{"url_path":"/sec/ifbd/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F/A","doc_date":"2026-06-12","source_url":"https://www.sec.gov/Archives/edgar/data/1815566/0001731122-26-000847-index.html","accession_number":"0001731122-26-000847","cik":"0001815566","ticker":"IFBD","issuer_name":"Infobird Co., Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1815566/0001731122-26-000847-index.html","primary_entity_key":"0001815566","primary_entity_name":"Infobird Co., Ltd"},"word_count":34118,"has_tables":true,"body_markdown":"**ITEM 3. KEY INFORMATION**\n\n \n\nSee “Introduction” and “Forward-Looking\nStatements and Risk Factors Summary” above.\n\n \n\n**A. [Reserved]**\n\n \n\n**B. Capitalization and Indebtedness**\n\n \n\nNot applicable.\n\n \n\n**C. Reasons for the Offer and Use of Proceeds**\n\n \n\nNot applicable.\n\n \n\n**D. Risk Factors**\n\n \n\n**Risks Related to Our Business and Industry**\n\n \n\n**We generated a significant\nportion of our revenues primarily from a few major customers, and loss of business from such customers could have reduced our revenues\nand significantly harmed our business.**\n\n \n\nAfter the Sale in August 2023,\nwe generated a significant portion of our revenues primarily from a few major customers since August 2023, and the loss of business from\nsuch customers could have reduced our revenues and significantly harmed our business. One or a few customers have in the past, represented\na substantial portion of our total revenues in any one year or over a period of several years.\n\n \n\nFor the year ended December 31,\n2025, two customers accounted for 80.7% and 11.3% of the Company’s total revenues, respectively. For the year ended December 31,\n2024, two customers accounted for 71.8% and 26.0% of the Company’s total revenues, respectively. For the year ended December 31,\n2023, two customers accounted for approximately 64.3% and 35.7% of our total revenues, respectively. As of December 31, 2025, two\ncustomers accounted for 86.0% and 11.4% of the total balance of accounts receivable, respectively. As of December 31, 2024, two customers\naccounted for 52.3% and 46.8% of the total balance of accounts receivable, respectively. As of December 31, 2023, one customer accounted\nfor 100% of the total balance of our accounts receivable.\n\n \n\nOur ability to maintain close\nrelationships with major customers is essential to the growth and profitability of our business. However, the volume of work performed\nfor a specific customer is likely to vary from year to year, in particular since we are generally not our customers’ exclusive technology\nservices provider and we do not have long-term commitments from any of our customers to purchase our services. In addition, our reliance\non any individual customer for a significant portion of our revenues may give that customer a certain degree of pricing leverage against\nus when negotiating contracts and terms of service. In addition, a number of factors other than our performance could cause the loss of\nor reduction in business or revenues from a customer, and these factors are not predictable. These factors may include organization restructuring,\npricing pressure, changes to its technology strategy, switching to another services provider or returning work in-house. The loss of any\nof our major customers could adversely affect our financial condition and results of operations.\n\n \n\n1\n\n \n\n \n\n**Any failure to offer high-quality\ncustomer support may materially and adversely affect our relationships with our customers.**\n\n \n\nOur ability to retain existing\ncustomers and attract new customers depends on our ability to maintain a consistently high level of customer service and technical support.\nOur customers depend on our service support team to assist them in utilizing our services effectively and to help them to resolve issues\nquickly and to provide ongoing support. If we are unable to hire and train sufficient support resources or are otherwise unsuccessful\nin assisting our customers effectively, it may materially and adversely affect our ability to retain existing customers and could prevent\nprospective customers from adopting to our services. We may be unable to respond quickly enough to accommodate short-term increases in\ndemand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes\nin the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could increase\nour costs and adversely affect our business, results of operations and financial condition. Our sales are highly dependent on our business\nreputation and on positive recommendations from customers. Any failure to maintain high-quality customer support, or a market perception\nthat we do not maintain high-quality customer support, may materially and adversely affect our reputation, business, results of operations\nand financial condition.\n\n \n\n**Incorrect or improper implementation\nor use of our services result in customer dissatisfaction and negatively affect our business, results of operations, financial condition,\nand growth prospects.**\n\n \n\n We believe our future success\nwill depend on our ability to increase sales of our services. We must often assist our customers in achieving successful implementations\nof our services, which we do through our professional consulting and technical support services. If our customers are unable to implement\nour services successfully, or unable to do so in a timely manner, customer perceptions of our services may be harmed, our reputation and\nbrand may suffer, and customers may choose to cease usage of our services or not to expand their use of our services. Our customers may\nneed training in the proper use of and the variety of benefits that can be derived from our services to maximize their benefits. If our\nservices are not effectively implemented or used correctly or as intended, or if we fail to adequately train customers on how to efficiently\nand effectively use our services, our customers may not be able to achieve satisfactory outcomes. This could result in negative publicity\nand legal claims against us, which may cause us to generate fewer sales to new customers and reductions in renewals or expansions of the\nuse of our services with existing customers, any of which would harm our business and results of operations.\n\n \n\n**Interruptions or performance\nproblems associated with our technology and infrastructure may materially and adversely affect our business, results of operations, and\nfinancial condition.**\n\n \n\nOur continued growth depends\nin part on the ability of our existing customers and new customers to access our SaaS services, at any time and within an acceptable amount\nof time. We may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including\ninfrastructure changes, human or software errors or capacity constraints. In some instances, we may not be able to identify the cause\nor causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve\nour performance as our SaaS services become more complex. If our services are unavailable or if our customers are unable to access features\nof our services within a reasonable amount of time or at all, our business, results of operations, and financial condition may be materially\nand adversely affected would be negatively affected.\n\n \n\nAfter the Acquisitions, we currently\nprovide our end-to-end digital advertising solutions via maternity vertical channels including Kaiwang (Hangzhou) Technology Co., Ltd.\n(“Qinbaobao”), Beijing Zhongming Century Technology Co., Ltd. Jiangsu Branch (“BabyTree”) and Ji’an Shengcheng\nMedia Co., Ltd. (“Mama Network”). We expect that in the future we may experience interruptions, delays and outages in service\nand availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting\ndisruptions and capacity constraints. Capacity constraints could be due to a number of potential causes including technical failures,\nnatural disasters, fraud or security attacks. In addition, if our security is compromised, our services are unavailable or our customers\nare unable to use our services within a reasonable amount of time or at all, then our business, results of operations and financial condition\nmay be materially and adversely affected. In some instances, we expect that we may not be able to identify the cause or causes of these\nperformance problems within a period of time acceptable to our customers. It may become increasingly difficult to maintain and improve\nour service performance, in particular during peak usage times, as the features of our services become more complex and the usage of our\nservices increases. Any of the above circumstances or events may harm our reputation, cause customers to stop using our services, or impair\nour ability to increase revenue from existing customers, impair our ability to grow our customer base, our business, results of operations,\nand financial condition may be materially and adversely affected.\n\n \n\n2\n\n \n\n \n\n**We may be forced to reduce\nthe prices of our services due to increased competition and reduced bargaining power with our customers, which could lead to reduced revenues\nand profitability.**\n\n \n\nThe customer engagement and the\ndigital advertising industry in China are developing rapidly and related technology trends are constantly evolving. This results in the\nfrequent introduction of new services and significant price competition from our competitors. We may be unable to offset the effect of\ndeclining average sales prices through increased sales volumes and or reductions in our costs. Furthermore, we may be forced to reduce\nthe prices of our services in response to offerings made by our competitors. Finally, we may not have the same level of bargaining power\nwe have enjoyed in the past when it comes to negotiating for the prices of our services, all of which may lead to reduced revenues and\nprofitability.\n\n \n\n**We primarily rely on a\nlimited number of vendors, and the loss of any such vendor could harm our business.**\n\n \n\nFor the year ended December 31,\n2025, three vendors accounted for 35.3%, 27.7% and 10.2% of the Company’s total purchases, respectively. For the year ended December\n31, 2024, three vendors accounted for 42.4%, 29.7% and 15.1% of our total purchases, respectively. For the years ended December 31, 2023\nand 2022, none of vendor accounted for more than 10.0% of our total purchases. As of December 31, 2025, three vendors accounted for 43.1%,\n22.2% and 17.3% of the total balance of accounts payable, respectively. As of December 31, 2024, two vendors accounted for 36.9% and 30.0%\nof the total balance of our accounts payable, respectively. As of December 31, 2023, none of vendor accounted for more than 10.0% of the\ntotal balance of accounts payable. For 2025, our vendors were mainly media and platform suppliers for digital advertising and marketing\ncampaign services, and for 2024 and 2023, our vendors were mainly system and information software suppliers for our business integration\nsolution business. We enter into agreements with vendors in the ordinary course of our business. Such agreements generally have initial\nterms ranging from one to two years. Any difficulty in replacing such vendors could negatively affect our performance. If we are prevented\nfrom or delayed in obtaining services, products, or components for products, due to political, civil, labor or other factors beyond our\ncontrol that affect our vendors, including natural disasters or pandemics, our operations may be substantially disrupted, potentially\nfor a significant period of time. Such delays may significantly reduce our revenues and profitability and harm our business while alternative\nsources of supply are secured.\n\n \n\n**We operate in highly competitive\nmarkets and the size and resources of many of our competitors may allow them to compete more effectively than we can, preventing us from\nachieving profitability.**\n\n \n\nThe markets we compete in are\nhighly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow our\nmarket share, any of which could substantially harm our business and results of operations. We compete for customers primarily on the\nbasis of our brand name, price and the range of products and services that we offer. Across our business, we face competitors who are\nconstantly seeking ideas which will appeal to customers and introducing new products that compete with our products. Many of our competitors\nhave significant competitive advantages, including longer operating histories, larger and broader customer bases, less-costly production,\nmore established relationships with a broader set of suppliers and customers, greater brand recognition and greater financial, research\nand development, marketing, distribution and other resources than we do. We cannot assure that we will be able to successfully compete\nagainst new or existing competitors. If we fail to maintain our reputation and competitiveness, customers demand for our products may\ndecline.\n\n \n\nIn addition to existing competitors,\nnew participants with a popular product or service idea could gain access to customers and become a significant source of competition\nin a short period of time. These existing and new competitors may be able to respond more rapidly than us to changes in customer preferences.\nOur competitors’ products may achieve greater market acceptance than our products and potentially reduce demand for our products,\nlower our revenues and lower our profitability.\n\n \n\n**If we fail to increase our brand recognition,\nwe may face difficulty in obtaining new customers.**\n\n \n\nAfter the Acquisitions, our brand\nis new in the PRC digital advertising industry, we believe that enhancing our brand recognition in a cost-effective manner outside of\nthat market is critical to achieving widespread acceptance of our current and future products and services and is an important element\nin our effort to increase our customer base. Successful promotion of our brand will depend largely on our ability to maintain a sizeable\nand active customer base, our marketing efforts and ability to provide reliable and useful products and services at competitive prices.\nBrand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we\nwill incur in building our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an\nunsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to\nthe extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial\ncondition, would be materially and adversely affected.\n\n \n\n3\n\n \n\n \n\n**Failure to adhere to regulations\nthat govern our customers’ businesses could result in breaches of contracts with our customers. Failure to adhere to the regulations\nthat govern our business could result in our being unable to effectively perform our services.**\n\n \n\nOur customers’ business\noperations are subject to certain rules and regulations in China or elsewhere. Our customers may contractually require that we perform\nour services in a manner that would enable them to comply with such rules and regulations. Failure to perform our services in such manner\ncould result in breaches of contract with our customers and, in some limited circumstances, civil fines and criminal penalties for us.\n\n \n\nAs of December 31, 2025 and 2024,\nwe have not been subject to any material penalties from the relevant government authorities for failure to obtain any license for our\nbusiness operations in the\n\n \n\nFurthermore, the Standing Committee\nof the National People’s Congress passed the Personal Information Protection Law of the PRC, which became effective from November\n1, 2021, and requires general network operators to obtain a personal information protection certification issued by recognized institutions\nin accordance with the CAC regulation before such information can be transferred out of China.\n\n \n\nGiven that the above-mentioned\nlaws, regulations and policies were recently promulgated or issued, or have not yet been formally promulgated or taken effect (as applicable),\ntheir enactment, interpretation, application and enforcement are subject to substantial uncertainties. While a number of key regulations\nhave now been formally promulgated and taken effect—including the Network Data Security Administration Regulations (effective January\n1, 2025), the Measures for the Administration of Compliance Audits of Personal Information Protection (effective May 1, 2025), and the\nCybersecurity Law (2025 Amendment) (effective January 1, 2026)—certain aspects of their interpretation, application and enforcement\nremain subject to uncertainties.As the definitions for terms such as network platform operator and national security are broad, the government\nwill likely retain significant discretion as to the interpretation and enforcement of the Cybersecurity Review Measures and any implementation\nrules, and we may be subject to the relevant rules. We cannot preclude the possibility that the Cybersecurity Review Measures will subject\nus to the cybersecurity review by the CAC in relation to our operations or require us to adjust our business practices, in which case\nour business, financial condition and prospects may be materially and negatively affected. In particular, under the Network Data Security\nAdministration Regulations, network data processing activities that affect or may affect national security are expressly subject to cybersecurity\nreview, and data processors handling personal information of over ten million users are subject to enhanced compliance obligations, including\nthe establishment of a dedicated data security management body. We have incurred, and will continue to incur, significant expenses in\nan effort to comply with cybersecurity, privacy, data protection and information security related laws, regulations, standards and protocols,\nespecially as a result of such newly promulgated laws and regulations. As of the date of this annual report, our PRC subsidiary, the VIE\nor its subsidiaries have not been involved in any investigations, nor have they received any inquiry, notice, warning, or sanction by\nthe CAC or related PRC governmental authorities as a result of violation of any currently effective PRC laws or regulations with respect\nto personal information or data requirements issued by the CAC up to date. However, as uncertainties may still arise regarding the interpretation\nand implementation of these laws and regulations, despite our efforts to comply with applicable laws, regulations and policies relating\nto cybersecurity, privacy, data protection and information security, we cannot assure you that our practices, offerings, services will\nmeet all of the requirements imposed on us by such laws, regulations or policies. Any failure or perceived failure to comply with applicable\nlaws, regulations or policies may result in inquiries or other proceedings being instituted against, or other lawsuits, decisions or sanctions\nbeing imposed on us by governmental authorities, users, consumers or other parties, including but not limited to warnings, fines, directions\nfor rectifications, suspension of the related business and termination of our applications, as well as in negative publicity on us and\ndamage to our reputation, any of which could have a material adverse effect on our business, results of operations, financial condition\nand prospects. If we become subject to cybersecurity inspection and/or review by the CAC or other PRC authorities or are required by them\nto take any specific actions, it could cause suspension or termination of the future offering of our securities, disruptions to our operations,\nresult in negative publicity regarding our company, and divert our managerial and financial resources. We may also be subject to significant\nfines or other penalties, which could materially and adversely affect our business, financial condition and results of operations. Furthermore,\nin the event that our PRC subsidiary, the VIE or its subsidiaries become operators of critical information infrastructure in the future,\nthey may be subject to the above-described regulation.