the PRC, and the\nbasic policies of the PRC regarding Hong Kong are reflected in the Basic Law, Hong Kong’s constitutional document, which provides\nHong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication\nunder the principle of “one country, two systems.” However, there is no assurance that there will not be any changes in the\neconomic, political and legal environment in Hong Kong in the future. Since we are based and conduct business in Hong Kong, any change\nof such political arrangements may pose an immediate threat to the stability of the economy in Hong Kong, thereby directly and adversely\naffecting our results of operations and financial position.\n\n \n\n9\n\n \n\n \n\nUnder\nthe Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, Hong Kong is exclusively in charge\nof its internal affairs and external relations, while the government of the PRC is responsible for its foreign affairs and defense. As\na separate customs territory, Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent developments,\nincluding the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region\nissued by the Standing Committee of the PRC National People’s Congress in June 2020, the U.S. State Department has indicated that\nthe United States no longer considers Hong Kong to have significant autonomy from China and then President Trump signed an executive\norder and the Hong Kong Autonomy Act, or HKAA, to remove Hong Kong’s preferential trade status and to authorize the U.S. administration\nto impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong\nKong’s autonomy. The United States may impose the same tariffs and other trade restrictions on exports from Hong Kong that it places\non goods from mainland China. These and other recent actions may represent an escalation in political and trade tensions involving the\nU.S, China and Hong Kong, which could potentially harm our business.\n\n \n\nGiven\nthe relatively small geographic size of Hong Kong, any of such incidents may have a widespread effect on our Operating Subsidiaries’\nbusiness operations, which could in turn adversely and materially affect our business, results of operations and financial condition.\nIt is difficult to predict the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore,\nlegislative or administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including\nus, and the market price of our Ordinary Shares could be adversely affected.\n\n \n\n**The\nimposition of tariffs and export restrictions, including the resulting trade wars and other trade barriers, have resulted in the cancellation\nof a substantial number of orders and a delay or reduction in further orders from our sole customer, Spectrum Brands, which has had a\nmaterial adverse effect on our business and results of operations.**\n\n** **\n\nIn recent years, the U.S. government has imposed significant tariffs and other trade barriers on a broad range of\ngoods imported from the PRC in response to perceived unfair trade practices. In response, the PRC government has implemented retaliatory\nmeasures. The imposition of these tariffs and the resulting trade tensions have in the past resulted in the cancellation of a substantial\nnumber of orders and a delay or reduction in further orders from our sole customer, Spectrum Brands, which has had a material adverse\neffect on our business and results of operations.\n\n \n\nOur\nsole customer is Spectrum Brands, a U.S. corporation headquartered in the U.S. We do not have a long-term agreement with Spectrum Brands\nand their purchases are made on an order-by-order basis. The imposition of such tariffs has previously resulted in the cancellation by Spectrum Brands of a substantial number\nof its orders and a delay or reduction in further orders.\n\n \n\nBased\non the uncertainty regarding the continued imposition of tariffs and the percentages of such tariffs, it is difficult to predict the\nfull impact of the tariffs on our business operations and what steps to take to mitigate such impacts. However, in order to commence\nmitigation of the adverse effects of the tariffs on our operations, we are exploring the possibility of closing our factory, which is\nlocated in China, and establishing a factory in another country. Unless the tariff situation improves to our satisfaction, we are evaluating the potential closure of our current factory in China and the establishment of manufacturing operations\nin another country; however, no assurance can be given as to whether, when, or on what terms any such actions may occur.\n\n \n\n10\n\n \n\n \n\nMoreover, tariffs could increase the cost to us of manufacturing our products\nas well as the cost to our U.S. customer of importing our products. The global trade environment remains dynamic and uncertain. Political\nuncertainty surrounding international trade disputes and the potential of their escalation could have a negative effect on overall consumer\nconfidence, which could materially and adversely affect our business. We also may have access to fewer business opportunities, and our\noperations may be negatively impacted as a result. In addition, the current and future actions or escalations by either the United States\nor China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business\nor our results of operations, as well as the financial condition of our customer. We cannot predict what actions may ultimately be taken\nwith respect to tariffs or trade relations, what products may be subject to such actions, or what actions may be taken by other countries\nin response. Any increased trade barriers or restrictions on global trade could have a materially adverse impact on our business and financial\nresults.\n\n \n\n**To\nthe extent that our independent registered public accounting firm’s audit documentation related to their audit reports for the\nCompany is located in China or in Hong Kong, our Ordinary Shares could be delisted and prohibited from trading on a U.S. exchange**\n\n \n\nThe\nHolding Foreign Countries Accountable Act, as amended, (the “HFCAA”) prohibits foreign companies from listing their securities\non U.S. exchanges if the company’s auditor has been unavailable for PCAOB inspection or investigation for two consecutive years\nbeginning in 2021. On December 16, 2021, the PCAOB issued the Determination Report, which found that the PCAOB is unable to inspect or\ninvestigate completely registered public accounting firms headquartered in (i) mainland China of the People’s Republic of China\nbecause of a position taken by one or more authorities in mainland China; and (ii) Hong Kong, a Special Administrative Region and dependency\nof the PRC, because of a position taken by one or more authorities in Hong Kong. In addition, the Determination Report identified specific\nregistered public accounting firms subject to these determinations.\n\n \n\nOn\nAugust 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance\nof the PRC (the “SOP”). Pursuant to the SOP, the PCAOB has independent discretion to select any issuer audits for inspection\nor investigation and has the unfettered ability to transfer information to the SEC. The determinations as to mainland China and Hong\nKong were vacated by the PCAOB as of December 15, 2022 as a result of the PCAOB’s having been able to conduct extensive and thorough\ninspections and investigations of mainland China and Hong Kong firms in 2022 under the SOP; however, if the PCAOB encounters any impediment,\nin the future, to conducting an inspection or investigation of auditors in mainland China or Hong Kong as a result of a position taken\nby an authority in either jurisdiction, it may issue new determinations consistent with the HFCAA.\n\n \n\nAlthough\nour current independent registered public accounting firm, SR CPA & Co., is headquartered in Hong Kong, based on the PCAOB’s\ncurrent position and China’s compliance with the SOP, we do not expect to be affected by the HFCAA at this time. However, if authorities\nin Hong Kong were to take a position in the future that would prevent the PCAOB from continuing to inspect or investigate completely\nregistered public accounting firms headquartered in Hong Kong and if such lack of inspection were to extend for the requisite period\nof time under the HFCAA, the PCAOB may issue new determinations based on its inability to inspect or investigate completely registered\npublic accounting firms headquartered in Hong Kong because of a position taken by an authority in that jurisdiction. If that were to\nhappen, our Ordinary Shares could be delisted and prohibited from trading on a U.S. exchange, including Nasdaq, and in the over-the-counter\ntrading market. In addition, our investors would be deprived of the benefits of the PCAOB’s oversight of our auditor through its\ninspections, and they may lose confidence in our reported financial information and procedures and the quality of our financial statements.\nAlso, we cannot assure you that U.S. regulatory authorities will not apply additional or more stringent criteria to us. Such uncertainty\ncould cause the market price of our Ordinary Shares to be materially and adversely affected.\n\n \n\n11\n\n \n\n  \n\n**Our\nbusiness depends on our ability to collect, use, maintain and otherwise process data, including personal data, relating to the production\nof our products, the engineering and design of new products and product lines and sales and marketing efforts. Any limitation imposed\non our collection, use, maintenance or other processing of this data could significantly diminish the value of our Company and cause\nus to lose revenue. Compliance with Hong Kong’s Personal Data (Privacy) Ordinance and any other regulations, legislation or self-regulations\nrelating to data protection, data privacy, cybersecurity, e-commerce and advertising may entail significant expenses. Uncertainties regarding\nthe application or interpretation of existing or newly adopted laws and regulations could also threaten our ability to collect, use,\nmaintain and otherwise process this data which, in turn, could materially harm our business and subject us to significant costs and legal\nliability for non-compliance.**\n\n****\n\n \n\nOur\nOperating Subsidiaries’ business and operations in Hong Kong are subject to data privacy related laws and regulations. In particular,\nthe Personal Data (Privacy) Ordinance (Chapter 486 of the laws of Hong Kong) (“PDPO”) imposes a duty on any data user who,\neither alone or jointly with other persons, controls the collection, holding, processing or use of any personal data which relates directly\nor indirectly to a living individual and can be used to identify that individual. Under the PDPO, data users shall take all practicable\nsteps to protect the personal data they hold from any unauthorized or accidental access, processing, erasure, loss or use. Once collected,\nsuch personal data should not be kept longer than necessary for the fulfilment of the purpose for which it is or is to be used and shall\nbe erased if it is no longer required, unless erasure is prohibited by law or is not in the public interest.\n\n \n\nThe\nPDPO also confers on the Privacy Commissioner for Personal Data (“Privacy Commissioner”) power to conduct investigations\nand institute prosecutions. The data protection principles (collectively, the “DPP”), which are contained in Schedule 1 to\nthe PDPO, outline how data users should collect, handle and use personal data, complemented by other provisions imposing further compliance\nrequirements. The collective objective of DPPs is to ensure that personal data is collected on a fully informed basis and in a fair manner,\nwith due consideration towards minimizing the amount of personal data collected. Once collected, the personal data should be processed\nin a secure manner and should only be kept for as long as necessary for the fulfillment of the purposes of using the data. Use of the\ndata should be limited to or related to the original collection purpose. Data subjects are given certain rights, inter alia: (a) the\nright to be informed by a data user whether the data user holds personal data of which the individual is the data subject; (b) if the\ndata user holds such data, to be supplied with a copy of such data; and (c) the right to request correction of any data they consider\nto be inaccurate. The Commissioner may carry out criminal investigations and institute prosecution for certain offenses. Depending on\nthe severity of the cases, the Privacy Commissioner will decide whether to prosecute or refer cases involving suspected commission to\nthe Department of Justice of Hong Kong. Victims may also seek compensation by civil action from data users for damage caused by a contravention\nof the PDPO. The Commissioner may provide legal assistance to the aggrieved data subjects if the Commissioner deems it fit to do so.\n\n \n\n12\n\n \n\n \n\nIf\nour Operating Subsidiaries conducting business operations in Hong Kong have violated certain provisions of the PDPO, we could face\nsignificant civil penalties and/or criminal prosecution. Based on advice of our HK counsel, we believe we have established the\nnecessary protocols and data collection standards to ensure compliance with the PDPO.\n\n \n\nMoreover,\nthe increase in attention to and regulation of data protection, data privacy and cybersecurity across the globe in recent years will\nrequire us to further devote resources and incur additional costs associated with compliance. Although we strive to comply with applicable\nlaws and regulations regarding data protection and data privacy and to inform our suppliers and customer of our business practices, it\nis possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our data collection,\nuse, maintenance and other processing practices or that it may be argued that our practices do not comply with Hong Kong’s Personal\nData (Privacy) Ordinance. Due to rapid changes in technology and the inconsistent interpretations of privacy and data collection and\nprotection laws and regulations, we may be required to materially change the way we do business. The challenges imposed by the ongoing\nneed to remain compliant with such laws and regulations, as well as the need to implement any changes due to newly introduced laws and\nregulations, may slow our growth, and if we are not able to cope with these challenges as effectively as other companies, we will be\ncompetitively disadvantaged, and therefore our business operations, financial position and results of operations could be materially and adversely\naffected.\n\n \n\n**We\nare incorporated under the laws of the Cayman Islands and are subject to its Data Protection Act, which regulates our collection and\nprocessing of personal data of our investors.