\n\n \n\n4\n\n \n\n \n\n**We face intense competition\nfrom onshore and offshore customer engagement service providers, and, if we are unable to compete effectively, we may lose customers and\nour revenues may decline.**\n\n \n\nThe markets for customer engagement\nservices and end-to-end digital advertising solutions are highly competitive and we expect competition to persist and intensify. We believe\nthat the principal competitive factors in our markets are industry expertise, breadth and depth of service offerings, quality of the services\noffered, reputation and track record, marketing and selling skills, scalability of technology infrastructure and price. In the customer\nengagement market, customers tend to engage multiple service providers instead of using an exclusive service provider, which could reduce\nour revenues to the extent that customers obtain similar or substituted services from other competing providers. Our ability to compete\nalso depends in part on a number of factors beyond our control, including the ability of our competitors to recruit, train, develop and\nretain highly skilled employees, in particular research and development employees, the price at which our competitors offer comparable\nservices and our competitors’ responsiveness to customer needs and market trends. Therefore, we cannot assure you that we will be\nable to retain our customers while competing against such competitors. Increased competition, our inability to compete successfully against\ncompetitors, pricing pressures or loss of market share may materially and adversely affect our business, financial condition and results\nof operations.\n\n \n\n**We have engaged in transactions\nwith related parties, and such transactions present possible conflicts of interest that could have a material and adverse effect on our\nbusiness, financial condition and results of operations.**\n\n \n\nWe have entered into a number\nof transactions with related parties. See “Item 7.B. Major Shareholders and Related Party Transactions” for further details\non related party transactions. We may in the future enter into additional transactions with entities in which members of our board of\ndirectors and other related parties hold ownership interests.\n\n \n\nTransactions with related parties\npresent potential for conflicts of interest, as the interests of related parties may not align with the interests of our shareholders.\nAlthough we believe that these transactions were in our best interests, we cannot assure you that these transactions were entered into\non terms as favorable to us as those that could have been obtained in an arms-length transaction. We may also engage in transactions with\nrelated parties in the future. Conflicts of interests may arise when we transact business with related parties. These transactions, individually\nor in the aggregate, may have a material and adverse effect on our business, financial condition and results of operations or may result\nin litigation.\n\n \n\n**Changes in demand for our\nproducts and business relationships with key customers and vendors may materially and adversely affect operating results.**\n\n \n\nTo achieve our objectives, we\nmust develop and sell products that are subject to the demands of our customers. This is dependent on several factors, including managing\nand maintaining relationships with key customers, responding to the rapid pace of technological change and obsolescence, which may require\nincreased investment by us or result in greater pressure to commercialize developments rapidly or at prices that may not fully recover\nthe associated investment, and the effect on demand resulting from customers’ research and development, capital expenditure plans\nand capacity utilization. If we are unable to keep up with our customers’ demands, our sales, earnings and operating results may\nbe materially and adversely affected. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and\nIndustry—We generate a significant portion of our revenues primarily from a few major customers, and loss of business from such\ncustomers could reduce our revenues and significantly harm our business” and “—We primarily rely on a limited number\nof vendors, and the loss of any such vendor could harm our business.”\n\n \n\n**Our future success depends\nin part on our ability to retain key executives and to attract, retain and motivate qualified personnel.**\n\n \n\nWe are highly dependent on the\nprincipal members of our executive team listed in “Item 6. Directors, Senior Management and Employees” located elsewhere in\nthis annual report, the loss of whose services may materially and adversely impact the achievement of our objectives. Recruiting and retaining\nother qualified employees for our business, including technical personnel, will also be critical to our success. Competition for skilled\npersonnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the\ncompetition among numerous companies for individuals with similar skill sets. The inability to recruit or loss of the services of any\nexecutive or key employee may materially and adversely affect our business.\n\n \n\n5\n\n \n\n \n\n**Failure of beneficial owners\nof our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits,\nrestrict our overseas and cross-border investment activities and subject us to liability under PRC law.**\n\n \n\nThe State Administration of Foreign\nExchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Foreign Exchange Control on Domestic\nResidents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, and its appendices.\nThese regulations require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection\nwith their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with\nsuch PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to\nin SAFE Circular 37 as a “special purpose vehicle”, or SPV. The term “control” under SAFE Circular 37 is broadly\ndefined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore SPVs by such\nmeans as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. SAFE Circular 37 further requires\namendment to the registration in the event of any significant changes with respect to the SPV, such as increase or decrease of capital\ncontributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder\nholding interests in a SPV fails to fulfill the required SAFE registration, the PRC subsidiaries of that SPV may be prohibited from making\nprofit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the SPV may\nbe restricted in its ability to contribute additional capital into its PRC subsidiaries. Further, failure to comply with the various SAFE\nregistration requirements described above could result in liability under PRC law for foreign exchange evasion.\n\n \n\nThese regulations apply to our\ndirect and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the\nfuture if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different views and procedures\non the application and implementation of SAFE regulations, and there remains uncertainty with respect to its implementation. We cannot\nassure you that these direct or indirect shareholders of our company who are PRC residents will be able to successfully update the registration\nof their direct and indirect equity interest as required in the future. If they fail to update the registration, our PRC subsidiaries\ncould be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange\nactivities, including restricting our PRC subsidiaries’ ability to distribute dividends to, or obtain loans denominated in foreign\ncurrencies from, our company, or prevent us from contributing additional capital into our PRC subsidiaries. As a result, our business\noperations and our ability to make distributions to you could be materially and adversely affected. In addition, non-U.S. shareholders\nmay experience unfavorable tax consequences if such non-U.S. shareholders are determined to be a resident enterprise for PRC tax purposes.\nSee “Item 4. Information on the Company - B. Business Overview - Regulations - Regulations on Tax in the PRC” and “Item\n10.E. Taxation - PRC Taxation” for further information.\n\n \n\nAs of the date of this annual\nreport, to our knowledge, all of our shareholders had registered according to SAFE Circular 37.\n\n \n\n**Failure to make adequate\ncontributions to various employee benefits plans as required by PRC regulations may subject us to penalties.**\n\n \n\nCompanies operating in China\nare required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds\nand other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including\nbonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where they\noperate their businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in\nChina given the different levels of economic development in different locations. As of December 31, 2025 and 2024, we have not made adequate\nemployee benefit payments in strict compliance with the relevant PRC regulations for and on behalf of our employees. Our failure\nin making contributions to various employee benefits plans in strict compliance with applicable PRC labor-related laws and regulations\nmay subject us to late payment penalties, and we could also be required to make up the contributions for these plans as well as to pay\nlate fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and\nresults of operations may be adversely affected.\n\n \n\n6\n\n \n\n \n\n**We do not have business\ninsurance coverage. Any future business liability, disruption or litigation we experience might divert management focus from our business\nand could significantly impact our financial results.**\n\n \n\nAvailability of business insurance\nproducts and coverage in China is limited, and most such products are expensive in relation to the coverage offered. We have determined\nthat the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurances on commercially reasonable\nterms make it impractical for us to maintain such insurance. As a result, we do not have any business liability, disruption or litigation\ninsurance coverage for our operations in China. Accordingly, a business disruption, litigation or natural disaster may result in substantial\ncosts and divert management’s attention from our business, which would have an adverse effect on our results of operations and financial\ncondition.\n\n \n\n**We may require additional\nfinancing in the future and our operations could be curtailed if we are unable to obtain required additional financing when needed.**\n\n \n\nIn addition to the net proceeds\nraised in our initial public offering and registered direct offering, we may need to obtain additional debt or equity financing to fund\nfuture capital expenditures. As of December 31, 2025, the Company had approximately $5.11 million in cash which primarily consists of\ncash on hand and bank deposits, which are unrestricted as to withdrawal and use and are deposited with banks in China and Hong Kong. The\nCompany’s working capital was approximately $4.73 million at December 31, 2025, approximately $0.01 million of which was deferred\nrevenue which the Company expects to realize and the Company does not expect to make any significant refund based on historical experience,\nand approximately $0.66 million of which was short-term loan borrowed from bank. Therefore, the Company’s working capital excluding\ndeferred revenue and short-term loan was approximately $5.40 million. The Company will require a minimum of approximately $0.52 million\nover the next twelve months to operate at its current level, either from revenues or funding. If the Company is unable to realize its\nassets within the normal operating cycle of a twelve (12) month period, the Company may have to consider supplementing its available sources\nof funds through other available sources of financing from PRC banks and other financial institutions or financial support from the Company’s\nrelated parties and shareholders.\n\n \n\nAny additional equity financing\nmay result in dilution to the holders of our outstanding ordinary shares. Additional debt financing may impose affirmative and negative\ncovenants that restrict our freedom to operate our business. We cannot guaranty that we will be able to obtain additional financing on\nterms that are acceptable to us, or any financing at all, and the failure to obtain sufficient financing could materially and adversely\naffect our business operations.\n\n \n\n**Future sales or other dilution\nof our equity could depress the market price of our ordinary shares.**\n\n \n\nSales of our ordinary shares,\npreferred shares, warrants, units or any combination of the foregoing in the public market, or the perception that such sales could occur,\ncould negatively impact the price of our ordinary shares. If one or more of our shareholders were to sell large portions of their holdings\nin a relatively short time, for liquidity or other reasons, the prevailing market price of our ordinary shares could be negatively affected.\n\n \n\nIn addition, the issuance of\nadditional shares of our ordinary shares, securities convertible into or exercisable for our ordinary shares, other equity-linked securities,\nincluding preferred shares or warrants or any combination of the securities will dilute the ownership interest of the shareholders of\nour ordinary shares and could depress the market price of our ordinary shares and impair our ability to raise capital through the sale\nof additional equity securities.\n\n \n\nWe may need to seek additional\ncapital. If this additional financing is obtained through the issuance of equity securities or warrants to acquire equity securities,\nour existing shareholders could experience significant dilution upon the issuance, conversion or exercise of such securities.\n\n \n\n7\n\n \n\n \n\n**We face risks related to\nnatural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly disrupt our operations.**\n\n \n\nThe\noutbreak of the novel coronavirus (COVID-19) has spread rapidly to many parts of the world since early 2020. The resurgence of the Omicron\nvariant has resulted in quarantines requirement, travel restrictions, and the temporary closure of stores and business facilities in many\nparts of China and Hong Kong in 2022. After the completion of the Sale in August 2023, we have not been affected by the COVID-19 pandemic.\n\n \n\nSubstantially all of our revenues\nand our workforce are concentrated in China. Consequently, our results of operations will likely be adversely, and may be materially,\naffected, to the extent that any other epidemic harms China, Hong Kong and the global economy in general. Any potential impact on our\nresults will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity\nof any pandemic and the actions taken by government authorities and other entities to contain any pandemic or treat its impact, almost\nall of which are beyond our control.\n\n \n\nIn general, our business could\nbe adversely affected by the effects of epidemics, including, but not limited to, COVID-19, avian influenza, severe acute respiratory\nsyndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions such as a snowstorm, flood or hazardous air pollution,\nor other outbreaks. In response to an epidemic, severe weather conditions, or other outbreaks, government and other organizations may\nadopt regulations and policies that could lead to severe disruption to our daily operations, including temporary closure of our offices\nand other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including but not limited\nto, temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with clients and partners\nfor a prolonged period of time. Various impacts arising from severe conditions may cause business disruption, resulting in material, adverse\nimpact to our financial condition and results of operations.\n\n \n\n**Risks Related to Doing Business in Hong Kong**\n\n \n\n**We may be subject to uncertainty\nabout any changes in the economic, political and legal environment in Hong Kong, and it is possible that most of the legal and operational\nrisks associated with operating in the PRC may also apply to operations in Hong Kong in the future.**\n\n \n\nSince July 2023, we moved our\nheadquarters from Beijing to Hong Kong as part of our plan to expand globally. We formed Inforbird Technologies, through which we have\ncommenced our operations in Hong Kong. As of the date of this annual report, we have moved our key technical staff in our Beijing office\nto our Hong Kong office and have recruited local staff in Hong Kong and will continue to hire additional staff to support our operations\nin Hong Kong. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected\nin the Basic Law, namely, Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and\nexecutive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country,\ntwo systems”. We cannot assure you that there will not be any changes in the economic, political and legal environment in Hong Kong.\nWe may be subject to uncertainty about any future actions of the PRC government and is possible that most of the legal and operational\nrisks associated with operating in the PRC may also apply to our operations in Hong Kong in the future. The PRC government may intervene\nor influence our current and future operations in Hong Kong at any time and exert more influence over the manner in which we must conduct\nour business activities. Such government actions, if and when they occur, could result in a material change in our operations in Hong\nKong.\n\n \n\n8\n\n \n\n \n\nOur operations in Hong Kong are\ngoverned by the laws and regulations in Hong Kong. If there is significant change to current political arrangements between mainland China\nand Hong Kong, the PRC government may intervene or influence our Hong Kong operations, which could result in a material change in our\noperations in Hong Kong.\n\n \n\nIn Hong Kong, the collection\nof personal data, their use and disclosure, retention and granting of access to and correction of personal data is governed by the Personal\nData (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong). See “Regulations in Hong Kong — Personal data law in\nHong Kong” for further details. The competition law in Hong Kong is primarily governed by the Competition Ordinance (Chapter\n619 of the Laws of Hong Kong), which prohibits three principal types of anti-competitive conducts, namely (a) anti-competitive agreements\nor practices; (b) abuse of market power; and (c) merger control of arrangements that could substantially reduce the level of competition\nin telecommunication industry. The Merger Rule in the Competition Ordinance prohibits undertakings from directly or indirectly carrying\nout a merger that has, or is likely to have, the effect of substantially reduce the level of competition in Hong Kong. This rule is only\napplicable to telecommunication carrier licensees. There is no general merger control regime in Hong Kong. See “*Item 4 Information\nOn the Company – B. Business Overview — Regulations — Hong Kong — Competition*” in this annual report\nfor further details.\n\n \n\n**The PRC government has\nrecently initiated a series of regulatory actions and statements to regulate business operations in mainland China. We do not expect such\nstatements by the PRC government would have any specific impact on our business operations in Hong Kong. If there is any change in\npolitical arrangements between mainland China and Hong Kong, it would affect the business environment in Hong Kong generally.**\n\n \n\nDue to the long arm application\nof the current PRC laws and regulations, the PRC government may exercise significant oversight and discretion over the conduct of our\nbusiness in Hong Kong and may intervene or influence our operations in Hong Kong, which could result in a material change in our operations\nand/or the value of our ordinary shares.\n\n \n\nExcept for the Basic Law, namely,\nHong Kong’s constitutional document, national laws of the mainland China do not apply in Hong Kong unless they are listed in Annex\nIII of the Basic Law and applied locally by promulgation or local legislation. National laws that may be listed in Annex III are currently\nlimited under the Basic Law to those which fall within the scope of defense and foreign affairs as well as other matters outside the limits\nof the autonomy of Hong Kong. National laws and regulations relating to data protection, cybersecurity and the anti-monopoly have not\nbeen listed in Annex III and so do not apply directly to Hong Kong.\n\n \n\nHowever, due to long arm provisions\nunder the current mainland China laws and regulations, there remain regulatory and legal uncertainty with respect to the implementation\nof laws and regulations of mainland China to Hong Kong. As a result, there is no guarantee that the mainland China government would not\nchoose to implement the laws of the mainland China to Hong Kong and exercise significant direct influence and discretion over the operation\nof, our Hong Kong subsidiaries in the future and, it will not have a material adverse impact on our business, financial condition and\nresults of operations, due to changes in laws, political environment or other unforeseeable reasons.\n\n \n\nIf we or our subsidiaries in\nHong Kong were to become subject to laws and regulations of mainland China, the legal and operational risks associated in mainland China\nmay also apply to our operations in Hong Kong, and we would face the risks and uncertainties associated with the legal system in the mainland\nChina, complex and evolving mainland China laws and regulation, and as to whether and how the recent mainland China government statements\nand regulatory developments, such as those relating to data and cyberspace security and anti-monopoly concerns, would be applicable to\nus and our subsidiaries in Hong Kong. For example, on August 20, 2021, the Standing Committee of the National People’s Congress\nof China promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information\nrights and privacy protection and took effect on November 1, 2021. According to Article 3 of the Personal Information Protection Law,\nit is applied not only to personal information processing activities carried out in the territory of mainland China but also to personal\ninformation processing activities outside the mainland China for the purpose of offering products or services to domestic natural persons\nin the territory of mainland China. The offending entities could be ordered to correct, or to suspend or terminate the provision of services,\nand face confiscation of illegal income, fines or other penalties.\n\n \n\n9\n\n \n\n \n\nThe laws and regulations in the\nmainland China are evolving, and their enactment timetable, interpretation, enforcement, and implementation involve significant uncertainties,\nand may change quickly with little advance notice, along with the risk that the PRC government may intervene or influence our subsidiaries’\noperations at any time could result in a material change in our operations and/or the value of our securities. Moreover, there are substantial\nuncertainties regarding the interpretation and application of mainland China laws and regulations including, but not limited to, the laws\nand regulations related to our business and the enforcement and performance of our arrangements with customers in certain circumstances.\nThe laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may\ninvolve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing\nlaws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted\nor interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing\nand proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new\nPRC laws or regulations may have on our business.\n\n \n\nThe laws, regulations and other\ngovernment directives in the mainland China may also be costly to comply with, and such compliance or any associated inquiries or investigations\nor any government actions may:\n\n \n\n \n●\ndelay or impede our development;\n\n** **\n\n \n●\nresult in negative publicity or increase our operating costs;\n\n** **\n\n \n●\nrequire significant management time and attention; and\n\n** **\n\n \n●\nsubject our Company to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices.\n\n** **\n\n****\n\nFurther, it is uncertain when\nand whether we will be required to obtain any pre-approval from the PRC government to continue to list on United States national exchanges\nor to conduct our current business operation, and even when such pre-approval is obtained, whether it will be denied or rescinded. Further,\nthe promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or\notherwise unfavorably may impact the ability or the way we may conduct our business and could require us to change certain aspects of\nour business to ensure compliance, which could decrease demand for our services, reduce revenues, increase costs, require us to obtain\nmore licenses, permits, approvals or certificates, or subject it to additional liabilities. As such, our operations could be adversely\naffected, directly or indirectly, by existing or future PRC laws and regulations relating to our business or industry, which could result\nin a material adverse change in the value of our ordinary shares, potentially rendering it worthless. As a result, both you and we will\nface uncertainty about future actions by the PRC government that could significantly affect our ability to offer or continue to offer\nsecurities to investors and cause the value of our securities to significantly decline or be worthless.\n\n \n\n**You may incur additional\ncosts and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against\nInfobird or its management based on Hong Kong laws.**\n\n \n\nCurrently, all of our operations\nare conducted outside the United States, and all of our assets are located outside the United States. You may incur additional costs and\nprocedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Infobird\nor its management, as judgments entered in the United States can be enforced in Hong Kong only at common law. If you want to enforce a\njudgment of the United States in Hong Kong, it must be a final judgment conclusive upon the merits of the claim, for a liquidated amount\nin a civil matter and not in respect of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained\nwere not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment\nmust be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied\nby the Hong Kong courts.\n\n \n\n10\n\n \n\n \n\n**Legislative or administrative\nactions in respect of China-U.S. relations could lead to uncertainties in the Hong Kong legal system and limit the legal protection available\nto us.**\n\n \n\nOn July 14, 2020, the former\npresident of the United States signed an executive order to end the special status enjoyed by Hong Kong under the United States-Hong Kong\nPolicy Act of 1992. This includes special treatment in areas including but not limited to customs tariffs, export controls, immigration,\nforeign investment, and extradition. The suspension or elimination of Hong Kong’s preferential treatment and continued tension between\nthe United States and the PRC could potentially impact Hong Kong’s common law legal system and may, in turn, bring about uncertainty\nin, for example, the enforcement of our contractual rights. This could materially and adversely affect our business and operations. We\ncannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing\nlaws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could\nlimit the legal protections available to us, including our ability to enforce our agreements with our customers. Furthermore, legislative\nor administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including us, and\nthe market price of our ordinary shares could be adversely affected.\n\n \n\n**The future development\nof national security laws and regulations in Hong Kong could materially impact our business by possibly triggering sanctions and other\nmeasures, which could cause economic harms to our business.**\n\n \n\nOn June 30, 2020, the Standing\nCommittee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law defines the duties and government\nbodies of the Hong Kong National Security Law for safeguarding national security and four categories of offences — secession, subversion,\nterrorist activities, and collusion with a foreign country or external elements to endanger national security — and their corresponding\npenalties. On July 14, 2020, the former president of the United States signed an executive order (the Hong Kong Autonomy Act, or HKAA)\nto end the special status enjoyed by Hong Kong under the United States-Hong Kong Policy Act of 1992, pursuant to section 202 of the United\nStates-Hong Kong Policy Act of 1992, authorizing the U.S. administration to impose blocking sanctions against individuals and entities\nwho are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020, the U.S. government\nimposed HKAA-authorized sanctions on eleven individuals. On October 14, 2020, the U.S. State Department submitted to relevant committees\nof Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of PRC\nto meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes secondary sanctions, including\nthe imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign\npersons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as\nany third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact\nof the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If any of our Hong Kong subsidiaries\nis determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our subsidiary’s business\noperations, financial position and results of operations could be materially and adversely affected.\n\n \n\n**It may be difficult for\noverseas shareholders and/or regulators to conduct investigations or collect evidence within the territory of the PRC, including Hong\nKong.**\n\n \n\nShareholder claims or regulatory\ninvestigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in the PRC, including\nHong Kong. For example, in mainland China, there are significant legal and other obstacles to providing information needed for regulatory\ninvestigations or litigation initiated outside mainland China. Although the authorities in mainland China may establish a regulatory cooperation\nmechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration,\nsuch cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of mutual and practical\ncooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March\n2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory\nof Mainland China. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability\nfor an overseas securities regulator to directly conduct investigations or evidence collection activities within Mainland China may further\nincrease difficulties faced by you in protecting your interests.\n\n \n\n11\n\n \n\n \n\nIn the event that the U.S. regulators\ncarry out an investigation on us and there is a need to conduct such investigation, or collect evidence within, the territory of the PRC,\nthe U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The\nU.S. regulators may, in the future, consider cross-border cooperation with a securities regulatory authority of the PRC by way of judicial\nassistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC. Additionally,\nthe Securities and Futures Commission of Hong Kong (“SFC”) is a signatory to the International Organization of Securities\nCommissions Multilateral Memorandum of Understanding (“MMOU”), which provides for mutual investigatory and other assistance\nand exchange of information between securities regulators around the world, including the SEC. This is also reflected in section 186 of\nthe Securities and Futures Ordinance (“SFO”) which empowers the SFC to exercise its investigatory powers to obtain information\nand documents requested by non-Hong Kong regulators, and section 378 of the SFO which allows the SFC to share confidential information\nand documents in its possession with such regulators. However, there is no assurance that such cooperation will materialize, or if it\ndoes, whether it will adequately address any efforts to investigate or collect evidence to the extent that may be sought by U.S. regulators.\n\n \n\n**Risks Related to Intellectual Property**\n\n \n\n**If we are not able to adequately\nprotect our proprietary intellectual property and information, and protect against third party claims that we are infringing on their\nintellectual property rights, our results of operations could be adversely affected.**\n\n \n\nThe value of our business depends\nin part on our ability to protect our intellectual property and information, including our patents, copyrights, trademarks, trade secrets,\nand rights under agreements with third parties, in China and around the world, as well as our customer, employee, and customer data. Third\nparties may try to challenge our ownership of our intellectual property in China and around the world. In addition, intellectual property\nrights and protections in China may be insufficient to protect material intellectual property rights in China. Further, our business is\nsubject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights. The steps we have\ntaken may not prevent unauthorized use of our intellectual property. We may need to resort to litigation to protect our intellectual property\nrights, which could result in substantial costs and diversion of resources. If we fail to protect our proprietary intellectual property\nand information, including with respect to any successful challenge to our ownership of intellectual property or material infringements\nof our intellectual property, this failure could have a significant adverse effect on our business, financial condition, and results of\noperations.\n\n \n\n**If we are unable to adequately\nprotect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive\nposition could be harmed or we could be required to incur significant expenses to enforce or defend our rights.**\n\n \n\nOur commercial success will depend\nin part on our success in obtaining and maintaining patents, copyrights, trademarks, trade secrets and other intellectual property rights\nin China and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary\ntechnology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any\ncompetitive advantage we may have, which could harm our business and ability to achieve profitability.\n\n \n\nWe cannot make any assurances\nthat our core trademarks include a scope sufficient to protect our services and products.\n\n \n\nWe cannot make any assurances\nthat the protection of our copyrights are sufficient. For example, our core technology, our no-code development platform, is not registered\nas a software copyright, which makes the technology vulnerable to the risk of third party’s infringement. Even though we intend\nto submit an application for copyright registration for our no-code development platform, we cannot assure you when the application will\nbe submitted or the registration will be completed, if at all, and whether the application will be rejected by the National Copyright\nAdministration of the PRC once submitted.\n\n \n\n12\n\n \n\n \n\nWe cannot provide any assurances\nthat any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with\na scope sufficient to protect our products, any additional features we develop for our products or any new products. Other parties may\nhave developed technologies that may be related or competitive to our system, may have filed or may file patent applications and may have\nreceived or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices\nor by claiming subject matter that could dominate our patent position. Our patent position may involve complex legal and factual questions,\nand, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents,\nif issued, may be challenged, deemed unenforceable, invalidated or circumvented. Proceedings challenging our patents could result in either\nloss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or\npatent application. In addition, such proceedings may be costly. Thus, any patents that we may own may not provide any protection against\ncompetitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought\nby us, which in turn could affect our ability to commercialize our products.