**\n\n** **\n\nWe\ncollect, process and maintain personal data about investors of the Company pursuant to the Data Protection Act, 2021 Revision, of the\nCayman Islands, as amended from time to time, as well as any regulations, codes of practice or orders promulgated pursuant thereto (the\n“DPA”). We are committed to processing personal data in accordance with the DPA. In our use of personal data, we will be\ncharacterized under the DPA as a “data controller.” By virtue of your investment in the Company, we and certain of our third-party\nservice providers may collect, record, store, transfer and otherwise process personal data by which individuals may be directly or indirectly\nidentified. Your personal data will be processed fairly and for lawful purposes, including: (i) where the processing is necessary for\nus to perform a contract to which you are a party or for taking pre-contractual steps at your request; (ii) where the processing is necessary\nfor compliance with any legal, tax or regulatory obligations to which we are subject; or (iii) where the processing is for the purposes\nof legitimate interests pursued by us or by a service provider to whom the data are disclosed. As a data controller, we will only use\nyour personal data for the purposes for which we collected it. We anticipate that we will share your personal data with our third-party\nservice providers for certain purposes. We may also share relevant personal data where it is lawful to do so and necessary to comply\nwith our contractual obligations or your instructions, or where it is necessary or desirable to do so in connection with any regulatory\nreporting obligations. In exceptional circumstances, we will share your personal data with regulatory, prosecuting and other governmental\nagencies or departments, and with parties to litigation (whether pending or threatened) in any country or territory, including to any\nother person where we have a public or legal duty to do so (e.g., to assist with detecting and preventing fraud, tax evasion and financial\ncrime or compliance with a court order).\n\n** **\n\n**A\ncyberattack, security breach or other unauthorized access or interruption to our information technology systems or those of any third-party\nservice providers could harm our reputation and subject us to significant liability.**\n\n \n\nWe\nare fully aware that cybersecurity threats, privacy breaches, insider threats or other incidents and malicious internet-based activity\ncontinue to increase, evolve in nature and become more sophisticated. Information security risks for companies such as ours have significantly\nincreased in recent years in part because of the proliferation of new technologies, the use of internet and telecommunications technologies\nto conduct financial transactions and the increased sophistication and activities of organized crime, hackers, terrorists and other external\nparties, as well as nation-state and nation-state-supported actors.\n\n \n\n13\n\n \n\n  \n\nOn\nApril 16, 2024, our Board of Directors approved the authorization of an amendment to the Company’s Audit Committee Charter (the\n“Audit Committee Charter”) pursuant to which it adopted a cybersecurity policy (the “Cybersecurity Policy”) and\nfurther approved that the Audit Committee will have full authority and powers to implement the Cybersecurity Policy. The Audit Committee\nCharter provides the members of the Audit Committee with authorization and authority to conduct continuous analysis of and review for\nany potential cybersecurity risks as part of the Company’s overall risk management program and to create a cyber-resilient organization,\nwhich will contribute to the value preservation of the Company. The Audit Committee Charter further provides authority and responsibility\nto the members of the Audit Committee to: (i) understand the economic drivers and impact of cyber risk, including the financial impact\nto our Company; (ii) align cyber-risk management policies with the Company’s business needs by integrating cyber-risk analysis\ninto significant business decisions; (iii) ensure our Company’s organizational structure supports cybersecurity goals; and (iv)\nincorporate cybersecurity expertise into Board governance. See “Item 16J. Cybersecurity.”\n\n \n\nIn\naddition, because we may utilize a third-party contractor to provide these services to us, including cloud, software, data center and\nother critical technology, to collect and maintain personal data on our shareholders, we rely heavily on the data security practices\nand policies adopted by these third-party service providers. Our ability to monitor our third-party service providers’ data security\nis limited. A vulnerability in our or our third-party service providers’ software or systems, a failure of our third-party service\nproviders’ safeguards, policies or procedures or a breach of a software or system could result in the compromise of the confidentiality,\nintegrity or availability of the data housed. We cannot guarantee that any cybersecurity incidents will not occur and adversely affect\nour shareholders. We and our third-party service providers and partners may be unable to anticipate or prevent techniques used in the\nfuture to obtain unauthorized access or to sabotage systems and we cannot guarantee that applicable recovery systems, security protocols,\nnetwork protection mechanisms and other procedures are or will be adequate to prevent network and service interruption, system failure\nor data loss. In addition, we may also become liable in the event our or our third-party service providers are subject to security breaches,\nprivacy breaches or other cybersecurity threats. This could expose us to a risk of litigation, indemnity obligations and damages, cause\nus to incur significant liability and financial loss and be subject to regulatory scrutiny, investigations, proceedings and fines and\npenalties, and require us to expend significant capital and other resources to alleviate problems caused by any such cybersecurity attack\nor other security breach or incident and to implement additional security measures.\n\n \n\nWe\ncurrently do not maintain cybersecurity insurance, and in the event that we were to seek to obtain such insurance coverage, it may not\nbe available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims in connection with cybersecurity\nliabilities. Insurers could also deny coverage as to any future claim.\n\n \n\n**We\nmay become subject to a variety of PRC laws and other regulations regarding data security or securities offerings that are conducted\noverseas and/or other foreign investment in China-based issuers, and any failure to comply with applicable laws and regulations could\nhave a material and adverse effect on our business, financial condition and results of operations and may hinder our ability to maintain\nour listing on a U.S. or other foreign exchange, access the capital markets or issue securities in the future, and cause our Ordinary\nShares to significantly decline in value or become worthless.**\n\n \n\nOn\nJune 10, 2021, the Standing Committee of the National People’s Congress enacted the PRC Data Security Law, which took effect on\nSeptember 1, 2021. The law requires data collection to be conducted in a legitimate and proper manner and stipulates that, for the purpose\nof data protection, data processing activities must be conducted based on data classification and a hierarchical protection system for\ndata security.\n\n \n\nOn\nJuly 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly\nissued a document to crack down on certain activities in the securities market and promote the high-quality development of the capital\nmarkets, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law enforcement\nand judicial cooperation, to enhance supervision over China-based companies listed overseas and to establish and improve the system of\nextraterritorial application of the PRC securities laws.\n\n \n\nOn\nAugust 20, 2021, the 30th meeting of the Standing Committee of the 13th National People’s Congress voted and passed the “Personal\nInformation Protection Law of the People’s Republic of China,” or the “PRC Personal Information Protection Law,”\nwhich became effective on November 1, 2021. The PRC Personal Information Protection Law applies to the processing of personal information\nof natural persons within the territory of China that is carried out outside of China where (i) such processing is for the purpose of\nproviding products or services for natural persons within China; (ii) such processing is to analyze or evaluate the behavior of natural\npersons within China; or (iii) there are any other circumstances stipulated by related laws and administrative regulations.\n\n \n\n14\n\n \n\n \n\nOn\nDecember 28, 2021, the CAC, jointly with the relevant authorities, formally published Measures for Cybersecurity Review (2021) which\ntook effect on February 15, 2022 and replaced the former Measures for Cybersecurity Review (2020) issued on April 13, 2020. Measures\nfor Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services\nand online platform operators (together with the operators of critical information infrastructure, the “Operators”) carrying\nout data processing activities that affect or may affect national security shall conduct a cybersecurity review and any online platform\noperator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity\nreview office if it seeks to conduct an overseas listing or securities offering.\n\n \n\nOur\nOperating Subsidiaries may in the future collect and store certain data (including certain personal information) from our customers,\nwho may be PRC individuals, in connection with our business and operations and for “Know Your Customers” purposes (to combat\nmoney laundering). Given that: (i) two of our Operating Subsidiaries are incorporated and located in Hong Kong and the other Operating\nSubsidiary is incorporated and located in mainland China; and (ii) we have an Operating Subsidiary engaged in business operations in\nmainland China, we currently may expect the Measures for Cybersecurity Review (2021) and the PRC Personal Information Protection Law\nto apply to our Operating Subsidiaries.\n\n \n\nOn\nFebruary 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures\nof Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and relevant supporting guidelines,\nwhich came into effect on March 31, 2023. On February 17, 2023, the CSRC also issued the Notice on the Administrative Arrangements for\nthe Filing of the Overseas Securities Offering and Listing by Domestic Companies (the “CSRC Notice”). Pursuant to the Trial\nMeasures and the CSRC Notice, among other things, (i) a domestic company that seeks to offer or list securities overseas, both directly\nand indirectly, must complete certain filing procedures with the CSRC within three working days following its submission of an initial\npublic offering or listing application; and (ii) domestic companies which have already, directly or indirectly, offered and listed securities\nin overseas markets prior to the effectiveness of the Trial Measures are required to fulfill their filing obligations and report relevant\ninformation to the CSRC within three working days after conducting a follow-on offering of equity securities on the same overseas market.\nIf the issuer meets both of the following criteria, the overseas offering and listing conducted by such issuer shall be deemed an indirect\noverseas offering and listing by a PRC domestic company: (i) 50% or more of any of the issuer’s operating revenue, total profit,\ntotal assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year were derived\nfrom PRC domestic companies; and (ii) the majority of the issuer’s business activities are carried out in mainland China, or its\nmain place(s) of business are located in mainland China, or the majority of its senior management team in charge of its business operations\nand management are PRC citizens or have their usual place(s) of residence located in mainland China. The determination of indirect overseas listings by domestic enterprises shall follow the principle of substance over\nform. Where a PRC domestic company is\nseeking an indirect overseas offering and listing in an overseas market, the issuer shall designate a major domestic operating entity\nresponsible for all filing procedures with the CSRC. If a domestic company fails to complete the required filing procedures or conceals\nany material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties,\nsuch as an order to rectify, warnings and fines, and its controlling shareholders, actual controllers, the person directly in charge\nand other directly liable persons may also be subject to administrative penalties, such as warnings and fines.\n\n \n\nIt is highly uncertain what existing or new laws or regulations or detailed implementations and interpretations will\nbe modified or promulgated, if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will\nhave on the daily business operations of our Operating Subsidiaries, their respective abilities to accept foreign investments and the\nlisting of our Ordinary Shares on a U.S. or other foreign exchange. Should new regulations be introduced, there remains significant uncertainty\nin the interpretation and enforcement of relevant PRC cybersecurity laws and regulations. If any of our Operating Subsidiaries is deemed\nto be an “Operator” required to file for cybersecurity review in connection with our continued listing or future securities\nofferings or if the Measures for Cybersecurity Review (2021) or the PRC Personal Information Protection Law becomes applicable to our\nOperating Subsidiaries, the business operations of our Operating Subsidiaries and the continued listing of our Ordinary Shares in the\nUnited States could be subject to the CAC’s cybersecurity review in the future. We may be required to complete the filing procedures\nwith the CSRC pursuant to the Trial Measures. If our Operating Subsidiaries become subject to the CAC or CSRC review, we cannot assure\nyou that our Operating Subsidiaries will be able to comply with the regulatory requirements in all respects. In the event of a failure\nto comply, our Operating Subsidiaries may become subject to fines and other penalties, which may have a material adverse effect on our\nbusiness, operations and financial condition, may adversely affect our continued listing or capital-raising activities, and may cause\nour Ordinary Shares to significantly decline in value or become worthless.\n\n \n\n15\n\n \n\n \n\nIf the Chinese government chooses to exert more oversight and control over\nofferings that are conducted overseas and/or foreign investment in China-based issuers, such action may significantly limit or completely\nhinder our ability to maintain our listing or access the capital markets and cause our Ordinary Shares to significantly decline in value\nor become worthless. As of the date of this Annual Report,\nexcept for the CSRC filing required under applicable PRC regulations for overseas listings or securities offerings, no effective laws\nor regulations in the PRC explicitly require us to seek approval from any other PRC governmental authorities in connection with our current\noverseas listing, nor has the Company or any of our Operating Subsidiaries received any inquiry, notice, warning or sanctions from the\nCSRC or any other PRC governmental authorities.\n\n \n\nThese recent statements, laws and regulations by the Chinese government,\nincluding the Measures for Cybersecurity Review (2021), the PRC Personal Information Protection Law and the Trial Measures, have indicated\nan intent to exert greater oversight and control over offerings that are conducted overseas and/or foreign investments in China-based\nissuers. It is uncertain whether the Chinese government will adopt additional requirements or extend the existing requirements to apply\nto our Operating Subsidiaries located in Hong Kong. We could be subject to approval or review of Chinese regulatory authorities. Any future\naction by the PRC government increasing the scrutiny by the CSRC could significantly limit or completely hinder our ability to maintain\nour listing or raise capital and could cause such securities to significantly decline in value or become worthless.