\n\n \n\nThough an issued patent is presumed\nvalid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate\nproprietary protection or competitive advantages against competitors with similar products. Competitors could purchase our products and\nattempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual\nproperty rights, design around our patents, or develop and obtain patent protection for more effective technologies, designs or methods.\nWe may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers,\nvendors, former employees and current employees.\n\n \n\nOur ability to enforce our patent\nrights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components that\nare used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or\npotential competitor’s product. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if\nwe were to prevail may not be commercially meaningful.\n\n \n\nIn addition, proceedings to enforce\nor defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings\ncould also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are\ninvalid or otherwise unenforceable. If any of our patents covering our products are invalidated or found unenforceable, or if a court\nfound that valid, enforceable patents held by third parties covered one or more of our products, our competitive position could be harmed\nor we could be required to incur significant expenses to enforce or defend our rights.\n\n \n\nThe degree of future protection\nfor our proprietary rights is uncertain, and we cannot ensure that:\n\n \n\n \n●\nany of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products;\n\n \n \n \n\n \n●\nany of our pending patent applications will be issued as patents;\n\n \n \n \n\n \n●\nwe will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire;\n\n \n \n \n\n \n●\nwe were the first to make the inventions covered by each of our patents and pending patent applications;\n\n \n \n \n\n \n●\nwe were the first to file patent applications for these inventions;\n\n \n \n \n\n \n●\nothers will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable;\n\n \n \n \n\n \n●\nany patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;\n\n \n \n \n\n \n●\nwe will develop additional proprietary technologies or products that are separately patentable; or\n\n \n \n \n\n \n●\nour commercial activities or products will not infringe upon the patents of others.\n\n \n\n13\n\n \n\n \n\nWe rely, in part, upon unpatented\ntrade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. Further,\nour trade secrets could otherwise become known or be independently discovered by our competitors.\n\n \n\n**Litigation or other proceedings\nor third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us\nfrom selling our products or affect our stock price.**\n\n \n\nOur commercial success will depend\nin part on not infringing the patents or copyrights, or otherwise violating the other proprietary rights, of others. Significant litigation\nregarding patent rights and copyright rights occur in our industry. Our competitors in both the United States and abroad, many of which\nhave substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied\nfor or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to\nmake, use and sell our products. We do not always conduct independent reviews of patents issued to third parties. In addition, patent\napplications in China and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications\ncan be revived, so there may be applications of others now pending or recently revived patents of which we are unaware. These applications\nmay later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with\nour ability to make, use or sell our products. Third parties may, in the future, assert claims that we are employing their proprietary\ntechnology without authorization, including claims from competitors or from non-practicing entities that have no relevant product revenue\nand against whom our own patent portfolio may have no deterrent effect. As we continue to commercialize our products in their current\nor updated forms, launch new products and enter new markets, we expect competitors may claim that one or more of our products infringe\ntheir intellectual property rights as part of business strategies designed to impede our successful commercialization and entry into new\nmarkets. The large number of patents, the rapid rate of new patent applications and issuances, the complexities of the technology involved,\nand the uncertainty of litigation may increase the risk of business resources and management’s attention being diverted to patent\nlitigation. We have, and we may in the future, receive letters or other threats or claims from third parties inviting us to take licenses\nunder, or alleging that we infringe, their patents.\n\n \n\nMoreover, we may become party\nto future adversarial proceedings regarding our patent portfolio or the patents of third parties. Patents may be subjected to opposition,\npost-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices. The legal threshold\nfor initiating litigation or contested proceedings may be low, so that even lawsuits or proceedings with a low probability of success\nmight be initiated. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these proceedings\nmay have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. We may also occasionally\nuse these proceedings to challenge the patent rights of others. We cannot be certain that any particular challenge will be successful\nin limiting or eliminating the challenged patent rights of the third party.\n\n \n\nAny lawsuits resulting from such\nallegations could subject us to significant liability for damages and invalidate our proprietary rights. Any potential intellectual property\nlitigation also could force us to do one or more of the following:\n\n \n\n \n●\nstop making, selling or using products or technologies that allegedly infringe the asserted intellectual property;\n\n \n \n \n\n \n●\nlose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses;\n\n \n \n \n\n \n●\npay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing;\n\n \n \n \n\n \n●\npay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;\n\n \n \n \n\n \n●\nredesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible; and\n\n \n \n \n\n \n●\nattempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.\n\n \n\n14\n\n \n\n \n\nAny litigation or claim against\nus, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources,\ndivert the attention of management from our core business and harm our reputation. If we are found to infringe the intellectual property\nrights of third parties, we could be required to pay substantial damages (which may be increased up to three times of awarded damages)\nand/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products\nto avoid infringement. Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would\nbe able to redesign our products in a way that would not infringe the intellectual property rights of others. We could encounter delays\nin product introductions while we attempt to develop alternative methods or products. If we fail to obtain any required licenses or make\nany necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize\none or more of our products.\n\n \n\n**If we are unable to protect\nthe confidentiality of our trade secrets, our business and competitive position could be harmed.**\n\n \n\nWe rely on copyright, patent,\ntrade secret, and trademark protection as well as confidentiality agreements with our employees, consultants and third parties, and we\nmay in the future rely on additional intellectual property protection, to protect our confidential and proprietary information. In addition\nto contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and\ntechnological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee\nor third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent\nan employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such\nmisconduct may not provide an adequate remedy to protect our interests fully. Unauthorized parties may also attempt to copy or reverse\nengineer certain aspects of our products that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated\na trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted\nsecurity measures, trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary\namong different jurisdictions. In addition, trade secrets may be independently developed by others in a manner that could prevent legal\nrecourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated,\nor if any such information was independently developed by a competitor, our business and competitive position could be harmed.\n\n \n\n**Third parties may assert\nownership or commercial rights to inventions we develop, which could have a material adverse effect on our business.**\n\n \n\nThird parties may in the future\nmake claims challenging the inventorship or ownership of our intellectual property. Any infringement claims or lawsuits, even if not meritorious,\ncould be expensive and time consuming to defend, divert management’s attention and resources, require us to redesign our products\nand services, if feasible, require us to pay royalties or enter into licensing agreements in order to obtain the right to use necessary\ntechnologies, and/or may materially disrupt the conduct of our business.\n\n \n\nIn addition, we may face claims\nby third parties that our agreements with employees, contractors or third parties obligating them to assign intellectual property to us\nare ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes\nregarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such\nintellectual property. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded\nfrom using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome could harm our\nbusiness and competitive position.\n\n \n\n15\n\n \n\n \n\n**Third parties may assert\nthat our employees or contractors have wrongfully used or disclosed confidential information or misappropriated trade secrets, which could\nresult in litigation.**\n\n \n\nWe may employ individuals who\npreviously worked with other companies, including our competitors or potential competitors. Although we try to ensure that our employees\nand contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we\nor our employees or contractors have inadvertently or otherwise used or disclosed intellectual property or personal data, including trade\nsecrets or other proprietary information, of a former employer or other third party. Litigation may be necessary to defend against these\nclaims. If we fail in defending any such claims or settling those claims, in addition to paying monetary damages or a settlement payment,\nwe may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation\ncould result in substantial costs and be a distraction to management and other employees.\n\n \n\n**Our computer systems and\noperations may be vulnerable to security breaches, which could materially and adversely affect our business.**\n\n \n\nWe believe the safety of our\ncomputer network and our secure transmission of information over the internet will be essential to our operations and our services. Our\nnetwork and our computer infrastructure are potentially vulnerable to physical breaches or to the introduction of computer viruses, abuse\nof use and similar disruptive problems and security breaches that could cause loss (both economic and otherwise), interruptions, delays\nor loss of services to our users. It is possible that advances in computer capabilities or new technologies could result in a compromise\nor breach of the technology we use to protect user transaction data. A party that is able to circumvent our security systems could misappropriate\nproprietary information, cause interruptions in our operations or utilize our network without authorization. Security breaches also could\ndamage our reputation and expose us to a risk of loss, litigation and possible liability. We cannot guarantee you that our security measures\nwill prevent security breaches.\n\n \n\n**Risks Related to Our Corporate Structure**\n\n \n\n**We depend upon the Contractual\nArrangements in conducting our business in China, which may not be as effective as direct ownership.**\n\n \n\nOur affiliation with Pinmu Century\nis managed through the Contractual Arrangements, which agreements may not be as effective in providing us with control over Pinmu Century\nas direct ownership in controlling entities organized in the PRC, which often hold the licenses necessary to conduct business in the PRC.\nThe Contractual Arrangements are not equivalent to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman,\nthe Cayman Islands holding company, nor Infobird Cayman itself have an equity ownership in, direct foreign investment in, or control of,\nthrough such ownership or investment, the VIE. Further, the Contractual Arrangements have not been tested in a court of law, including\nin China courts. The Contractual Arrangements are governed by and would be interpreted in accordance with the laws of the PRC. If Pinmu\nCentury fails to perform the obligations under the Contractual Arrangements, we may have to rely on legal remedies under the laws of the\nPRC, including seeking specific performance or injunctive relief, and claiming damages. There is a risk that we may be unable to obtain\nany of these remedies, which could affect our investors and the value of their investment. The legal environment in the PRC is not as\ndeveloped as in other jurisdictions. As a result, uncertainties in the PRC legal system could limit our ability to enforce the Contractual\nArrangements, or could affect the validity of the Contractual Arrangements. Thus, the Contractual Arrangements may be less effective than\ndirect ownership and we may incur substantial costs to enforce the terms of the Contractual Arrangements.\n\n \n\n16\n\n \n\n \n\n**We may not be able to consolidate\nthe operations and financial results of some of our affiliated companies or such consolidation could materially and adversely affect our\noperating results and financial condition.**\n\n \n\nThe Contractual Arrangements\nare not equivalent to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding\ncompany, nor Infobird Cayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership or\ninvestment, the VIE. Our business is conducted through Pinmu Century, which is considered a VIE for accounting purposes, and we, through\nPure Media, are considered the primary beneficiary for accounting purposes, thus enabling us to consolidate Pinmu Century’s operations\nand financial results in our consolidated financial statements. Infobird Cayman and Pure Tech were established as the holding companies\nof Pure Media. Pure Media is the primary beneficiary for accounting purposes of Pinmu Century and its subsidiaries. All of these entities\nare under common control which results in the consolidation of Pinmu Century and subsidiaries which have been accounted for as a reorganization\nof entities under common control at carrying value. Pure Media is deemed to have a controlling financial interest and be the primary beneficiary\nfor accounting purposes of Pinmu Century because it has both of the following characteristics: (1) the power to direct activities\nat Pinmu Century that most significantly impact such entity’s economic performance, and (2) the right to receive benefits from Pinmu\nCentury that could potentially be significant to such entity.\n\n \n\nIn the event that in the future\nPinmu Century no longer meets the definition of a VIE under applicable accounting rules, or we are no longer deemed to be the primary\nbeneficiary for accounting purposes, we would not be able to consolidate line-by-line Pinmu Century’s operations and financial results\nin our consolidated financial statements for reporting purposes. Also, if in the future an affiliate company becomes a VIE and we become\nthe primary beneficiary for accounting purposes, we would be required to consolidate that entity’s operations sand financial results\nin our consolidated financial statements for accounting purposes. If such entity’s financial results were negative, this would have\na corresponding negative impact on our operating results for reporting purposes.\n\n \n\n**Because we rely on the\nContractual Arrangements for our revenue, the termination of these agreements would severely and detrimentally affect our continuing business\nviability under our current corporate structure.**\n\n \n\nWe are a holding company and\nall of our business operations are conducted through the Contractual Arrangements. The Contractual Arrangements are not equivalent to\nequity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding company, nor Infobird\nCayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership or investment, the VIE.\nFurther, the Contractual Arrangements have not been tested in a court of law, including in China courts. Although Pinmu Century does not\nhave termination rights pursuant to the Contractual Arrangements, it could terminate, or refuse to perform under, the Contractual Arrangements.\nBecause neither we, nor our subsidiaries, own equity interests of Pinmu Century, the termination or non-performance of the Contractual\nArrangements would sever our ability to receive payments from Pinmu Century under our current holding company structure. While we are\ncurrently not aware of any event or reason that may cause the Contractual Arrangements to terminate, we cannot assure you that such an\nevent or reason will not occur in the future. In the event that the Contractual Arrangements are terminated, this would have a severe\nand detrimental effect on our continuing business viability under our current corporate structure, which, in turn, would affect the value\nof your investment.\n\n \n\n17\n\n \n\n \n\n**Contractual arrangements\nin relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIE owe additional\ntaxes, which could negatively affect our financial condition and the value of your investment.**\n\n \n\nUnder applicable PRC laws and\nregulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within\nten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax\nauthorities determine that the VIE contractual arrangements were not entered into on an arm’s-length basis in such a way as to result\nin an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of the VIE in the form\nof a transfer pricing adjustment. The PRC tax authorities could effectively disregard the VIE structure, resulting in increased tax liabilities.\nA transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the VIE for PRC tax purposes,\nwhich could in turn increase tax liabilities without reducing our tax expenses. In addition, the PRC tax authorities may impose late payment\nfees and other penalties on the VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position\ncould be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay late payment fees and\nother penalties.\n\n \n\n**We conduct our business\nthrough Pinmu Century by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these Contractual\nArrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected.\nIn addition, changes in or different interpretations of such PRC laws and regulations may also materially and adversely affect our business.**\n\n \n\nPRC laws and regulations impose\ncertain restrictions or prohibitions on foreign ownership of companies that engage in internet and other related businesses, including\nthe provision of domestic call center services. The major foreign investor of a domestic call center services provider is required to\nhave a record of good performance and operating experience in managing value-added telecommunications business, however, such requirement\nof record of good performance and operating experience in managing value-added telecommunications business for the major foreign investor\nwas repealed by the Decision of the State Council on Revising and Repealing Certain Administrative Regulations, effective on May 1, 2022.\nWe are a company incorporated in the Cayman Islands and Pure Media is considered a foreign-invested enterprise. To comply with PRC laws\nand regulations, we conduct our business in China mainly through Pinmu Century and its subsidiaries, based on a series of contractual\narrangements by and among Pure Media, Pinmu Century and its shareholders, or the Contractual Arrangements. The Contractual Arrangements\nare not equivalent to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding\ncompany, nor Infobird Cayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership or\ninvestment, the VIE. Further, the Contractual Arrangements have not been tested in a court of law, including in China courts.\n\n \n\nThere are uncertainties regarding\nthe interpretation and application of PRC laws, rules and regulations, including the laws, rules and regulations governing the validity\nand enforcement of the Contractual Arrangements between Pure Media and Pinmu Century. We have been advised by our PRC counsel, based on\ntheir understanding of the current PRC laws, rules and regulations, that (i) the structure for operating our business in China (including\nour corporate structure and Contractual Arrangements with Pure Media, Pinmu Century and its shareholders) will not result in any violation\nof PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements among Pure Media and Pinmu Century and its shareholders\ngoverned by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect.\nHowever, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations\nconcerning foreign investment in the PRC, and their application to and effect on the legality, binding effect and enforceability of the\nContractual Arrangements. In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals\nmay in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC legal counsel.\nTherefore, the Contractual Arrangements may be determined by PRC authorities to be inconsistent with the laws and regulations of the PRC,\nincluding those related to foreign investment in certain industries. Our ordinary shares could decline in value or become worthless if\nsuch determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiaries\nand the VIE that conduct substantially all of our operations.\n\n \n\n18\n\n \n\n \n\nIn addition, if any of our PRC\nentities or their ownership structure or the Contractual Arrangements are determined to be in violation of any existing or future PRC\nlaws, rules or regulations, or any of our PRC entities fail to obtain or maintain any of the required governmental permits or approvals,\nthe relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:\n\n \n\n \n●\nrevoking the business and operating licenses;\n\n \n \n \n\n \n●\ndiscontinuing or restricting the operations;\n\n \n \n \n\n \n●\nimposing conditions or requirements with which the PRC entities may not be able to comply;\n\n \n \n \n\n \n●\nrequiring us and our PRC entities to restructure the relevant ownership structure or operations, including termination of the Contractual Arrangements with the VIE and deregistering the equity pledge of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control the VIE;\n\n \n \n \n\n \n●\nrestricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business; or\n\n \n \n \n\n \n●\nimposing fines or confiscating the income from our PRC subsidiaries or the VIE.\n\n \n\nThe imposition of any of these\npenalties would severely disrupt our ability to conduct business and have a material adverse effect on our financial condition, results\nof operations and prospects.\n\n \n\n**The shareholders of the\nVIE may have actual or potential conflicts of interest with us and as a result may refuse to perform, or may breach, the Contractual Arrangements,\nwhich may materially and adversely affect our business and financial condition.**\n\n \n\nThe shareholders of the VIE may\nhave actual or potential conflicts of interest with us. These shareholders may refuse to perform or sign or may breach, or cause the VIE\nto breach, or refuse to renew, the existing Contractual Arrangements, which would have a material and adverse effect on our ability to\neffectively control the VIE and receive economic benefits from it. As a result, control over, and funds due from, the VIE may be jeopardized\nif the shareholders of the VIE breach, or refuse to renew, the Contractual Arrangements. For example, the shareholders may be able to\ncause our agreements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under\nthe Contractual Arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all of these shareholders\nwill act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements\nto address potential conflicts of interest between these shareholders and our company. If we cannot resolve any conflict of interest or\ndispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business\nand subject us to substantial uncertainty as to the outcome of any such legal proceedings.\n\n \n\n**Any failure by the VIE\nor its shareholders to perform their obligations under the Contractual Arrangements, or any unauthorized use of indicia of corporate power\nor authority, would have a material adverse effect on our business.**\n\n \n\nIf the VIE or its shareholders\nfail to perform their respective obligations under the Contractual Arrangements or if any physical instruments, such as chops and seals,\nor other indicia of corporate power or authority, are used without our authorization, we may have to incur substantial costs and expend\nadditional resources to seek legal remedies under PRC laws, including specific performance or injunctive relief, and/or claiming damages,\nwhich we cannot assure you will be effective under PRC laws. For example, if the shareholders of the VIE were to refuse to transfer their\nequity interest in the VIE to us or our designee if we exercise the purchase option pursuant to the Contractual Arrangements, or if they\nwere otherwise to act in bad faith toward us, then we may have to take legal action to compel them to perform their contractual obligations.\n\n \n\n19\n\n \n\n \n\nThe Contractual Arrangements\nare governed by PRC laws. Accordingly, any disputes would be resolved in accordance with PRC legal procedures. The legal environment in\nthe PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit\nour ability to enforce the Contractual Arrangements or could affect the validity of the Contractual Arrangements, and as a result we may\nnot be able to exert effective control over the VIE, and our ability to conduct our business may therefore be materially adversely affected.\n\n \n\n**Our current corporate structure\nand business operations may be affected by the relatively newly enacted Foreign Investment Law.**\n\n \n\nOn March 15, 2019, the National\nPeople’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020. In addition, the State Council approved\nthe Regulation on Implementing the PRC Foreign Investment Law, or the Implementation Regulations, on December 26, 2019, effective from\nJanuary 1, 2020. Since they are relatively new, uncertainties exist in relation to their interpretation. The Foreign Investment Law does\nnot explicitly classify whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested\nenterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under definition\nof “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws,\nadministrative regulations or the State Council of the PRC, or the State Council. Therefore, it still leaves leeway for future laws, administrative\nregulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment. Therefore, there\ncan be no assurance that our control over the VIE through contractual arrangements will not be deemed as foreign investment in the future.\n\n \n\nThe Foreign Investment Law grants\nnational treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either\n“restricted” or “prohibited” from foreign investment in a “negative list”. The Foreign Investment\nLaw provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require\nmarket entry clearance and other approvals from relevant PRC government authorities. If our control over the VIE through contractual arrangements\nare deemed as foreign investment in the future, and any business of the VIE is “restricted” or “prohibited” from\nforeign investment under the “negative list” effective at the time, we may be deemed to be in violation of the Foreign Investment\nLaw, the contractual arrangements that allow us to have control over the VIE may be deemed as invalid and illegal, and we may be required\nto unwind such contractual arrangements and/or restructure our business operations, any of which may have a material adverse effect on\nour business operations.\n\n \n\nFurthermore, if future laws,\nadministrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual arrangements,\nwe may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely\nand appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our\ncurrent corporate structure and business operations.\n\n \n\n**If any of our affiliated\nentities becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy assets held by such entity,\nwhich could materially and adversely affect our business, financial condition and results of operations.**\n\n \n\nWe currently conduct our operations\nin China through our Contractual Arrangements. As part of these arrangements, substantially all of our assets that are significant to\nthe operation of our business are held by our affiliated entities. If any of these entities becomes bankrupt and all or part of their\nassets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities,\nwhich could materially and adversely affect our business, financial condition and results of operations. In addition, if any of our affiliated\nentities undergoes a voluntary or involuntary liquidation proceeding, its equity owner or unrelated third-party creditors may claim rights\nrelating to some or all of these assets, which would hinder our ability to operate our business and could materially and adversely affect\nour business, our ability to generate revenue and the market price of our ordinary shares.\n\n \n\n20\n\n \n\n \n\n**Risks Related to Doing Business in China**\n\n \n\n**Changes in China’s\neconomic, political or social conditions or government policies could have a material adverse effect on our business and operations.**\n\n \n\nSubstantially all of our assets\nand operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced\nto a significant degree by political, economic and social conditions in China generally and therefore by the significant discretion of\nChinese governmental authorities. The Chinese economy differs from the economies of most developed countries in many respects, including\nthe level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although\nthe PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership\nof productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive\nassets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry\ndevelopment by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth\nthrough allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing\npreferential treatment to particular industries or companies. The increased global focus on environmental and social issues and China’s\npotential adoption of more stringent standards in these areas may adversely impact the operations of China-based issuers, including us.\n\n \n\nWhile the Chinese economy has\nexperienced significant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy,\nand the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the PRC government\nor in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments\ncould materially and adversely affect our business and operating results, lead to a reduction in demand for our services and adversely\naffect our competitive position. The PRC government has implemented various measures to encourage economic growth and guide the allocation\nof resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial\ncondition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.\nIn addition, in the past the PRC government has implemented certain measures, including interest rate adjustment, to control the pace\nof economic growth. These measures may cause decreased economic activity in China, which may materially and adversely affect our business\nand operating results.\n\n \n\n**Our operations are located\nin, China through our subsidiaries, the VIE and its subsidiaries. Our ability to operate in China may be impaired by changes in Chinese\nlaws and regulations, including those relating to taxation, environmental regulation, restrictions on foreign investment, and other matters.**\n\n \n\nBecause our operations are conducted\nin Hong Kong and China through our subsidiaries, the Chinese government may exercise significant oversight and discretion over the conduct\nof our business, may intervene in or influence our operations at any time, and may exert more\noversight and control over offerings conducted overseas and/or foreign investment in China-based issuers, any of which such actions by\nthe Chinese government could significantly limit or completely hinder our ability to offer or continue to offer securities to investors\nand cause the value of such securities to significantly decline or be worthless, and could result in a material change in our operations\nand/or the value of our ordinary shares. The Chinese government has exercised and continues to exercise substantial control over virtually\nevery sector of the Chinese economy through regulation and state ownership. The central Chinese government or local governments having\njurisdiction within China may impose new, stricter regulations, or interpretations of existing regulations, that would require additional\nexpenditures and efforts on our part to ensure our compliance with such regulations or interpretations. As such, our subsidiary in the\nPRC may be subject to governmental and regulatory interference in the provinces in which they operate. We could also be subject to regulation\nby various political and regulatory entities, including local and municipal agencies and other governmental subdivisions. Our ability\nto operate in China may be impaired by any such laws or regulations, or any changes in laws and regulations in the PRC. We may incur increased\ncosts necessary to comply with existing and future laws and regulations or penalties for any failure to comply. Recent statements by the\nChinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign\ninvestments in China-based issuers. Given the current regulatory environment in the PRC,\n\n \n\n21\n\n \n\n \n\nwe are subject to the uncertainty of different interpretation\nand enforcement of rules and regulations in the PRC adverse to us, which may be announced or implemented with little or no advance notice.\nOur operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business\nor industry, particularly in the event permission to list on U.S. exchanges becomes required, or if such permission may be withheld or\nrescinded once granted. Accordingly, the Chinese government’s actions in the future, including any decision to intervene in or influence\nour operations at any time or to exert control over foreign investment in China-based issuers, may cause us to make material changes to\nour operations, may significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and/or\nmay cause the value of such securities to significantly decline or be worthless.\n\n \n\n**If we become subject to\nthe recent scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources\nto investigate and resolve the matter which could harm our business operations and our reputation and could result in a loss of your investment\nin our ordinary shares, in particular if such matter cannot be addressed and resolved favorably.**\n\n \n\nRecently, U.S. public companies\nthat have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by\ninvestors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around\nfinancial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance\npolicies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative\npublicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases, has become virtually\nworthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and\nexternal investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity\nwill have on us or our business. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true\nor untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation may\nbe a major distraction to our management. If such allegations are not proven to be groundless, our business operations will be severely\nhindered and your investment in our ordinary shares could be rendered worthless.\n\n \n\n**U.S. regulatory bodies\nmay be limited in their ability to conduct investigations or inspections of our operations in China.**\n\n \n\nAny disclosure of documents or\ninformation located in China by foreign agencies may be subject to jurisdiction constraints and must comply with China’s state secrecy\nlaws, which broadly define the scope of “state secrets” to include matters involving economic interests and technologies.