\n\n \n\n**Failure\nto comply with PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial\nowners or us to liability or penalties, limit our ability to inject capital into PRC subsidiary or limit PRC subsidiary’s ability\nto increase their registered capital or distribute profits.**\n\n \n\nThe\nSAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment\nand Financing and Roundtrip Investment through Special Purpose Vehicles, or the SAFE Circular 37, on July 14, 2014, which replaced the\nformer circular commonly known as the “SAFE Circular 75” promulgated by the SAFE on October 21, 2005. The SAFE Circular 37\nrequires PRC residents to register with local branches of the SAFE in connection with their direct establishment or indirect control\nof an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity\ninterests in domestic enterprises or offshore assets or interests, referred to in the SAFE Circular 37 as a “special purpose vehicle.”\nThe SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special\npurpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division\nor other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfil the required\nthe SAFE registration, the special purpose vehicle may be prohibited from making profit distributions to the shareholder, and the shareholder\nmay be restricted in its ability to contribute foreign exchange or additional capital into PRC.\n\n \n\nWe\nhave notified substantial beneficial owners of Ordinary Shares who we know are PRC residents of their filing obligation. However, such\nbeneficial owners may not have completed SAFE registration and we may not at all times be aware of the identities of all of our beneficial\nowners who are PRC residents. We do not have control over our beneficial owners and cannot assure you that all of our PRC-resident beneficial\nowners will comply with the SAFE Circular 37 and subsequent implementation rules. Furthermore, since it is unclear how the SAFE Circular\n37, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant\nPRC government authorities, we cannot predict how these regulations will affect our business operations or future strategies. Failure\nto register or comply with relevant requirements may limit our ability to contribute additional capital to our PRC subsidiary or limit\nour PRC subsidiary to make profit distributions to us or our shareholder who are PRC resident.\n\n \n\n**If\nthe Chinese government were to impose new requirements for approval from PRC authorities in connection with overseas securities activities,\nsuch actions could materially and adversely affect our business, financial condition and the market value of our securities.**\n\n** **\n\nRecently,\nthe General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued\nthe “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or “the Opinions,”\nwhich were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal\nsecurities activities and the need to strengthen the supervision over overseas listings by Chinese companies.\n\n \n\nAs of the date\nof this Annual Report, no effective laws or regulations in the PRC explicitly require the Company and its PRC subsidiary to seek approval\nfrom any other PRC governmental authorities in connection with our existing operations or current overseas listing, nor has the Company\nor any of our Operating Subsidiaries received any inquiry, notice, warning or sanctions from the CSRC or any other PRC governmental authorities;\nIn addition, FIL, our Hong Kong subsidiary that owns 100% of the outstanding shares of FPPF, is afforded the legal protections of national\ntreatment under the Foreign Investment Law of the People’s Republic of China.\n\n \n\nIf\nwe have erroneously concluded that these permission requirements do not apply to us, or if applicable laws, regulations or interpretations\nchange, and it is determined in the future that the permission requirements become applicable to us, we may be subject to review, may\nface challenges in addressing these requirements and may incur substantial costs in complying with them. Any such developments could\nresult in material adverse changes in our business operations and financial position and may limit our ability to maintain our overseas\nlisting or access capital markets, and cause the market value of our securities to significantly decline or become worthless.\n\n \n\n16\n\n \n\n \n\n**Given the current PRC regulatory environment,\nit is uncertain whether the Company may be required to complete filings with the CSRC in the future in connection with overseas securities\nactivities. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other\nPRC governmental authorities required for listings or securities activities. As of the date of this Annual Report, we have not received\nany inquiry, notice, warning, sanctions or regulatory objection from the CSRC or other PRC governmental authorities.**\n\n \n\nOn February 17, 2023, with the\napproval of the State Council, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic\nCompanies, or the Trial Measures, and relevant supporting guidelines, which became effective on March 31, 2023. Pursuant to the Trial\nMeasures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures\nwith the CSRC pursuant to the requirements of the Trial Measures. If a domestic company fails to complete the required filing procedures\nor conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative\npenalties, such as an order to rectify, warnings and fines, and its controlling shareholders, actual controllers, the person directly\nin charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines; (ii) if the issuer\nmeets both of the following criteria, the overseas offering and listing conducted by such issuer shall be deemed an indirect overseas\noffering and listing by a PRC domestic company: (A) 50% or more of any of the issuer’s operating revenue, total profit, total assets\nor net assets as documented in its audited consolidated financial statements for the most recent fiscal year were derived from PRC domestic\ncompanies; and (B) the majority of the issuer’s business activities are carried out in mainland China, or its main place(s) of business\nare located in mainland China, or the majority of its senior management team in charge of its business operations and management are PRC\ncitizens or have their usual place(s) of residence located in mainland China; and (C) where a PRC domestic company is seeking an indirect\noverseas offering and listing in an overseas market, the issuer shall designate a major domestic operating entity responsible for all\nfiling procedures with the CSRC, and where an issuer makes an application for an initial public offering or listing in an overseas market,\nthe issuer shall submit filings with the CSRC within three business days after such application is submitted. The determination of indirect\noverseas listings by domestic enterprises shall follow the principle of substance over form.\n\n \n\nAs of the date of this Annual Report,\nour Company and our PRC subsidiary have not been involved in any investigations on cybersecurity review initiated by CAC or any PRC regulatory\nauthorities. However, if approvals from the CAC or other PRC regulatory authorities are required in connection with our continued listing\nor future capital-raising activities, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies\nmay impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in\nChina, delay or restrict cross-border cash transfers, or take other actions that could have a material adverse effect on our business,\nfinancial condition, results of operations and prospects, as well as the trading price of our Securities. If PRC regulatory agencies promulgate\nnew rules requiring additional approvals for overseas securities activities, and we are unable to obtain such approvals or exemptions,\nthe market value of our securities could be materially and adversely affected.\n\n \n\nWe believe that our PRC subsidiary’\noperations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments\nof the jurisdictions in which our PRC subsidiary operates may impose new, stricter regulations or interpretations of existing regulations\nwith little advance notice that would require additional expenditures and efforts to ensure our subsidiary’s compliance with such\nregulations or interpretations. Our PRC subsidiary may incur increased costs necessary to comply with existing and newly adopted laws\nand regulations or penalties for any failure to comply. In the event that our PRC subsidiary is not able to substantially comply with\nany existing or newly adopted laws and regulations, our business operations may be materially adversely affected and the value of our\nOrdinary Shares may significantly decrease.\n\n \n\n**We may be affected by the currency peg system\nin Hong Kong.**\n\n \n\nSince 1983, Hong Kong dollars have\nbeen pegged to the U.S. dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that this policy will not be changed\nin the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures\ndenominated in foreign currency may increase. This would in turn adversely affect the operations and profitability of our business.\n\n \n\n**Risks\nRelated to Our Operating Subsidiaries’ Business Operations and Industry**\n\n \n\n**We\nrely on one customer, and if we fail to retain this customer or attract new customers, our business, financial condition, results of\noperations and growth prospects will be materially and adversely affected, and we would likely be forced to cease our business operations.**\n\n \n\nWe rely on one customer who contributed approximately 100% of our total\nrevenues for the fiscal years ended December 31, 2025, 2024 and 2023. We do not have a long-term agreement with our key customer and their\npurchases are made on an order-by-order basis. Our business with this customer has been, and we expect it will continue to be, conducted\nbased on the actual orders received from time to time. Our sole customer is not obligated in any way to continue placing orders with us\nat the same or increasing levels, or at all. Our customer’s level of demand for our products may fluctuate significantly from period\nto period. Such fluctuation is attributable mainly to changes in our customer’s business strategies, operational needs and product\nportfolio, as well as consumer trends. The loss of our sole customer, our inability to attract new customers, a significant decrease in\nour existing customer’s spending on the products we offer, or a failure to make repeat purchases of our products, would have a severe\nadverse impact on our business, financial condition, results of operations and growth prospects and would likely result in the cessation\nand termination of our business.\n\n \n\n17\n\n \n\n \n\n**Our\nsole customer may take actions that adversely affect our gross profit and operating results.**\n\n** **\n\nWe\nare dependent upon our one key customer whose bargaining strength is substantial and growing. We may be negatively affected by changes\nin their policies, such as price and term demands, special packaging, shorter lead times for the delivery of products, smaller and more\nfrequent shipments or other conditions. If we do not effectively respond to these demands, this customer could decrease its purchases\nfrom us and a reduction in the demand for our products or the costs of complying with their business demands could have a material adverse\neffect on our business, operating results and financial condition.\n\n \n\n**Our\nability to deliver products to our sole customer in a timely manner and to satisfy our customer’s fulfillment standards is subject\nto several factors, some of which are beyond our control.**\n\n \n\nOur\nsole customer places great emphasis on timely delivery of our products for specific selling seasons, especially during our third fiscal\nquarter, and on the fulfillment of consumer demand throughout the year. We cannot control all of the various factors that might affect\nour product delivery. Production delays, difficulties encountered in shipping from overseas, customs clearance delays and operational\nissues with any of the third-party logistics providers we use are on-going risks of our business. Accordingly, we are subject to risks,\nincluding labor disputes, inclement weather, public health crises (such as pandemics and epidemics), natural disasters, possible acts\nof terrorism, port and canal backlogs and blockages, availability of shipping containers and increased security restrictions associated\nwith the carriers’ ability to provide delivery services to meet our shipping needs. These risks have been exacerbated by surges\nin demand and shifts in shopping patterns across key markets, which has resulted in carrier-imposed capacity restrictions, carrier delays\nand longer lead times for our products. Failure to deliver products to our key customer in a timely and effective manner could damage\nour reputation and result in the loss of our only customer or reduced orders, which could have a material adverse effect on our business,\noperating results and financial condition.\n\n \n\n**To\ncompete successfully in the global marketplace, we must develop and introduce innovative new products to meet changing consumer preferences.**\n\n \n\nOur\nlong-term success in the competitive personal care electric appliance industry depends on our ability to develop and commercialize a\ncontinuing stream of innovative new products that meet changing consumer preferences and take advantage of opportunities sooner than\nour competition. We face the risk that our competitors will introduce innovative new products that compete with our products. There are\nnumerous uncertainties inherent in successfully developing and commercializing new products on a continuing basis and new product launches\nmay not deliver expected growth in sales or operating income. If we are unable to develop and introduce a continuing stream of competitive\nnew products it may have an adverse effect on our business, operating results and financial condition.\n\n \n\n**Our\nOperating Subsidiaries may not be able to obtain or maintain all necessary licenses, permits and approvals and to make all necessary\nregistrations and filings for their business activities in multiple jurisdictions and related to residents.**\n\n \n\nIn accordance with the relevant laws and regulations in the PRC, our PRC\nOperating Subsidiary, FPPF, is required to maintain various approvals, licenses and permits to operate its business, including, but not\nlimited to, business licenses. These approvals, licenses and permits are obtained upon satisfactory compliance with, among other things,\nthe applicable laws and regulations.\n\n \n\nOur PRC Operating Subsidiary may be subject to regulatory measures imposed\nby various governmental entities in the PRC as follows: (i) regulations relating to competition; (ii) electronic commerce law; (iii) regulations\nrelating to intellectual property: copyright, trademark, patent and domain name; (iv) regulations on offshore parent holding companies’\ndirect investment in and loans to their PRC subsidiaries; (v) regulations relating to foreign exchange; (vi) regulations relating to dividend\ndistributions; (vii) regulations relating to overseas listings; (viii) regulations relating to employment; (ix) regulations relating to\ncustomer rights protection; and (x) regulations relating to tax: income tax, value-added tax. As of the date of this Annual Report, our\nPRC Operating Subsidiary has received all necessary governmental approvals and licenses for operations in the PRC and has not been denied\nany such licenses or approvals.