\nThere is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect our operations will be\nhonored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, particularly\nthose entities that are located within China. Furthermore, under the current PRC laws, an on-site inspection of our facilities by any\nof these regulators may be limited or prohibited.\n\n \n\n**There are uncertainties\nunder the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies located in the PRC.**\n\n \n\nShareholder claims that are common\nin the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or\npracticality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder\ninvestigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may\nestablish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border\nsupervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not\nbeen efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law, which\nbecame effective in March 2020, or Article 177, the securities regulatory authority of the State Council may collaborate with securities\nregulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further\nprovides that overseas securities regulatory authorities are not allowed to carry out investigation and evidence collection directly within\nthe territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities\nbusiness activities to overseas agencies without prior consent of the securities regulatory authority of the State Council and the competent\ndepartments of the State Council.\n\n \n\n22\n\n \n\n \n\nOur principal business operations\nare conducted in the PRC. In the event that the U.S. regulators carry out investigations on us and there is a need to conduct investigation\nor collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection\ndirectly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority\nof the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory\nauthority of the PRC. However, there is no assurance that the U.S. regulators could succeed in establishing such cross-border cooperation\nin a specific case or could establish the cooperation in a timely manner. If U.S. regulators are unable to conduct such investigations,\nsuch U.S. regulators may determine to suspend and ultimately delist our ordinary shares from the Nasdaq Capital Market or choose to suspend\nor de-register our SEC registration.\n\n \n\n**Uncertainties with respect\nto China’s legal system could materially and adversely affect us.**\n\n \n\nThere are risks arising from\nthe legal system in China, including risks and uncertainties regarding the enforcement of laws. In particular, there are uncertainties\nregarding the interpretation and enforcement of PRC laws, rules and regulations, and changes in policies, laws, rules and regulations\nin the PRC could adversely affect us. Most of our operations are conducted in Hong Kong through our current subsidiaries, and are governed\nby PRC laws, rules and regulations. The PRC legal system is a civil law system based on written statutes. Unlike the common law system,\nprior court decisions under the civil law system may be cited for reference but have limited precedential value.\n\n \n\nIn 1979, the PRC government began\nto promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation\nover the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However,\nPRC law still restricts certain foreign investments in China, and such laws are continually evolving, as more fully described under “Item\n4. Information on the Company – B. Business Overview – Regulations – Regulations Relating to Foreign Investment”.\nChina has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects\nof economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties.\nFurther, rules and regulations in China can change quickly with little advance notice. In particular, because these laws, rules and regulations\nare relatively new and quickly evolving, and because of the limited number of published decisions and the non-precedential nature of these\ndecisions, and because the laws, rules and regulations often give the relevant regulator certain discretion in how to enforce them, the\ninterpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable.\n\n \n\nSince PRC administrative and\ncourt authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult\nto evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect\nour judgment on the relevance of legal requirements or tort claims. In addition, the regulatory uncertainties may be exploited through\nunmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.\n\n \n\nFurthermore, the PRC legal system\nis based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a\nretroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation,\nwhich could result in a material change in our operations and/or the value of our ordinary shares. In addition, any administrative and\ncourt proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Further,\nsuch evolving laws and regulations and the inconsistent enforcement thereof could also lead to failure to obtain or maintain licenses\nand permits to do business in China, which would adversely affect us.\n\n \n\n23\n\n \n\n \n\n**Our business generates\nand processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity.\nThe improper use or disclosure of data could have a material and adverse effect on our business and prospects.**\n\n \n\nOur business generates and processes\na large quantity of data. We face risks inherent in handling and protecting a large volume of data. In general, we expect that data security\nand data protection compliance will receive greater attention and focus from regulators, both domestically and globally, as well as attract\ncontinued or greater public scrutiny and attention going forward, which could increase our compliance costs and subject us to heightened\nrisks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to\npenalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could\nbe materially and adversely affected.\n\n \n\nThe PRC regulatory and enforcement\nregime with regard to data security and data protection is evolving and may be subject to different interpretations or significant changes.\nMoreover, different PRC regulatory bodies, including the Standing Committee of the National People’s Congress, or the SCNPC, the\nMinistry of Industry and Information Technology, or the MIIT, the CAC, the Ministry of Public Security, or the MPS and State Administration\nof Market Regulation, or the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications.\nSee “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Information Security\nand Privacy Protection.” Compliance with the PRC Cybersecurity Law, the PRC National Security Law, the Data Security Law, the Personal\nInformation Protection Law, the Cybersecurity Review Measures, as well as additional laws and regulations that may come into effect in\nthe future, including the Measures for the Security Assessment of Cross-border Data Transmission and other data security and personal\ninformation protection laws and regulations, may result in a significant increase in our compliance costs, force us to change our business\npractices, adversely affect our business performance as well as subject us to negative publicity, which could harm our reputation among\nusers and negatively affect the trading price of our securities. As many of these laws and regulations have not come into effect yet,\nor only came into effect recently, there are uncertainties with respect to how they will be interpreted, implemented and enforced in practice,\nand we may be subject to regulatory investigations, fines, suspension of businesses and revocation of licenses.\n\n \n\nAs of the date of this annual\nreport, we, our subsidiaries and the VIE, are not covered by permissions requirements from the CAC or any other governmental agency that\nis required to approve the VIE’s operations, as we, our subsidiaries and the VIE (i) are not required to go through cybersecurity\nreview by the CAC, and (ii) have not received or were denied any such requisite permissions or approvals by any PRC authority. However,\nconsidering that the interpretation and application of data protection laws are often uncertain, in flux and complicated, and the regulatory\nframework in China for the protection of information in cyberspace is evolving quickly, we cannot assure you that we would be able to\nfully comply with them. Any failure to or delay in clearing such review process would subject us to restrictions and penalties imposed\nby the CAC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, delays of or restrictions\non the repatriation of the proceeds from our offshore offerings into China, or other actions that could materially and adversely affect\nour business, financial condition, results of operations, and prospects, as well as the trading price of our securities.\n\n \n\n24\n\n \n\n \n\nThe following are examples of\ncertain recent PRC regulatory activities in this area:\n\n \n\nCybersecurity and Data Security\n\n \n\nIn June 2021, the SCNPC promulgated\nthe Data Security Law, which took effect in September 2021. The Data Security Law, among other things, provides for security review procedure\nfor data-related activities that may affect national security. The Data Security Law prohibits entities and individuals in China from\nproviding any foreign judicial or law enforcement authority with any data stored in China without approval from competent PRC authority,\nand sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations, including\nrectification order, warning, fines, suspension of relevant business, and revocation of business permits or licenses. In July 2021, the\nstate council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1,\n2021. Pursuant to this regulation, critical information infrastructure means key network facilities or information systems of critical\nindustries or sectors, such as public communication and information service, energy, transportation, water conservation, finance, public\nservices, e-government affairs and national defense science, the damage, malfunction or data leakage of which may endanger national security,\npeople’s livelihoods and the public interest. In December 2021, the CAC, together with other authorities, jointly promulgated the\nCybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity\nReview Measures, critical information infrastructure operators that procure internet products and services must be subject to the cybersecurity\nreview if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform\noperators that hold personal information of over one million users must apply with the Cybersecurity Review Office for a cybersecurity\nreview before any public listing on a foreign stock exchange. As of the date of this annual report, we have not been informed that we\nare a critical information infrastructure operator by any government authorities. Furthermore, the exact scope of “critical information\ninfrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide\ndiscretion in the interpretation and enforcement of the applicable laws. Therefore, it is uncertain whether we would be deemed to be a\ncritical information infrastructure operator under PRC law. If we are deemed to be a critical information infrastructure operator under\nthe PRC cybersecurity laws and regulations, we may be subject to obligations in addition to what we have fulfilled under the PRC cybersecurity\nlaws and regulations.\n\n \n\nIn November 2021, the CAC released\nthe Draft Administration Regulations on Cyber Data Security. The Draft Administration Regulations on Cyber Data Security provide that\ndata processors refer to individuals or organizations that, during their data processing activities such as data collection, storage,\nutilization, transmission, publication and deletion, have autonomy over the purpose and the manner of data processing. In accordance with\nthe Draft Administration Regulations on Cyber Data Security, data processors shall apply for a cybersecurity review for certain activities,\nincluding, among other things,(i) the listing in a foreign country of data processors that process the personal information of more than\none million users and (ii) any data processing activity that affects or may affect national security. In addition, the Draft Administration\nRegulations on Cyber Data Security requires that data processors that process “important data” or are listed overseas must\nconduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment\nreport of the preceding year to the municipal cybersecurity department by the end of January each year. As of the date of this annual\nreport, the Network Data Security Administration Regulations are in effect. In light of the fact that the interpretation and application\nof data protection laws are often uncertain, in flux and complicated, it is possible that existing or newly introduced laws and regulations,\nor their interpretation, application or enforcement, could significantly affect the value of our data, force us to change our data collection,\ndata use and other business practices, cause us to incur significant compliance costs, and subject us to regulatory investigations, fines,\nsuspension of businesses and revocation of licenses, which may materially and adversely affect our business, financial condition, results\nof operations, and prospects, as well as the trading price of our securities. Furthermore, if such regulations were to be adopted in their\ncurrent form, given that our business generates and processes a large quantity of data, we may be subject to additional regulatory obligations\nwith respect to data security, and may face challenges in addressing their requirements and amending our internal data processing policies\nand practices to ensure compliance therewith.\n\n \n\n25\n\n \n\n \n\nMoreover, on July 7, 2022, the\nCAC promulgated the Measures for the Security Assessment of Cross-border Data Transmission, which came into effect on September 1, 2022.\nAccording to these measures, personal data processors will be subject to security assessment conducted by the CAC prior to any cross-border\ntransfer of data if the transfer involves (i) important data; (ii) personal information transferred overseas by operators of critical\ninformation infrastructure or a data processor that has processed personal data of more than one million persons; (iii) personal information\ntransferred overseas by a data processor who has already provided personal data of 100,000 persons or sensitive personal data of 10,000\npersons overseas since January 1 of last year; or (iv) other circumstances as requested by the CAC. According to the official interpretation\nof the CAC, the Measures for the Security Assessment of Cross-border Data Transmission cover (1) overseas transmission and storage by\ndata processors of data generated during PRC domestic operations, and (2) access to or use of the data collected and generated by data\nprocessors and stored in the PRC by overseas institutions, organizations or individuals. In addition, on March 22, 2024, the CAC promulgated\nthe Promotion and Regulation of Cross-Border Data Flow Provisions, which relaxed certain conditions for cross-border data transfers and\nnarrowed the scope of mandatory security assessments. As of the date of this annual report, these measures are in effect and have been\nimplemented in practice. Despite the fact that we do not collect or process personal data of more than one million persons, nor collect\nor process personal data of 100,000 persons or sensitive personal data of 10,000 persons, considering that the interpretation and application\nof data protection laws are often uncertain, in flux and complicated, if we were found by the regulatory authorities to have failed to\ncomply with the applicable rules and regulations on cyber security, we would be subject to warnings, fines, confiscation of illegal revenue,\nrevocation of licenses, cancellation of filings, or even criminal liability and our business, results of operations and financial condition\nwould also be adversely affected. Furthermore, in light of the evolving regulatory framework in China for the protection of information\nin cyberspace, we may be subject to uncertainties of and adjustments to our business practices, which may incur additional operating expenses\nand adversely affect our results of operations and financial condition.\n\n \n\nAlthough as of the date of this\nannual report, we, our subsidiaries and the VIE, are not covered by permissions requirements from the CAC or any other governmental agency\nthat is required to approve the VIE’s operations, considering that certain aspects of the interpretation and application of data\nprotection laws remain subject to ongoing developments, we will closely monitor and assess any development in the rule-making process.\nTo address the concerns brought by the applicable laws and regulations on data privacy and security, we are taking a more prudent approach\nin business operation and believe we can reduce our risk of exposure related to the implementation of these laws and regulations to a\ncertain extent by the following measures:\n\n \n\n \n●\nPay close attention to the latest trends in regulatory development and maintain continuous communication with the relevant regulatory authorities;\n\n \n \n \n\n \n●\nEnhance and improve the data processing activities in accordance with the latest regulatory requirements;\n\n \n \n \n\n \n●\nAdopt additional security measures and internal control system to protect the customer data from the risks of data leakage, theft and destruction and illegal control, and make advanced preparations in light of the regulatory development; and\n\n \n \n \n\n \n●\nContinue to improve cybersecurity awareness in our future network development and deployment.\n\n \n\nAlthough we are making efforts\nto comply with the applicable laws, regulations and standards, there can be no assurance that our measures will be effective and sufficient\nunder the foregoing rules and regulations. If we were found by the regulatory authorities to have failed to comply with the applicable\nrules and regulations on cyber security, we would be subject to warnings, fines, confiscation of illegal revenue, revocation of licenses,\ncancellation of filings, or even criminal liability and our business, results of operations and financial condition would also be adversely\naffected.\n\n \n\n26\n\n \n\n \n\nPersonal Information and Privacy\n\n \n\nIn August 2021, the SCNPC promulgated\nthe Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy\nprotection and took effect on November 1, 2021. We update our privacy policies from time to time to meet the latest regulatory requirements\nof PRC government authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless,\nthe Personal Information Protection Law elevates the protection requirements for personal information processing, and many specific requirements\nof this law remain to be clarified by the regulatory authorities, and courts in practice. We may be required to make further adjustments\nto our business practices to comply with the personal information protection laws and regulations.