\n\n \n\n18\n\n \n\n \n\nMoreover,\nour Operating Subsidiaries are also subject to laws, regulations and policies relating to the protection of the environment and to workplace\nhealth and safety and may be adversely affected by new and changing laws and regulations. They are required to adopt measures to control\nthe discharge of polluting matters, toxic substances or hazardous substances and noise at their facilities in accordance with such applicable\nlaws and regulations and to implement such measures that ensure the safety and health of their employees. Changes to current laws, regulations\nor policies or the imposition of new laws, regulations and policies in the personal care electric appliance industry could impose new\nrestrictions or prohibitions on their current practices. Our Operating Subsidiaries may incur significant costs and expenses and need\nto budget additional resources to comply with any such requirements, which may have a material and adverse effect on their business,\nfinancial condition, results of operations and prospects.\n\n \n\nAs\nof the date of this Annual Report, our Operating Subsidiaries have received all substantial and necessary governmental approvals for\noperations in the PRC and Hong Kong. However, in the event that our Operating Subsidiaries fail to renew the relevant licenses or filings,\nthere is no assurance that our Operating Subsidiaries can find suitable suppliers in a timely manner or on reasonable commercial terms,\nor that such suppliers will at all times perform in a satisfactory level. Therefore, our Operating Subsidiaries’ business, reputation,\nprospects, results of operations and financial condition may be materially and adversely affected. For further discussion, including\nthe possible consequences for non-compliance, see “Regulatory Environment.”\n\n \n\n**Significant\nchanges in or our compliance with regulations, interpretations or product certification requirements could adversely impact our operations.**\n\n \n\nWe\nare subject to U.S. and foreign regulations, including environmental, health and safety laws, and industry-specific product certifications.\nThe products we sell are subject to product safety laws and regulations in various jurisdictions. These laws and regulations specify\nproduct safety testing requirements and set product identification, labeling and claim requirements.\n\n \n\nSignificant\nnew regulations, material changes to existing regulations, or greater oversight, enforcement, or changes in interpretation of existing\nregulations, could further delay or interrupt distribution of our products in the U.S. and other countries, result in fines or penalties\nor cause our costs of compliance to increase. We cannot guarantee that our products will receive regulatory approval in all countries.\nSome of our personal care electronic appliances require various safety certifications, including UL certifications. Significant new certification\nrequirements or changes to existing certification requirements could further delay or interrupt distribution of our products or make\nthem more costly to produce.\n\n \n\nWe\nare not able to predict the nature of potential changes to, or enforcement of laws, regulations, product certification requirements,\nrepeals, or interpretations. Nor are we able to predict the impact that any of these changes would have on our business in the future.\nFurther, if we were found to be noncompliant with applicable laws and regulations in these or other areas, we could be subject to governmental\nor regulatory actions, including fines, import detentions, injunctions, product withdrawals or recalls or asset seizures, any of which\ncould have a material adverse effect on our business, results of operations and financial condition.\n\n \n\n**Our\nbusiness may be adversely impacted by product defects or other quality issues.**\n\n \n\nProduct\ndefects or other quality issues can occur throughout the product development, design and manufacturing processes. Any product defects\nor any other failure of our products or substandard product quality could harm our reputation and result in adverse publicity, lost revenues,\ndelivery delays, product recalls, relationships with our network partners and other business partners, product liability claims, administrative\npenalties, harm to our brand and reputation and significant warranty and other expenses, and could have a material adverse impact on\nour business, financial condition, operating results and prospects.\n\n \n\n**Global\nclimate change and related legal and regulatory developments could negatively affect our business, results of operations, liquidity and\nfinancial condition.**\n\n \n\nThe\neffects of climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere, such\nas droughts, heat waves, flooding, wildfires, increased storm severity, sea level rise and power outages or shortages, particularly in\ncertain regions in which we operate, may materially adversely impact our business. China, where our manufacturing operations are conducted,\nis presently undergoing the worst heat wave in 60 years while also contending with a prolonged drought drying up reservoirs and crippling\nhydropower stations. This has resulted in power shortages and factories having to cease or limit their production operations. While the\nCompany has not experienced any disruptions in the operations of its manufacturing operating subsidiary, any such disruptions could have\na material adverse effect on its business, operations, liquidity and financial condition.\n\n \n\n**An\neconomic downturn may adversely affect consumer discretionary spending and demand for our products and services.**\n\n \n\nOur\nproducts and services may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such\ndiscretionary items include general economic conditions and other factors, such as consumer confidence in future economic conditions,\nconsumer sentiment, the availability and cost of consumer credit, levels of unemployment and tax rates. Unfavorable economic conditions\nmay lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not\ngrow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services may\nhave an adverse effect on our operating results and financial condition.\n\n \n\n19\n\n \n\n \n\n**The\nwar in Ukraine, conflicts in the Middle East and shipping disruptions in the Red Sea could materially and adversely affect our business\nand results of operations.**\n\n \n\nThe\nuncertainties regarding the effects and duration of global hostilities, including the recent outbreak of war in Ukraine, the Israel-Gaza\nand Hezbollah conflict and any associated military campaigns have affected global economic markets, including a dramatic increase in\nthe price of oil and gas, and the uncertain resolution of these conflicts could result in protracted and/or severe damage to the global\neconomy. Russia’s recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the\nUnited States, the European Union and other countries against Russia and possibly countries that support, directly or indirectly, Russia’s\nincursion. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and\nthus could affect the business of our sole customer, even though we do not have any direct exposure to Russia or the adjoining geographic\nregions. In addition, Russia and Ukraine are major exporters of critical minerals needed for semiconductors, which could have a significant\nnegative impact on us and on our sole customer. The extent and duration of the military action, sanctions and resulting market disruptions\nare impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may\nmagnify the impact of other risks described herein. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict\nand governmental reactions are rapidly developing and beyond our control. Moreover, the recent armed conflict between Israel and Hamas\nis highly unpredictable, and this conflict could lead to further significant market and other disruptions, including significant volatility\nin commodity prices, supply of energy resources, instability in financial markets, political and social instability and increases in\ncyberattacks and espionage. Prolonged unrest, intensified military activities or more extensive sanctions impacting the affected regions\ncould have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business,\nfinancial condition, results of operations and prospects.\n\n \n\nIn\naddition, recently there have been shipping disruptions in the Red Sea and surrounding waterways due to attacks on marine vessels by\nthe Houthi movement which controls part of Yemen. These disruptions may impact our ability to distribute our products to our customers\nin a cost-effective and timely manner and to meet our customer’s demands, all of which could have an adverse effect on our financial\ncondition and results of operations.\n\n \n\n**Our\nOperating Subsidiaries rely on our management team and employees in their business.**\n\n \n\nOur experienced executive directors and senior management team are one\nof the key factors contributing to our Operating Subsidiaries’ success. Their extensive experience and knowledge of the personal\ncare electric appliance industry help formulate and implement business strategy and foster growth of our Operating Subsidiaries’\nbusiness. The loss of services of any senior management members without timely and suitable replacement may cause disruption or loss of\nour Operating Subsidiaries’ business operations and prospects. Please refer to Item 6. “Directors, Senior Management and Key\nEmployees” in this Annual Report for details about the experience and roles of our Executive Directors, Independent Non-Executive\nDirectors and senior management.\n\n \n\nAside\nfrom our key management, our Operating Subsidiaries also rely on our employees for their daily operations. Our Operating Subsidiaries’\nresults of operations and business performance may be materially and adversely affected if we cannot retain the services of our employees\nand recruit suitable replacements in a timely manner.\n\n \n\n**Our\nOperating Subsidiaries derive a significant portion of their revenue from international operations and are exposed to foreign exchange\nrisk**. **Moreover, fluctuations in exchange rates could have a material and adverse effect on our results of operations and\nthe value of your investment**.\n\n \n\nMost\nof our Operating Subsidiaries’ sales are settled in U.S. dollars. Our Operating Subsidiaries currently do not have a foreign\ncurrency hedging policy. For the fiscal year ended December 31, 2025, our Operating Subsidiaries did not record any foreign exchange\ngain or loss. For the fiscal year ended December 31, 2024, our Operating Subsidiaries did not record any foreign exchange gain or\nloss. For the fiscal year ended December 31, 2023, our Operating Subsidiaries recorded a net foreign exchange gain of approximately\nHK$213,000. Significant volatility in foreign exchange rates may negatively affect our results of operations and other comprehensive\nincome.\n\n \n\nIn\naddition, our Operating Subsidiaries’ revenues and expenses will also be denominated in Hong Kong dollars. Although the\nexchange rate between of the Hong Kong dollar to the U.S. dollar has been pegged since 1983, we cannot assure you that the Hong Kong\ndollar will remain pegged to the U.S. dollar. Any significant fluctuations in the exchange rates between Hong Kong dollars and U.S.\ndollars may have a material adverse effect on our Operating Subsidiaries’ revenue and financial condition. For example, to the\nextent that we were required to convert U.S. dollars we received from our operations or financing activities into Hong Kong dollars\nfor our Operating Subsidiaries’ operations, fluctuations in the exchange rates of the Hong Kong dollar against the U.S. dollar\nwould have an adverse effect on the amounts we receive from the conversion. We have not used any forward contracts, futures, swaps,\nor currency borrowings to hedge our exposure to foreign currency risk.\n\n \n\n20\n\n \n\n \n\n**Our\nOperating Subsidiaries are exposed to the credit risk of their customers**.\n\n \n\nThe credit risk exposure\nof our Operating Subsidiaries mainly arises from trade receivables from our customers. As of December 31, 2025, 2024, and 2023, our Operating\nSubsidiaries’ accounts receivable amounted to approximately HK$26,760,000, HK$37,342,000, and HK$31,486,000, respectively, which\nrepresented approximately 36.6%, 38.7%, and 30.6% of total assets, respectively. For the fiscal years ended December 31, 2025, 2024,\nand 2023, our Operating Subsidiaries did not record any impairment/reversal of accounts receivables. However, our Operating Subsidiaries\nare still subject to the credit risk of their customers and their liquidity is dependent on their customers making prompt payments.\n\n \n\nFurthermore,\nour Operating Subsidiaries’ suppliers generally offer them a credit period of 30 days to 60 days, while our Operating Subsidiaries\ngenerally grant their customers a credit period ranging from 30 days to 90 days. The longer credit period granted to our Operating Subsidiaries’\ncustomers compared to that offered by their suppliers indicates a potential risk of a possible cash flow shortage, which may affect the\nliquidity of their business. In the event that our Operating Subsidiaries experience a cash flow shortage when their customers do not\nmake settlements on a timely manner, the financial position, profitability and cash flow of our Operating Subsidiaries may be adversely\naffected.\n\n \n\n**Our\nOperating Subsidiaries may be harmed by negative publicity.**\n\n \n\nOur\nOperating Subsidiaries operate in highly competitive industries, and there are other companies in the market that offer similar products\nand services. They derive most of their customers through word of mouth and rely on the positive feedback of their customers. Thus, customer\nsatisfaction with our Operating Subsidiaries’ products is critical to the success of their business. If our Operating Subsidiaries\nfail to meet our customer’s expectations, there may be negative feedback which may have an adverse impact on our Operating Subsidiaries’\nbusiness and reputation. In the event that our Operating Subsidiaries are unable to maintain a high level of customer satisfaction, or\nany customer dissatisfaction is inadequately addressed, our Operating Subsidiaries’ business, financial condition, results of operations\nand prospects may also be adversely affected.\n\n \n\nOur\nOperating Subsidiaries’ reputation may also be adversely affected by negative publicity in reports and publications such as major\nnewspapers and forums or any other negative publicity or rumors. There is no assurance that our Operating Subsidiaries will not experience\nnegative publicity in the future or that such negative publicity will not have a material and adverse effect on their reputation or prospects.\nThis may result in our Operating Subsidiaries’ being unable to attract new customers or retain existing customers and may in turn\nadversely affect their business and results of operations.\n\n \n\n**We\nmay be unable to successfully implement our business strategies and future plans for our Operating Subsidiaries.**\n\n \n\nAs\npart of our business strategies and future plans, we intend to expand our Operating Subsidiaries’ operations. While we have planned\nsuch expansion based on our outlook regarding our Operating Subsidiaries’ business prospects, there is no assurance that such expansion\nplans will be commercially successful or that the actual outcome of those expansion plans will match our expectations. The success and\nviability of our expansion plans are dependent upon our ability to successfully implement our development projects, hire and retain skilled\nemployees to carry out our Operating Subsidiaries’ product development and new market strategies and future plans and implement\nstrategic business development and marketing plans effectively and upon an increase in demand for their products by existing and new\ncustomers in the future.\n\n \n\nFurther,\nthe implementation of our business strategies and future plans for our Operating Subsidiaries’ business operations may require\nsubstantial capital expenditure and additional financial resources and commitments. There is no assurance that these business strategies\nand future plans will achieve the expected results or outcome such as an increase in revenue that will be commensurate with our investment\ncosts or the ability to generate any cost savings, increased operational efficiency and/or productivity improvements to our Operating\nSubsidiaries’ operations. There is also no assurance that we will be able to obtain financing on terms that are favorable, if at\nall. If the results or outcome of our future plans do not meet our expectations, including if our Operating Subsidiaries fail to achieve\na sufficient level of revenue or fail to manage their costs efficiently, we may not be able to recover our investment costs, and our\nbusiness, financial condition, results of operations and prospects may be adversely affected.\n\n \n\n21\n\n \n\n  \n\n**We may not be adequately insured against losses\nand liabilities arising from our operations**\n\n \n\nWe recognize that our business\nis subject to various operational risks and potential liabilities, as described in the risk factors above. We currently maintain employees’\ncompensation insurance, which does not have limitation on damages or when the pre-determined amount of compensation exceeds our total\nconsideration. We do not carry an office insurance, professional indemnity for projects, or directors’ and officers’ liability\ninsurance. Although we believe our existing insurance coverage is generally consistent with industry practice and addresses certain foreseeable\nrisks, it may not be adequate to cover all potential losses, claims, or damages suffered by us. Any recovery under our insurance policies\ndepends on the assessment and approval of the relevant insurers in accordance with the terms under the policies. There is no assurance\nthat we will be indemnified in full, or at all, in any particular instance. Should we experience losses, damages, or liabilities in the\ncourse of our operations that fall outside the scope of our insurance coverage, we may not have adequate funds to satisfy those obligations.\nAny such payments could have a material adverse effect on our business, results of operations, and financial condition.\n\n** **\n\n**Compliance with governmental regulations could\nincrease our operating costs and interfere with our business efforts.**\n\n \n\nMost U.S. federal, state and local\nauthorities require certification by Underwriters Laboratory, Inc., an independent, not-for-profit corporation engaged in the testing\nof products for compliance with certain public safety standards, or other safety regulation certification prior to marketing electrical\nappliances. Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products. Our products, or additional\nelectrical appliances which we may develop, may not meet the specifications required by these authorities. A determination that our products\nare not in compliance with these rules and regulations could result in the imposition of fines or awards of damages to private litigants.\n\n** **\n\n**A cyberattack, security breach or other unauthorized\naccess or interruption to our information technology systems or those of any third-party service providers could harm our reputation and\nsubject us to significant liability.**\n\n \n\nWe are fully aware that cybersecurity threats, privacy\nbreaches, insider threats or other incidents and malicious internet-based activity continue to increase, evolve in nature and become more\nsophisticated. Information security risks for companies such as ours have significantly increased in recent years in part because of the\nproliferation of new technologies, the use of internet and telecommunications technologies to conduct financial transactions and the increased\nsophistication and activities of organized crime, hackers, terrorists and other external parties, as well as nation-state and nation-state-supported\nactors.\n\n \n\nOn April 16, 2024, our Board of Directors approved\nthe authorization of an amendment to the Company’s Audit Committee Charter (the “Audit Committee Charter”) pursuant\nto which it adopted a cybersecurity policy (the “Cybersecurity Policy”) and further approved that the Audit Committee will\nhave full authority and powers to implement the Cybersecurity Policy. The Audit Committee Charter provides the members of the Audit Committee\nwith authorization and authority to conduct continuous analysis of and review for any potential cybersecurity risks as part of the Company’s\noverall risk management program and to create a cyber-resilient organization, which will contribute to the value preservation of the Company.\nThe Audit Committee Charter further provides authority and responsibility to the members of the Audit Committee to: (i) understand the\neconomic drivers and impact of cyber risk, including the financial impact to our Company; (ii) align cyber-risk management policies with\nthe Company’s business needs by integrating cyber-risk analysis into significant business decisions; (iii) ensure our Company’s\norganizational structure supports cybersecurity goals; and (iv) incorporate cybersecurity expertise into Board governance. See “Management\n– Audit Committee Charter.”\n\n \n\nIn addition, because we may utilize a third-party\ncontractor to provide these services to us, including cloud, software, data center and other critical technology, to collect and maintain\npersonal data on our shareholders, we rely heavily on the data security practices and policies adopted by these third-party service providers.\nOur ability to monitor our third-party service providers’ data security is limited. A vulnerability in our or our third-party service\nproviders’ software or systems, a failure of our third-party service providers’ safeguards, policies or procedures or a breach\nof a software or system could result in the compromise of the confidentiality, integrity or availability of the data housed. We cannot\nguarantee that any cybersecurity incidents will not occur and adversely affect our shareholders. We and our third-party service providers\nand partners may be unable to anticipate or prevent techniques used in the future to obtain unauthorized access or to sabotage systems\nand we cannot guarantee that applicable recovery systems, security protocols, network protection mechanisms and other procedures are or\nwill be adequate to prevent network and service interruption, system failure or data loss. In addition, we may also become liable in the\nevent our or our third-party service providers are subject to security breaches, privacy breaches or other cybersecurity threats. This\ncould expose us to a risk of litigation, indemnity obligations and damages, cause us to incur significant liability and financial loss\nand be subject to regulatory scrutiny, investigations, proceedings and fines and penalties, and require us to expend significant capital\nand other resources to alleviate problems caused by any such cybersecurity attack or other security breach or incident and to implement\nadditional security measures.\n\n \n\nWe currently do not maintain cybersecurity insurance,\nand in the event that we were to seek to obtain such insurance coverage, it may not be available on acceptable terms or may not be available\nin sufficient amounts to cover one or more large claims in connection with cybersecurity liabilities. Insurers could also deny coverage\nas to any future claim.\n\n** **\n\n****\n\n22\n\n \n\n** **\n\n**Risks\nRelated to Our Operating Subsidiaries’ Industry**\n\n \n\n**An\neconomic downturn may adversely affect consumer discretionary spending and demand for our products and services.**\n\n \n\nOur\npersonal care electric appliance products may be considered discretionary items for consumers. Factors affecting the level of consumer\nspending for such discretionary items include general economic conditions and other factors, such as consumer confidence in future economic\nconditions, consumer sentiment, the availability and cost of consumer credit, levels of unemployment and tax rates. Unfavorable economic\nconditions may lead consumers to delay or reduce purchases of our products and consumer demand for our products and services may not\ngrow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services may\nhave an adverse effect on our operating results and financial condition.\n\n \n\n**Risks\nRelated to Our Securities**\n\n \n\n**We\nmay not maintain the listing of our Ordinary Shares on the Nasdaq Capital Market, which could limit investors’ ability to make\ntransactions in our Ordinary Shares and subject us to additional trading restrictions.**\n\n \n\nOn September 12, 2025, the Company\nwas notified by Nasdaq that it was not in compliance with the Minimum Bid Price Rule. On December 31, 2025, the Company received a letter\nfrom the Listing Qualifications Department of Nasdaq indicating that the Company had regained compliance with the minimum bid price requirement\nset forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”), which requires the Company’s ordinary shares\nto maintain a minimum closing bid price of $1.00 per share. The letter from Nasdaq stated that the Staff has determined that for the last\n10 consecutive business days, from December 16, 2025, through December 30, 2025, the closing bid price of the Company’s Class A\nOrdinary Shares was at $1.00 per share or greater. The Company reclassified its ordinary shares into Class A and Class B Ordinary Shares\nat the general meeting on September 29, 2025. Accordingly, the Company is now in compliance with the Minimum Bid Price Rule, and Nasdaq\nconsiders this matter closed.\n\n \n\nThere can be no assurance that we will be able to maintain compliance with the Minimum Bid Price Rule or any other\nNasdaq continued listing standard. The market price of our Class A Ordinary Shares may be affected by factors beyond our control, including\nmarket volatility and sales of substantial numbers of shares by existing shareholders, which could cause the bid price of our Class A\nOrdinary Shares to again fall below $1.00 per share. Although we have regained compliance, Nasdaq could, in its discretion, impose a monitoring\nperiod. During any such monitoring period, if we fail to comply with any applicable continued listing requirement, we may not be entitled\nto an automatic grace period and Nasdaq could issue a delisting determination.\n\n \n\nIf\nour Ordinary Shares are delisted from Nasdaq, we could face significant material adverse consequences, including:\n\n \n\n \n●\nlimited\navailability of market quotations for our Ordinary Shares;\n\n \n \n \n\n \n●\nreduced\nliquidity for our Ordinary Shares;\n\n \n \n \n\n \n●\na\ndetermination that our Ordinary Shares are “penny stock,” which will require brokers trading in our shares to adhere\nto more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary\nShares;\n\n \n \n \n\n \n●\na\nlimited amount of news and analyst coverage; and\n\n \n \n \n\n \n●\ndecreased\nability to issue additional securities or obtain additional financing in the future.\n\n \n\nIn\naddition, as long as our Ordinary Shares are listed on Nasdaq, U.S. federal law prevents or preempts the states from regulating their\nsale, although the law does allow the states to investigate companies if there is a suspicion of fraud and, if there is a finding of\nfraudulent activity, then the states can regulate or bar their sale. If we were no longer listed on Nasdaq, we would be subject to regulations\nin each state in which we offer our shares\n\n** **\n\n23\n\n \n\n \n\n**As of the date of this annual report, except\nfor the filing with the China Securities Regulatory Commission (“CSRC”) applicable to our overseas securities listings, no\neffective laws or regulations in the People’s Republic of China (“PRC”) explicitly require us to seek approval from\nany other PRC governmental authorities for our current overseas listing status. Given the current PRC regulatory environment, it is uncertain\nwhen and whether we will be required to obtain additional approvals or permissions from PRC authorities to maintain or pursue listings\non U.S. exchanges in the future, and even if such permissions are obtained, whether they could be subsequently denied, delayed, or rescinded.**\n\n \n\nAs of the date of this annual report,\nwe have not received any inquiry, notice, warning, sanction, or regulatory objection from the CSRC or any other PRC governmental authority\nregarding our historical overseas securities listings. However, if we are required to obtain approvals or permissions in the future and\nfail to receive or maintain such approvals, we may be unable to maintain or pursue listings on U.S. exchanges, which could materially\nand adversely affect the value of our securities and the interests of our investors.\n\n \n\nIn response to heightened data security and national security concerns relating to overseas listings by PRC-based\ncompanies, on January 4, 2022, the Cyberspace Administration of China (“CAC”) issued revised measures expanding the categories\nof businesses and circumstances subject to cybersecurity review requirements. It remains uncertain whether additional laws, regulations,\nor rules will be promulgated or existing regulations will be amended, and what the scope, interpretation, or enforcement of such laws\nor regulations may be. Any such developments could materially impact the operations of our operating subsidiaries, our ability to receive\nforeign investment, or our ability to maintain or pursue listings on U.S. exchanges. For further information, see “Risk Factors\n- Risks Related to Doing Business in the People’s Republic of China and Hong Kong.”\n\n \n\n**Any\nfuture action by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign\ninvestment in China-based issuers or expanding the categories of industries and companies whose foreign securities offerings are subject\nto government review could significantly limit or completely hinder our ability to offer or continue to offer securities to investors\nand cause the value of our securities to significantly decline or the securities to become worthless.**\n\n****\n\n \n\nRecent\nstatements by the Chinese government have indicated an intent to exert greater oversight and control over offerings that are conducted\noverseas and/or over foreign investments in China-based issuers. On July 6, 2021, the General Office of the Communist Party of China\nCentral Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities\nmarket and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental\nauthorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based\ncompanies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.