\n\n \n\nMany of the data-related legislations\nare relatively new and certain concepts thereunder remain subject to interpretation by the regulators. If any data that we possess belongs\nto data categories that are subject to heightened scrutiny, we may be required to adopt stricter measures for protection and management\nof such data. The Cybersecurity Review Measures and the Draft Administration Regulations on Cyber Data Security remain unclear on whether\nthe relevant requirements will be applicable to companies that are already listed in the United States, such as us. We cannot predict\nthe impact of the Cybersecurity Review Measures and the Draft Administration Regulations on Cyber Data Security, if any, at this stage,\nand we will closely monitor and assess any development in the rule-making process. If the Cybersecurity Review Measures and the enacted\nversion of the Draft Administration Regulations on Cyber Data Security mandate clearance of cybersecurity review and other specific actions\nto be taken by issuers like us, we face uncertainties as to whether these additional procedures can be completed by us timely, or at all,\nwhich may subject us to government enforcement actions and investigations, fines, penalties or suspension of our non-compliant operations,\nand materially and adversely affect our business and results of operations. As of the date of this annual report, we have not been involved\nin any formal investigations on cybersecurity review made by the CAC on such basis. In general, compliance with the existing PRC laws\nand regulations, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, related to data security\nand personal information protection, may be costly and result in additional expenses to us, and subject us to negative publicity, which\ncould harm our reputation and business operations. There are also uncertainties with respect to how such laws and regulations will be\nimplemented and interpreted in practice.\n\n \n\n**The approval of, or report\nand fillings with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law,\nand, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and report\nprocess.**\n\n \n\nThe Regulations on Mergers and\nAcquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended\nin 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled\nby PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s\nsecurities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our offshore offerings\nmay ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take\nus to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in\nobtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to\nsanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China,\nrestrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely\naffect our business, financial condition, and results of operations.\n\n \n\nOn July 6, 2021, the relevant\nPRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions\nemphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based\ncompanies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the\nrisks and incidents faced by China-based overseas-listed companies.\n\n \n\n27\n\n \n\n \n\nOn February 17, 2023, the CSRC\nreleased the Overseas Listing Trial Measures, effective March 31, 2023. The Overseas Listing Trial Measures establish a new filing-based\nregime to regulate overseas offerings and listings by domestic companies. According to the Overseas Listing Trial Measures, PRC domestic\ncompanies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the\nfiling procedure with the CSRC and report relevant information. According to the Overseas Listing Trial Measures, companies that have\nalready offered shares or been listed overseas prior to the implementation of such new regulations qualify as “Stock Enterprises”,\nand Stock Enterprises are not required to apply for the filing immediately until a subsequent overseas offering or listing occurs. However,\nthe Overseas Listing Trial Measures, among others, require the issuer or its main operational entity in the PRC to file with the CSRC\nfor its follow-on securities offerings in the same offshore market within three business days after the completion of such offerings,\nand file with the CSRC for its offerings or listing in offshore stock market other than the stock market of its initial public offering\nor listing within three business days after the submission of offering application outside mainland China. Furthermore, a listed company\nshould report material events to the CSRC within three business days after the occurrence and announcement of certain events, including,\namong others, the change of control, investigation or penalties imposed by relevant authorities, the change of listing status or the transfer\nof listing board. Failure to comply with the filing or reporting requirements for any of our subsequent offering, listing or any other\ncapital raising activities may result in administrative penalties, such as order to rectify, warnings, fines and other penalties on us,\nour direct or indirect shareholders and our management. Given the uncertainties surrounding the latest CSRC filing requirements at this\nstage, we cannot assure you that we will be able to complete the filings and fully comply with the relevant new rules on a timely basis,\nor at all. Nor can we assure you that any new rules or regulations promulgated in the future will not impose additional requirements on\nus. As of the date of this annual report, we have not received any formal inquiry, notice, warning, sanction, or any regulatory objection\nfrom the CSRC with respect to the Overseas Listing Trial Measures.\n\n \n\nOn February 24, 2023, the CSRC,\nMinistry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China jointly\nrevised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which\nwas issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or\nthe Provisions. The revised Provisions were issued under the title of “Provisions on Strengthening Confidentiality and Archives\nAdministration of Overseas Securities Offering and Listing by Domestic Companies”, or the Confidentiality and Archives Provisions,\nwhich came into effect on March 31, 2023 together with the Overseas Listing Trial Measures. One of the major revisions as reflected in\nthe Confidentiality and Archives Provisions is expanding application to cover indirect overseas offering and listing, as is consistent\nwith the Overseas Listing Trial Measures. The Confidentiality and Archives Provisions require that, among other things, (a) a domestic\ncompany that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or\nentities including securities companies, securities service providers and overseas regulators, any documents and materials that contain\nstate secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to laws, and\nfile with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or through\nits overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities\nservice providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security\nor public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived\nfailure by us or our PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the Confidentiality\nand Archives Provisions and other relevant PRC laws and regulations may subject the relevant entities to legal liabilities, including\ncriminal liabilities.\n\n \n\n28\n\n \n\n \n\nIn addition, we cannot assure\nyou that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in\nthe future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review\nunder the Cybersecurity Review Measures and the Draft Administration Regulations on Cyber Data Security (if implemented), are required\nfor our offshore offerings, it is uncertain whether we can or how long it will take for us to obtain such approval or complete such filing\nprocedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or\ncompleting such filing procedures for our offshore offerings, or a rescission of any such approval or filing if obtained by us, may subject\nus to sanctions by the CSRC or other PRC regulatory authorities for our offshore offerings. These regulatory authorities may impose fines\nand penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China,\ndelay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially\nand adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed\nsecurities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our\noffshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other\nactivities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur.\nIn addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals\nor accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver\nof such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity\nregarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and\nthe trading price of our listed securities. Our failure to obtain or maintain any requisite approvals may have a material adverse effect\non our ability to continue as a going concern, and could result in a loss of your entire investment.\n\n \n\n**We may be classified\nas a “PRC resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences\nto us and our non-PRC shareholders.**\n\n \n\nUnder\nthe PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management\nbody” within the PRC is considered a resident enterprise and will be subject to enterprise income tax on its global income at the\nrate of 25%. The related implementation rules define the term “de facto management body” as the body that exercises full and\nsubstantial control over, and overall management of, the business, productions, personnel, accounts and properties of an enterprise. In\nApril 2009, the State Administration of Taxation, or the SAT, issued a circular, known as Circular 82, which provides certain specific\ncriteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore\nis located in China. Although Circular 82 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,\nnot those controlled by PRC individuals or foreigners, the criteria set forth in Circular 82 may reflect the SAT’s general position\non how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.\nAccording to Circular 82, an offshore-incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded\nas a PRC tax resident by virtue of having its “de facto management body” in China. It will be subject to PRC enterprise income\ntax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management\nis in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval\nby organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and\nboard and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives\nhabitually reside in the PRC.\n\n \n\nWe believe none of our entities\noutside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination\nby the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”\nAs substantially all of our management members are based in China, it remains uncertainties how the tax residency rule would apply in\nour case. If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC\nenterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its worldwide income, which\ncould materially reduce our net income. In addition, we are also subject to PRC enterprise income tax reporting obligations. Furthermore,\nif the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, dividends paid by us and\ngains realized on the sale or other disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC\nenterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such\ndividends and gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim\nthe benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident\nenterprise. Any such tax may reduce the returns on your investment in our ordinary shares.\n\n \n\n29\n\n \n\n \n\n**Changes in international\ntrade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China and may have a material\nadverse effect on our business.**\n\n \n\nPolitical events, international\ntrade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and could have a\nmaterial adverse effect on us and our customers, service providers, and other partners. International trade disputes could result in tariffs\nand other protectionist measures which may materially and adversely affect our business. Tariffs could increase the cost of the goods\nand products which could affect customers’ spending levels. In addition, political uncertainty surrounding international trade disputes\nand the potential of the escalation to trade war and global recession could have a negative effect on customer confidence, which could\nmaterially and adversely affect our business. We may have also access to fewer business opportunities, and our operations may be negatively\nimpacted as a result. In addition, the current and future actions or escalations by either the United States or China that affect trade\nrelations may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results of operations,\nand we cannot provide any assurances as to whether such actions will occur or the form that they may take.\n\n \n\n**You may experience difficulties\nin effecting service of legal process, enforcing foreign judgments, including those obtained in the U.S., or bringing actions in China\nagainst us or our management based on foreign laws.**\n\n \n\nWe are a holding company incorporated\nunder the laws of the Cayman Islands. We conduct substantially all of our operations in China and substantially all of our assets are\nlocated in China. In addition, all our senior employees reside within China for a significant portion of the time and most are PRC residents.\nAs a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside mainland China, including\nour management. In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts\nwith the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court\nin any of these non-PRC jurisdictions, including the U.S., in relation to any matter not subject to a binding arbitration provision may\nbe difficult or impossible.\n\n \n\n**We may rely on dividends\nand other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation\non the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.**\n\n \n\nWe are a Cayman Islands holding\ncompany and we rely principally on dividends and other distributions on equity from our Hong Kong and PRC subsidiaries for our cash requirements,\nincluding for services of any debt we may incur. Our PRC subsidiary’s ability to distribute dividends is based upon its distributable\nearnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to its respective shareholders only out of their accumulated\nprofits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiary is required to\nset aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered\ncapital. Each of our PRC subsidiaries as a FIE is also required to further set aside a portion of its after-tax profits to fund the employee\nwelfare fund, although the amount to be set aside, if any, is determined at its discretion. These reserves are not distributable as cash\ndividends. If our PRC subsidiary incur debt on its own behalf in the future, the instruments governing the debt may restrict their ability\nto pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or other payments\nto their respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could\nbe beneficial to our businesses, pay dividends or otherwise fund and conduct our business.\n\n \n\nIn addition, the Enterprise Income\nTax Law, or EIT Law, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable\nby Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between\nthe PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.\n\n \n\n30\n\n \n\n \n\nPursuant to a special arrangement\nbetween Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest\nin the PRC company. Under the Notice of the State Taxation Administration on Issues regarding the Administration of the Dividend Provision\nin Tax Treaties promulgated in 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These\nconditions include, but are not limited to: (i) the taxpayer must be the beneficial owner of the relevant dividends, and (ii) the corporate\nshareholder to receive dividends from the PRC subsidiary must have met the direct ownership thresholds during the 12 consecutive months\npreceding the receipt of the dividends. Further, the STA promulgated the Announcement of the Certain Issues with Respect to the “Beneficial\nOwner” in Tax Treaties in 2018, which sets forth certain detailed factors in determining “beneficial owner” status,\nand specifically, if an applicant’s business activities do not constitute substantive business activities, the applicant will not\nqualify as a “beneficial owner.” Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between\nthe PRC central government and governments of other countries or regions is subject to the Administrative Measures for Non-Resident Taxpayers\nto Enjoy Treatments under Tax Treaties promulgated by the STA on October 14, 2019 and became effective from January 1, 2020, which provides\nthat non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding\ntax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria\nto enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, collect and retain relevant materials for reference\nin accordance with these treaties and accept supervision and management from the tax authorities.\n\n \n\n**PRC regulation of loans\nto and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may restrict or\nprevent us from using the proceeds of our initial public offering to make loans or additional capital contributions to our PRC subsidiaries,\nwhich could materially and adversely affect our liquidity and our ability to fund and expand our business.**\n\n \n\nAny funds we transfer to our\nPRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with\nrelevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC\nsubsidiaries are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information\nSystem and registration with other governmental authorities in China. In addition, (a) any foreign loan procured by our PRC subsidiaries\nis required to be registered with SAFE or its local branches, and (b) our PRC subsidiaries may not procure loans which exceed the statutory\nlimits. Any medium-or long- term loan to be provided by us to our PRC subsidiaries must be filed and registered with the National Development\nand Reform Commission, or NDRC and the SAFE or its local branches. We may not obtain these government approvals or complete such registrations\non a timely basis, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to receive\nsuch approvals or complete such registration, our ability to use the proceeds of our initial public offering and to capitalize our PRC\noperations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our\nbusiness.