\n\n \n\nAdditionally,\nwe could be subject to various government and regulatory interference in the regions in which we operate, which could result in a\nmaterial change in our operations and the value of the securities. Pursuant to Article 6 of the Revised Draft, companies holding\ndata of more than one million users must now apply for cybersecurity approval when seeking overseas listings because of the risk\nthat such data and personal information could be “affected, controlled, and maliciously exploited by foreign\ngovernments.” We are not currently subject to cybersecurity review with the CAC to conduct business operations in\nChina, given that: (i) we are not the “operator of critical information infrastructure” or “online platform\noperator;” (ii) we do not possess a large amount of personal information in our business operations; and (iii) as of the date\nof this Annual Report, we have not been involved in any investigations initiated by the CAC, nor have we received any inquiry,\nnotice, warning or sanction in such respect.\n\n \n\n24\n\n \n\n  \n\nOn February 17, 2023, with the approval of the State Council, the China\nSecurities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering\nand Listing by Domestic Companies (“Trial Measures”), and relevant supporting guidelines, which came into effect on March\n31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly,\nshall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following\ntheir submission of initial public offerings or listing applications. Subsequent securities offerings of an issuer in the same overseas\nmarket where it has previously offered, and listed securities must be filed with the CSRC within three business days after the offering\nis completed. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any major\ncontent in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings\nand fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also\nbe subject to administrative penalties, such as warnings and fines.\n\n \n\nAs of the date of this Annual Report, we have not received any formal inquiry, notice, warning, sanction or objection\nfrom the CSRC with respect to the continued listing of our Ordinary Shares and the primary production and business operations of the Company are located within China, and therefore it should be deemed to fall under\nthe principle of substance over form, qualifying it as a PRC domestic enterprise. Accordingly, under the Trial Measures, PRC domestic\nenterprises seeking overseas listings are required to file with the CSRC.\n\n \n\nHowever, there can be no assurance that the relevant PRC governmental authorities,\nincluding the CSRC any other PRC governmental authorities would not promulgate new rules or new interpretation of current rules. If we\ninadvertently fail to maintain full compliance with all new regulatory requirements outlined in these opinions, or if we are unable to\ncomply with any future implementing rules in a timely or complete manner, our ability to offer or continue to offer our Securities to\ninvestors could be significantly limited or completed hindered, which could cause the value of our Ordinary Shares to significantly decline\nin value or become worthless. We may also face sanctions by the CSRC, the Cyberspace Administration of China or other PRC regulatory agencies.\nThese regulatory agencies may impose fines or penalties, limit our operations in China, or take other actions that could have a material\nadverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our Securities.\n\n \n\nThe\npromulgation of new laws or regulations, or the new interpretation of existing laws and regulations, may restrict or otherwise unfavorably\nimpact our ability or way to conduct business and may require us to change certain aspects of our business to ensure compliance, which\ncould decrease demand for our services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates,\nor subject us to additional liabilities.\n\n \n\n**The\ndual-class structure of our ordinary shares has the effect of concentrating voting control with certain shareholders, which limits the\nability of other shareholders to influence corporate matters and could adversely affect the market price of Ordinary Shares.**\n\n \n\nWe\nhave a dual-class voting structure consisting of Class A ordinary shares and Class B ordinary shares. Under this structure, holders of\nClass A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to 20 votes per share,\nresulting in a concentration of voting power in the hands of holders of our Class B ordinary shares.\n\n \n\nAs\nof the date of this annual report, LMIL owns approximately 72.3% of our issued and outstanding ordinary shares, consisting of 100% of\nour outstanding Class B ordinary shares. As a result, we are a “controlled company” within the meaning of Nasdaq Listing\nRule 5615(c) because our Chief Executive Officer, Executive Director and Chairman of the Board of Directors, Mr. Huang Hongwu, and our\nChief Financial Officer and Executive Director, Ms. Wang Xuefei, through their respective ownership interests of 60% and 40% in LMIL,\nindirectly beneficially own 8,000,000 Class B ordinary shares, representing approximately 72.3% of our total issued and outstanding ordinary\nshares and approximately 98.1% of our total voting power.\n\n \n\nAs\nlong as Mr. Huang and Ms. Wang collectively maintain voting control of our company, they will be able to exercise substantial control\nover matters requiring shareholder approval, including the election and removal of directors, amendments to our Amended and Restated\nMemorandum and Articles of Association, mergers or consolidations, sales of all or substantially all of our assets, and other significant\ncorporate transactions. Such control may limit or delay actions that may be favored by our other shareholders and may result in conflicts\nof interest.\n\n \n\nIn\naddition, this concentration of ownership may discourage, delay, or prevent a change of control transaction that other shareholders may\nconsider favorable, including a transaction in which shareholders might otherwise receive a premium for their shares. The issuance of\nadditional Class B ordinary shares, or the conversion of Class B ordinary shares into Class A ordinary shares, could further concentrate\nvoting control or dilute the economic interests of holders of Class A ordinary shares. As a result, the market price of our Class A ordinary\nshares may be adversely affected.\n\n \n\n**The\ndual-class structure of our ordinary shares may adversely affect the trading market for our Ordinary Shares**.\n\n \n\nSeveral\nshareholder advisory firms have publicly expressed opposition to the use of multi-class share structures. As a result, the dual-class\nstructure of our ordinary shares may cause such firms to publish negative commentary regarding our corporate governance practices or\notherwise seek to influence us to change our capital structure. Any negative commentary or recommendations by shareholder advisory firms\nrelating to our corporate governance practices or capital structure could adversely affect investor perception and the market price of\nour Ordinary Shares.\n\n \n\n25\n\n \n\n \n\nBecause\nwe are a “controlled company” within the meaning of the Nasdaq Listing Rules, we may elect to rely on certain corporate governance\nexemptions that could adversely affect our public shareholders.\n\n \n\nOur\ncontrolling shareholders, Mr. Huang Hongwu and Ms. Wang Xuefei, collectively indirectly own more than a majority of the voting power\nof our outstanding ordinary shares. Under the Nasdaq Listing Rules, a company of which more than 50% of the voting power is held by an\nindividual, group, or another company is considered a “controlled company” and may elect to comply with certain reduced corporate\ngovernance requirements, including exemptions from the requirement that a majority of the board of directors be independent and that\nthe nominating and corporate governance and compensation committees consist entirely of independent directors.\n\n \n\nAlthough\nwe currently do not intend to rely on the “controlled company” exemptions under the Nasdaq Listing Rules, we may elect to\nrely on these exemptions in the future. If we were to do so, a majority of the members of our board of directors might not be independent,\nand our nominating and corporate governance and compensation committees might not consist entirely of independent directors. As a result,\nduring any period in which we rely on such exemptions, and during any applicable transition period thereafter, our public shareholders\nmay not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements\nof Nasdaq.\n\n \n\n**FINRA\nsales practice and regulatory requirements may limit investors’ ability to buy and sell our securities.**\n\n \n\nBroker-dealers\nthat recommend securities transactions to customers are subject to Regulation Best Interest (“Reg BI”) adopted by the U.S.\nSecurities and Exchange Commission, which requires broker-dealers to act in the best interest of retail customers when making investment\nrecommendations. Reg BI imposes a heightened standard of conduct compared to prior suitability requirements.\n\n \n\nFINRA\nsuitability rules do continue to apply to institutional investors and require that, in recommending an investment, a broker-dealer must\nhave a reasonable basis to believe that the investment is suitable for the customer based on the customer’s financial circumstances,\ninvestment objectives, and other relevant information. Prior to recommending securities to customers, broker-dealers must make reasonable\nefforts to obtain and evaluate such information and, in the case of retail customers, determine that the recommendation is in the customer’s\nbest interest.\n\n \n\nBoth\nReg BI and FINRA suitability requirements may make it more difficult for broker-dealers to recommend securities that are perceived to\nbe speculative or low-priced. As a result, broker-dealers may be less willing to recommend or make a market in our ordinary shares, which\ncould reduce trading volume and liquidity in our securities. Any such reduction in liquidity could adversely affect investors’\nability to buy or sell our ordinary shares in the public market at prevailing prices or at all.\n\n \n\n**Nasdaq\nmay apply additional and more stringent criteria for our continued listing.**\n\n \n\nNasdaq\nListing Rule 5101 provides Nasdaq with broad discretionary authority over the continued listing of our securities on Nasdaq. In general,\nNasdaq may use such discretion to deny initial listings, apply additional or more stringent criteria for the initial or continued listings\nof particular securities or suspend or delist particular securities based on any event, condition or circumstance that exists or occurs\nthat makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though\nthe securities meet all enumerated criteria for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to\ndeny initial or continued listings or to apply additional and more stringent criteria in certain instances, including but not limited\nto where: (i) the company engaged an auditor that has not been subject to inspection by PCAOB, an auditor that the PCAOB cannot inspect\nor an auditor that has not demonstrated sufficient resources, geographic reach or experience to adequately perform the company’s\naudit; (ii) the company planned a small public offering, that would result in insiders holding a large portion of the company’s\nlisted securities; and (iii) the company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S. shareholders,\noperations or members of the board of directors or management. If any such concerns should apply to us, we may be subject to additional\nand more stringent criteria of Nasdaq for our continued listing of our Ordinary Shares.\n\n \n\n**Our\nstock price may be volatile, and the value of our Ordinary Shares may decline.**\n\n \n\nWe\ncannot predict the prices at which our Ordinary Shares trade. The IPO price of our Ordinary Shares was determined through negotiations\nbetween us and the underwriters and did not necessarily reflect the value of our business and prospects following our IPO. The market\nprice of our Ordinary Shares may fluctuate substantially in response to various factors, some of which are beyond our control. These\nfluctuations could cause an investor to lose all or part of their investment in our Ordinary Shares or prevent investors from selling\ntheir Ordinary Shares at or above the price they paid for them.\n\n \n\n26\n\n \n\n  \n\nMoreover,\nthe stock market has recently experienced extreme price and volume fluctuations. Broad market and industry fluctuations, as well as general\neconomic, political, regulatory and market conditions, may also negatively impact the market price of our Ordinary Shares. Price volatility\nmay be greater if the public float and trading volume of our Ordinary Shares is low. Furthermore, in the past, companies that have experienced\nvolatility in the market price of their securities have been subject to securities class-action litigation following periods of volatility\nin the market price of their securities. We may be the target of this type of litigation in the future, which could result in substantial\ncosts, divert management’s attention and resources and harm our business, financial condition and results of operations.\n\n \n\n**Certain\nrecent initial public offerings of companies with smaller public floats have experienced extreme stock price and volume fluctuations\nseemingly unrelated to company performance. Such volatility, if it should occur to us, may make it difficult for investors\nto assess the rapidly changing value of our Ordinary Shares.**\n\n \n\nCertain\nrecent instances of extreme stock price and volume fluctuations have been seemingly unrelated to company performance following a number\nof recent initial public offerings, particularly among companies with relatively smaller public floats, and we expect that such instances\nmay continue and/or increase in the future. The trading price of our Ordinary Shares is likely to be volatile, and our Ordinary Shares\nmay be subject to rapid and substantial price volatility. Such volatility, including any stock run-ups, may be unrelated or disproportionate\nto our actual or expected operating performance and financial condition or prospects and may distort the market perception of our Ordinary\nShares, price and our Company’s financial performance and public image, negatively affect the long-term liquidity of our Ordinary\nShares, regardless of our actual or expected operating performance. If we encounter such volatility, it will likely make it difficult\nand confusing for prospective investors to assess the rapidly changing value of our Ordinary Shares and understand the value thereof.\n\n \n\nWe\nalso anticipate that our Ordinary Shares are likely to be more sporadically and thinly traded than that of larger, more established companies\nwith larger public floats. As a consequence of this lack of liquidity, the trade of relatively small quantities of Ordinary Shares by\nour stockholders may disproportionately influence the price of those shares in either direction. The price of our Ordinary Shares could,\nfor example, decline precipitously in the event that a large number of our Ordinary Shares are sold on the market without commensurate\ndemand as compared to a larger, more established issuer that could better absorb those sales without adverse impact on its stock price.\n\n \n\n**If\nsecurities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market\nprice and trading volume of our Ordinary Shares could decline.**\n\n \n\nThe\nmarket price and trading volume of our Ordinary Shares will be heavily influenced by the way analysts interpret our financial information\nand other disclosures. We do not have control over these analysts. If few securities analysts commence coverage of us, or if industry\nanalysts cease coverage of us, our Ordinary Share price could be negatively affected. If securities or industry analysts do not publish\nresearch or reports about our business, downgrade our Ordinary Shares, or publish negative reports about our business, our Ordinary Share\nprice would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand\nfor our Ordinary Shares could decrease, which might cause our Ordinary Share price to decline and could decrease the trading volume of\nour Ordinary Shares.\n\n \n\n**Because\nwe do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return\non your investment.**\n\n \n\nWe\ncurrently intend to retain all of our available funds and any future earnings to fund the development and growth of our business. As\na result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our\nOrdinary Shares as a source for any future dividend income. Our Board of Directors has complete discretion as to whether to distribute\ndividends, subject to certain requirements of Hong Kong law. Even if our Board of Directors decides to declare and pay dividends, the\ntiming, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow,\nour capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition,\ncontractual restrictions and other factors as determined by our Board of Directors. Accordingly, the return on an investment in our Ordinary\nShares will likely depend entirely upon any future price appreciation of our Ordinary Shares. There is no guarantee that our Ordinary\nShares will appreciate in value or even maintain the price at which an investor may have purchased our shares. An investor may not realize\na return on their investment in our Ordinary Shares and may even lose their entire investment.\n\n \n\n27\n\n \n\n \n\n**As\nan exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to\ncorporate governance matters that differ in material respects from Nasdaq Capital Market corporate governance listing standards.\nThese practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq Capital Market\ncorporate governance listing standards.**\n\n \n\nAs a foreign private issuer whose Ordinary Shares are listed on the Nasdaq\nCapital Market, we rely on Nasdaq Listing Rule 5615(a), which permits a foreign private issuer to follow the corporate governance practices\nof its home country, the Cayman Islands, in lieu of certain Nasdaq corporate governance requirements. Accordingly, our corporate governance\npractices may differ in material respects from those applicable to U.S. domestic issuers listed on the Nasdaq Capital Market.\n\n \n\nWe intend to follow home country practice in lieu of the Nasdaq requirements with respect to certain corporate governance\nstandards that may afford less protection to investors, including, but not limited to:\n\n \n\n●\nhave a majority of the board of directors consist of independent directors (Nasdaq Rule 5605(b)(1));\n\n \n \n\n●\nrequire non-management directors to meet on a regular basis without management present (Nasdaq Rule 5605(b)(2));\n\n \n \n\n●\nhave an independent compensation committee (Nasdaq Rule 5605(d));\n\n \n \n\n●\nhave an independent nominating committee (Nasdaq Rule 5605(e)); and\n\n \n \n\n●\nseek shareholder approval for the implementation of certain equity compensation plans and dilutive issuances of Ordinary Shares, such as transactions, other than a public offering, involving the sale of 20% or more of our Ordinary Shares for less than the greater of the book or market value as required by Nasdaq Rule 5635.\n\n \n\nOur audit committee is, however, required to comply with the provisions\nof Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on the Nasdaq Capital Market. Therefore, we have a fully\nindependent audit committee in accordance with Rule 10A-3 of the Exchange Act. However, because we are a foreign private issuer, our audit\ncommittee is not subject to certain additional Nasdaq Capital Market corporate governance requirements applicable to listed U.S. companies,\nincluding the requirements to have a minimum of three members and to affirmatively determine that all members are “independent,”\nunder the more stringent standards applicable to U.S. domestic issuers, using criteria different from those applicable to us as a foreign\nprivate issuer.\n\n \n\nIn addition, because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions\nof U.S. securities laws and regulations that are applicable to U.S. domestic issuers. These exemptions include, but are not limited to,\nthe following:\n\n \n\n●\nthe\nrules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;\n\n \n \n\n●\nthe\nsections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered\nunder the Exchange Act;\n\n \n \n\n●\nthe\nsections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability\nfor insiders who profit from trades made in a short period of time; and\n\n \n \n\n●\nthe\nselective disclosure rules by issuers of material non-public information under Regulation FD.\n\n \n\nWe\nare required to file this Annual Report and future annual reports on Form 20-F within four months of the end of each fiscal year. In\naddition, we intend to publish our financial results on a semi-annual basis through press releases distributed pursuant to the rules\nand regulations of the Nasdaq Capital Market. Press releases relating to financial results and material events will also be furnished\nto the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely\ncompared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections\nor information that would be made available to you if you were investing in a U.S. domestic issuer.\n\n \n\n28\n\n \n\n \n\n**We\nmay lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.**\n\n \n\nAs\ndiscussed above, we are a foreign private issuer and, therefore, we are not required to comply with all of the periodic disclosure and\ncurrent reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last Business\nDay of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect\nto us on June 30, 2026 In the future, we would lose our foreign private issuer status if: (i) more than 50% of our outstanding voting\nsecurities are owned by U.S. residents; and (ii) a majority of our directors or executive officers are U.S. citizens or residents, or\nwe fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we were to lose our foreign\nprivate issuer status, we would be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer\nforms, which are more detailed and extensive than the forms available to a foreign private issuer. We would also have to comply with\nU.S. federal proxy requirements, and our officers, directors and 10% shareholders would become subject to the short-swing profit disclosure\nand recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain\ncorporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer,\nwe would incur significant additional legal, accounting and other expenses that we do not incur as a foreign private issuer.\n\n \n\n**We incur significantly increased costs and devote substantial management time as a result of the listing of our Ordinary Shares on\nthe Nasdaq Capital Market.**\n\n \n\nAs a public company, we are required to comply with the legal, accounting and other expenses as a public reporting\ncompany, particularly after we cease to qualify as an emerging growth company. For example, we are required to comply with the additional\nrequirements of the rules and regulations of the SEC and Nasdaq rules, including applicable corporate governance practices. Compliance\nwith these requirements increases our legal and financial compliance costs and makes some activities more time-consuming and costly. In\naddition, our management and other personnel need to divert attention from operational and other business matters to devote substantial\ntime to these public company requirements.\n\n \n\nIn addition, changing laws, regulations and standards relating to corporate\ngovernance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making\nsome activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to\ntheir lack of specificity, and, as a result, their application in practice may evolve over time as new guidelines are provided by regulatory\nand governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing\nrevisions to disclosure and governance practices. We invest resources to comply with evolving laws, regulations and standards, and this\ninvestment results in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating\nactivities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended\nby regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate\nlegal proceedings against us, and our business may be adversely affected.\n\n \n\n**You\nmay have more difficulties protecting your interests than you would as a shareholder of a U.S. corporation.**\n\n \n\nWe\nare an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed\nby our Articles of Association, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action\nagainst our directors and us, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law\nare to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from\ncomparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are\nof persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties\nof our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some\njurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States.\nSome U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.\nIn addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the\nUnited States.\n\n \n\n29\n\n \n\n \n\nShareholders\nof Cayman Islands exempted companies like us have no general rights under Cayman Islands law to obtain copies of the register of\nmembers or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles\nof association. A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any\ncountry or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. There is no\nrequirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names\nand addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However,\nan exempted company shall make available at its registered office, in electronic form or any other medium, such register of members,\nincluding any branch register of member, as may be required of it upon service of an order or notice by the Tax Information\nAuthority pursuant to the Tax Information Authority Act (2021 Revision) of the Cayman Islands. This may make it more difficult for\nyou to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other\nshareholders in connection with a proxy contest.\n\n \n\nCertain\ncorporate governance practices in the Cayman Islands, which is our home country, may differ significantly from requirements for companies\nincorporated in other jurisdictions such as U.S. states. Currently, we plan to rely on home country practice with respect to any corporate\ngovernance matter. Accordingly, our shareholders may be afforded less protection than they otherwise would under rules and regulations\napplicable to U.S. domestic issuers.\n\n \n\nAs\na result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our\nmanagement, members of the Board of Directors or our Controlling Shareholders than they would as shareholders of a company incorporated in\na U.S. state.\n\n \n\n**You\nmay experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China or Hong Kong\nagainst us or our management named in this Annual Report based on foreign laws.**\n\n \n\nWe\nare an exempted company incorporated under the laws of the Cayman Islands, we conduct a substantial amount of operations in China, and\na substantial portion of our assets are located in China and Hong Kong. In addition, certain senior executive officers reside within\nChina and/or Hong Kong for a significant portion of the time and are either PRC or Hong Kong nationals. As a result, it may be difficult\nfor our shareholders to effect service of process upon us or those persons inside China or Hong Kong. In addition, neither China nor\nHong Kong has treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many\nother countries and regions. Therefore, recognition and enforcement in China or Hong Kong of judgments of a court in any of these non-PRC\nor Hong Kong jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.\n\n \n\nShareholder\nclaims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue\nas a matter of law or practicality in China or Hong Kong. For example, in China, there are significant legal and other obstacles to obtaining\ninformation needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although\nthe local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another\ncountry or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory\nauthorities in the United States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article\n177 of the PRC Securities Law which took effect in March 2020, no overseas securities regulator is allowed to directly conduct investigation\nor evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC or Hong Kong\nsecurities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities\nbusiness activities to overseas parties.\n\n \n\n30\n\n \n\n \n\n**Certain\njudgments obtained against us by our shareholders may not be enforceable.**\n\n \n\nWe\nare a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all\nof our current directors and officers are nationals and residents of countries other than the United States and substantially all of\nthe assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service\nof process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including\njudgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.\nEven if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment\nagainst our assets or the assets of our directors and officers. As a result of all of the above, our shareholders may have more difficulties\nin protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of\na corporation incorporated in a jurisdiction in the United States.\n\n** **\n\n**Our\nOrdinary Shares may be subject to rapid and substantial price volatility unrelated to our performance, which could result in substantial\nlosses to investors.**\n\n \n\nOur Ordinary Shares may be subject to rapid and substantial price and trading\nvolume volatility and their trading price could fluctuate widely due to factors beyond our control. We have a relatively small public\nfloat and the concentrated ownership of our Ordinary Shares among our executive officers and directors. As a result of our small public\nfloat, our Ordinary Shares may be less liquid and have greater stock price volatility than the shares of companies with broader public\nownership. This may also happen because of the broad market and industry factors, like the performance and fluctuation of the market prices\nof other companies with business operations located mainly in the PRC or Hong Kong that may have listed their securities in the United\nStates. In addition to market and industry factors, the price and trading volume for our Ordinary Shares may be highly volatile for factors\nspecific to our Operating Subsidiaries’ operations, including the following:\n\n \n\n●\nfluctuations\nin our Operating Subsidiaries’ revenues, earnings, and cash flow;\n\n \n \n\n●\nchanges\nin financial estimates by securities analysts;\n\n \n \n\n●\nadditions\nor departures of key personnel;\n\n \n \n\n●\nrelease or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and\n\n \n \n\n●\npotential\nlitigation or regulatory investigations.\n\n \n\nAny\nof these factors may result in significant and sudden changes in the volume and price at which our shares will trade.\n\n \n\nIn addition, the stock price of a number of companies, particularly among\ncompanies with relatively smaller public floats, has experienced extreme price and volume fluctuations that have often been unrelated\nor disproportionate to the operating performance of these companies. Such rapid and substantial price volatility may be unrelated to our\nactual or expected operating performance and financial condition or prospects, making it difficult for investors to assess the rapidly\nchanging value of our stock. This volatility may prevent an investor from being able to sell their securities at or above the price paid\nfor the securities\n\n \n\nFurthermore,\nin the past, shareholders of public companies have often brought securities class action suits against those companies following periods\nof instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount\nof our management’s attention and other resources from our business and operations and require us to incur significant expenses\nto defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our\nreputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be\nrequired to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.\n\n \n\n31\n\n \n\n \n\n**If\nwe are classified as a passive foreign investment company, United States taxpayers who own our securities may have adverse United States\nfederal income tax consequences.**\n\n \n\nWe\nare a non-U.S. corporation and, as such, we will be classified as a passive foreign investment company, which is known as a PFIC, for\nany taxable year if, for such year, either\n\n \n\n●\nAt\nleast 75% of our gross income for the year is passive income; or\n\n \n \n\n●\nThe\naverage percentage of our assets (determined at the end of each quarter) during the taxable year that produce passive income or that\nare held for the production of passive income is at least 50%.\n\n \n\nPassive\nincome generally includes dividends, interest, rents, royalties (other than rents or royalties derived from the active conduct of a trade\nor business) and gains from the disposition of passive assets.\n\n \n\nIf\nwe are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who\nholds our securities, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional\nreporting requirements.\n\n \n\nIt\nis possible that for our current taxable year or for any subsequent year more than 50% of our assets may be assets which produce passive\nincome. We will make this determination following the end of any particular tax year. We treat our affiliated entities as being owned\nby us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities\nbut also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results\nin our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its\npro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.\n\n \n\n**We\nare an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.**\n\n \n\nWe\nare an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various\nrequirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required\nto comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth\ncompany. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain\ninformation they may deem important.\n\n \n\nThe\nJOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards\nuntil such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words,\nan “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise\napply to private companies. We have elected to take advantage of the extended transition period, although we have early adopted certain\nnew and revised accounting standards based on transition guidance permitted under such standards. As a result of this election, our future\nfinancial statements may not be comparable to other public companies that comply with the public company effective dates for these new\nor revised accounting standards.\n\n \n\n**Our\nExecutive Directors, together, have substantial influence over the Company. Their interests may not be aligned with the interests of\nour other shareholders, and they could prevent or cause a change of control or other transactions.**\n\n \n\nLMIL, our controlling shareholder,\nis beneficially owned by Mr. Huang Hongwu (60%), our Chairman, President, Executive Director and Chief Executive Officer, and Ms. Wang\nXuefei (40%), our CFO, Treasurer and Executive Director. Their combined direct ownership of 100.00% of LMIL results in their controlling\napproximately 72.3% of our issued and outstanding Ordinary Shares and approximately 98.1% of the total voting power of our outstanding\nshares.\n\n \n\nAccordingly, as our controlling\nshareholders, they could control the outcome of any corporate transaction or other matter submitted to the shareholders for approval,\nincluding mergers, consolidations, the election of directors and other significant corporate actions, including the power to prevent or\ncause a change in control. The interests of our largest shareholders may differ from the interests of our other shareholders. Without\nthe consent of our controlling shareholders, we may be prevented from entering into transactions that could be beneficial to us or our\nother shareholders. The concentration in the ownership of our shares may cause a material decline in the value of our shares. For more\ninformation regarding our principal shareholders and their affiliated entities, see Item 7. “Major Shareholders and Related Party\nTransactions.”\n\n \n\n32\n\n \n\n \n\n**The\nsale or availability for sale of substantial amounts of our Ordinary Shares could adversely affect their market price.**\n\n \n\nAs\nof the date of this Annual Report, we have 11,062,500 Ordinary Shares issued and outstanding, a portion of which are held by public shareholders and may be sold in the public market, subject to applicable securities\nlaws.\nThe remaining 8,000,000, which are owned by our controlling shareholder, may also be sold in the public market in the future, subject\nto the restrictions in Rule 144 under the Securities Act. Sales of substantial amounts of our Ordinary Shares in the public\nmarket or the perception that these sales could occur, could adversely affect the market price of our Ordinary Shares, and could materially\nimpair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities\nheld by our controlling shareholder or any other shareholder or the availability of these securities for future sale will have on the\nmarket price of our Ordinary Shares.\n\n \n\n**Short\nselling may drive down the market price of our Ordinary Shares.**\n\n \n\nShort\nselling is the practice of selling shares that the seller does not own but rather has borrowed from a third party with the intention\nof buying identical shares back at a later date to return to the lender. The short seller hopes to profit from a decline in the value\nof the shares between the sale of the borrowed shares and the purchase of the replacement shares, as the short seller expects to pay\nless in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the shares to decline,\nmany short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its\nbusiness prospects in order to create negative market momentum and generate profits for themselves after selling the shares short. These\nshort attacks have, in the past, led to the selling of shares in the market. If we were to become the subject of any unfavorable publicity,\nwhether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such\nallegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the\nmanner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of\ncommercial confidentiality.\n\n \n\n**There\nare uncertainties with respect to indirect transfers of assets (including equity interests) of our Operating Subsidiaries in the PRC**.\n\n \n\nThe\nAnnouncement of the State Administration of Taxation on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises\n(“Announcement No. 37”) and the Announcement on Certain Issues Concerning Enterprise Income Tax for Indirect Transfer of\nAssets by Non-Resident Enterprises (“Circular 7”) issued by The State Administration of Taxation (“SAT”), provide\ncomprehensive guidelines in relation to, and also heighten the PRC tax authorities scrutiny over, indirect transfers by a non-resident\nenterprise of assets (including equity interests) of a PRC resident enterprise (“PRC Taxable Assets”).\n\n \n\n33\n\n \n\n \n\nAnnouncement\nNo. 37 and Circular 7 specify that the PRC tax authorities are entitled to reclassify the nature of an indirect transfer of PRC Taxable\nAssets when a non-resident enterprise transfers PRC Taxable Assets indirectly by disposing of equity interests in an overseas holding\ncompany directly or indirectly holding such PRC Taxable Assets by disregarding the existence of such overseas holding company and considering\nthe transaction to be a direct transfer of PRC Taxable Assets if such transfer is deemed to have been conducted for the purposes of avoiding\nPRC enterprise income taxes and without any other reasonable commercial purposes. It is unclear whether any exemptions specified under\nCircular 7 will be applicable to the transfer of our Shares on a public market by our non-resident enterprise Shareholders or to any\nfuture acquisition by us outside of the PRC involving PRC Taxable Assets. Therefore, the PRC tax authorities may deem any transfer of\nour Shares by our Shareholders that are non-resident enterprises, or any future acquisition by us outside of the PRC involving PRC Taxable\nAssets to be subject to the foregoing regulations, which may subject our Shareholders or us to additional PRC tax reporting obligations\nor tax liabilities.\n\n \n\n**We\nmay be classified as a PRC resident enterprise for PRC enterprise income tax purposes and be subject to PRC taxation on our worldwide\nincome, which could result in unfavorable tax consequences to us and our shareholders.**\n\n \n\nUnder\nthe EIT Law, if an enterprise is established outside of the PRC with a “de facto management body” located within the PRC,\nsuch enterprise will be considered a PRC tax resident enterprise for tax purposes. Under the regulation on the Implementation of the\nEIT Rules, the term “de facto management body” is defined as a body that exercises full and substantial control over and\noverall management of the business, production, personnel, accounts, and properties of an enterprise, so we may be considered a PRC resident\nenterprise by the PRC tax authorities and will normally be subject to the enterprise income tax on our worldwide income at the rate of\n25%.\n\n \n\nIt\nis unclear how the PRC tax authorities will determine whether an offshore entity is a non-PRC resident enterprise. There is no assurance\nthat PRC tax authorities will not consider us as a “resident enterprise.” If the PRC tax authorities subsequently determine\nthat we or our offshore holding companies are deemed to be or should be classified as “resident enterprise(s),” such entity\nor entities may be subject to enterprise income tax on their worldwide income at a rate of 25%, which could have a material and adverse\nimpact on our financial condition and results of operations.\n\n \n\n**The\nstatement by the SEC regarding proposed rule changes submitted by Nasdaq and an act passed by the U.S. Senate and the U.S. House of Representatives\nreflect an ongoing trend toward for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties\nto future offerings, business operations, share price and reputation.**\n\n \n\nU.S.\npublic companies that have substantially all of their operations in China (including in Hong Kong) have been the subject of intense scrutiny,\ncriticism, and negative publicity by investors, financial commentators, and regulatory agencies, such as the SEC. Much of the scrutiny,\ncriticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls\nover financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of\nfraud.\n\n \n\nOn\nDecember 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their\noversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman\nJay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the\nrisks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating\npast SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in\nChina and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other\nU.S. regulatory actions, including in instances of fraud, in emerging markets generally.\n\n \n\n34\n\n \n\n  \n\nOn\nMay 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCA”) requiring a foreign company\nto certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company\nuses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive\nyears, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives\napproved the Holding Foreign Companies Accountable Act.\n\n \n\nOn\nMay 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating\nin a “Restrictive Market,” (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and\nonly permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing and (iii) apply additional\nand more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.\n\n \n\nAs more stringent criteria may be imposed, including the HFCA, which became\nlaw in December 2020, our Ordinary Shares could ultimately be subject to trading restrictions or delisting if our auditor cannot be fully\ninspected. The PCAOB issued a Determination Report on December 16, 2021 (the “Determination Report”), which found that the\nPCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s\nRepublic of China because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative\nRegion and dependency of the PRC, and identified our auditor among the firms subject to the Hong Kong determination.\n\n \n\nOn\nDecember 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting\nfirms headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 Determination Report to the contrary. However, there can be no assurance that such access will continue without interruption in the future.\n\n \n\nThe HFCAA prohibits foreign companies from listing their securities on\nU.S. exchanges if the company’s auditor has been unavailable for PCAOB inspection or investigation for three consecutive years and,\nas a result, an exchange may determine to delist our Ordinary Shares. Pursuant to subsequent amendments to the HFCAA, the time period\nfor the delisting of foreign companies under the HFCAA to two consecutive years instead of three years. If we are unable to maintain compliance\nwith these inspection requirements, it will accelerate the point at which our Ordinary Shares may be prohibited from trading or delisted\nfrom an exchange.\n\n \n\nAs\na result of this scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply\ndecreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder\nlawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear\nwhat effect this sector-wide scrutiny, criticism and negative publicity will have on us, future offerings, business, and our Ordinary\nShare price. Any similar allegations or investigations involving us, regardless of merit, would require significant management\nattention and resources and could materially adversely affect our business and the market price of our Ordinary Shares."}