\n\n \n\nIn 2008, SAFE promulgated the\nCircular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency\nCapital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFE Circular 142 regulates the conversion by FIEs of foreign currency\ninto Renminbi by restricting the usage of converted Renminbi. SAFE Circular 142 provides that any Renminbi capital converted from registered\ncapitals in foreign currency of FIEs may only be used for purposes within the business scopes approved by PRC governmental authority and\nsuch Renminbi capital may not be used for equity investments within China unless otherwise permitted by PRC law. In addition, the SAFE\nstrengthened its oversight of the flow and use of Renminbi capital converted from registered capital in foreign currency of FIEs. The\nuse of such Renminbi capital may not be changed without SAFE approval, and such Renminbi capital may not in any case be used to repay\nRenminbi loans if the proceeds of such loans have not been utilized. On July 4, 2014, SAFE issued the Circular of the SAFE on Relevant\nIssues Concerning the Pilot Reform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested\nEnterprises, or SAFE Circular 36, which launched the pilot reform of administration regarding conversion of foreign currency registered\ncapitals of FIEs in 16 pilot areas. According to SAFE Circular 36, some of the restrictions under SAFE Circular 142 will not apply to\nthe settlement of the foreign exchange capitals of an ordinary FIE in the pilot areas, and such FIE is permitted to use Renminbi converted\nfrom its foreign-currency registered capital to make equity investments in the PRC within and in accordance with the authorized business\nscope of such FIEs,\n\n \n\n31\n\n \n\n \n\nsubject to certain registration and settlement procedure\nas set forth in SAFE Circular 36. On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding\nthe Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June\n1, 2015 and superseded SAFE Circular 36 and SAFE Circular 142 on the same date. SAFE Circular 19 launched a nationwide reform of the administration\nof the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion,\nbut continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capitals for expenditure beyond their\nbusiness scopes, providing entrusted loans or repaying loans between non-financial enterprises. Violations of these Circulars could result\nin severe monetary or other penalties. SAFE Circular 19 may significantly limit our ability to use transfer any foreign currency we hold,\nincluding the net proceeds of our initial public offering to fund the establishment of new entities in China by our subsidiaries, to invest\nin or acquire any other PRC companies through our PRC subsidiaries, or to establish variable interest entities in the PRC, which may materially\nand adversely affect our business, financial condition and results of operations. In light of the various requirements imposed by PRC\nregulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able\nto complete the necessary registration or obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary\nregistration or obtain the necessary approval, our ability to make loans or equity contributions to our PRC subsidiaries may be negatively\naffected, which could materially and adversely affect our PRC subsidiaries’ liquidity and its ability to fund its working capital\nand expansion projects and meet its obligations and commitments.\n\n \n\n** Discontinuation of\nany of the preferential tax treatments available to us or imposition of any additional taxes could adversely affect our financial condition\nand results of operations.**\n\n \n\nThe EIT Law and its implementation\nrules, effective 2008, unified the previously existing separate income tax laws for domestic enterprises and FIEs and adopted a unified\n25% enterprise income tax, or the EIT, rate applicable to all resident enterprises in China, subject to certain exceptions. In addition,\ncertain enterprises may enjoy a preferential EIT rate of 15% under the EIT Law if they qualify as High and New Technology Enterprise,\nor HNTE, subject to various qualification criteria. For example, in 2023, Pinmu Century qualified as a HNTE and was eligible for a 15%\npreferential tax rate effective for two years starting from 2023 to 2026. If Pinmu Century fails to maintain or renew its HNTE status,\nits applicable EIT rate may be increased to 25%, which could have a material adverse effect on our financial condition and results of\noperations.\n\n \n\n**Fluctuations in exchange\nrates could have a material and adverse effect on our results of operations and the value of your investment.**\n\n \n\nThe value of the Renminbi against\nthe U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions\nin China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging\nthe value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three\nyears. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained\nwithin a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably.\nOn November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year review of the basket\nof currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, Renminbi is determined\nto be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese\nyen and the British pound. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi\ninternationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure\nyou that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult\nto predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in\nthe future.\n\n \n\n32\n\n \n\n \n\nSignificant revaluation of the\nRenminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars into\nRenminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount\nwe would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments\nfor dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a\nnegative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the Renminbi relative\nto U.S. dollars would affect our financial results reported in U.S. dollar terms regardless of any underlying change in our business or\nresults of operations.\n\n \n\nVery limited hedging options\nare available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions\nin an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,\nthe availability and effectiveness of these hedges may be limited, and we may not be able to adequately hedge our exposure, or at all.\nIn addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi\ninto foreign currency. As a result, fluctuations in exchange rates may have a material and adverse effect on your investment.\n\n \n\n**PRC governmental control\nof currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.**\n\n \n\nThe PRC government imposes controls\non the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency into or out of China,\nwhich essentially may restrict the ability to transfer funds into or out of China. We receive substantially all of our revenues in Renminbi.\nUnder our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC subsidiaries\nto fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account\nitems, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign\ncurrencies without prior approval of the SAFE by complying with certain procedural requirements. Specifically, under the existing exchange\nrestrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends\nto our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted\ninto foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.\nAs a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective\ndebt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in\na currency other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions\nin the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign\ncurrency demands, we may not be able to pay dividends in foreign currencies to our shareholders.\n\n \n\n**Certain PRC regulations\nmay make it more difficult for us to pursue growth through acquisitions.**\n\n \n\nAmong other things, the Regulations\non Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies\nin 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign\ninvestors more time-consuming and complex. Such regulation requires, among other things, that the MOFCOM be notified in advance of any\nchange-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial\nPRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued\nby the State Council in 2008, are triggered. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became\neffective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must\nbe cleared by the MOFCOM before they can be completed. In addition, PRC national security review rules which became effective in September\n2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial\nto national security be subject to security review before consummation of any such acquisition. In 2011, the General Office of the State\nCouncil promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign\nInvestors, also known as Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises\nby foreign investors. Further, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition\nof Domestic Enterprises by Foreign Investors,\n\n \n\n33\n\n \n\n \n\neffective in September 2011, to implement Circular\n6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and\nsecurity” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic\nenterprises with “national security” concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance\nand actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides\nthat a specific merger or acquisition is subject to a security review, it will submit it to the Inter-Ministerial Panel, an authority\nestablished under Circular 6 led by the NDRC, and MOFCOM under the leadership of the State Council, to carry out security review. The\nregulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments,\nleases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation\nstating that the merging or acquisition of a company engaged in the software services business requires security review, and there is\nno requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review. On\nDecember 19, 2020, the NDRC and the MOFCOM jointly promulgated the Measures on the Security Review of Foreign Investment, effective on\nJanuary 18, 2021, setting forth provisions concerning the security review mechanism on foreign investment, including the types of investments\nsubject to review, review scopes and procedures, among others. The Office of the Working Mechanism of the Security Review of Foreign Investment,\nor the Office of the Working Mechanism, will be established under the NDRC, who will lead the task together with the MOFCOM. Foreign investor\nor relevant parties in China must declare the security review to the Office of the Working Mechanism prior to the investments in, among\nother industries, important cultural products and services, important information technology and internet products and services, important\nfinancial services, key technologies and other important fields relating to national security, and obtain control in the target enterprise.\nSee “Item 4. Information on the Company—B. Business Overview—Regulations— Regulations Relating to Foreign Investment.”\n\n \n\nWe may pursue potential strategic\nacquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such\ntransactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM,\nmay delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our\nmarket share.\n\n \n\n**PRC regulations relating\nto the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC\nsubsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’\nability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.**\n\n \n\nIn July 2014, SAFE promulgated\nthe Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and\nRoundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign\nExchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or\nSAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including\nPRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore\ninvestment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore\nacquisitions that we make in the future.\n\n \n\n34\n\n \n\n \n\nUnder SAFE Circular 37, PRC residents\nwho make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore SPVs will be required\nto register such investments with the SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder\nof a SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material\nchange. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with\nthe local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed\nregistration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction,\nshare transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary\nin China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy\non Direct Investment, or SAFE Circular 13, which became effective on June 1, 2015. Under SAFE Circular 13, applications for foreign exchange\nregistration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular\n37, will be filed with qualified banks instead of the SAFE. The qualified banks will directly examine the applications and accept registrations\nunder the supervision of the SAFE.\n\n \n\nWe cannot assure you that all\nof our shareholders that may be subject to SAFE regulations have completed all necessary registrations with the local SAFE branch or qualified\nbanks as required by SAFE Circular 37, and we cannot assure you that these individuals may continue to make required filings or updates\non a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of\nall PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with the\nSAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC\nsubsidiaries’ ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from\nmaking distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially\nand adversely affected.\n\n \n\nFurthermore, as these foreign\nexchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear\nhow these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented\nby the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to\nour foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may materially and\nadversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot\nassure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary\nfilings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy\nand could adversely affect our business and prospects.\n\n \n\nAs of the date of this annual\nreport, to our knowledge, all of our shareholders had registered according to SAFE Circular 37.\n\n \n\n**We face uncertainty with\nrespect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.**\n\n \n\nOn February 3, 2015, the State\nAdministration of Taxation of the PRC, or the SAT, issued the Announcement of the State Administration of Taxation on Several Issues Relating\nto Enterprise Income Tax on Indirect Transfers of Assets by Non-resident Enterprises, or SAT Bulletin 7, which was partially abolished\non December 1, 2017 and December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions involving transfer of taxable assets\nthrough the offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal\ngroup restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to\nboth foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets.\n\n \n\n35\n\n \n\n \n\nOn October 17, 2017, the SAT\nissued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income\nTax at Source, or SAT Bulletin 37, which was partially revised. SAT Bulletin 37 came into effect on December 1, 2017. The SAT Bulletin\n37 further clarifies the practice and procedure of withholding of non-resident enterprise income tax.\n\n \n\nWhere a non-resident enterprise\ntransfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer,\nthe non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such\nIndirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard\nthe existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing,\navoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and\nthe transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a\nrate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to\npenalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.\n\n \n\nWe face uncertainties as to the\nreporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring,\nsale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company\nis transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under\nSAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC\nsubsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to\nexpend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase\ntaxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have\na material adverse effect on our financial condition and results of operations.\n\n \n\n**Additional factors outside\nof our control related to doing business in China could negatively affect our business.**\n\n \n\nAdditional factors that could\nnegatively affect our business include a potential significant revaluation of the Renminbi, which may result in an increase in the cost\nof producing products in China, labor shortages and increases in labor costs in China as well as difficulties in moving products manufactured\nin China out of the country, whether due to port congestion, labor disputes, slowdowns, product regulations and/or inspections or other\nfactors. Prolonged disputes or slowdowns can negatively impact both the time and cost of transporting goods. Natural disasters or health\npandemics impacting China can also have a significant negative impact on our business. Further, the imposition of trade sanctions or other\nregulations against products imported by us from, or the loss of “normal trade relations” status with, China, could significantly\nincrease our cost of products exported outside of China and harm our business.\n\n \n\n**The joint statement by\nthe SEC and the Public Company Accounting Oversight Board, or the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign\nCompanies Accountable Act, or the HFCAA, all call for additional and more stringent criteria to be applied to emerging market companies\nupon assessing the qualification of their auditors, especially non-U.S. auditors who are not inspected by the PCAOB.**\n\n \n\nOn April 21, 2020, the then SEC\nChairman Jay Clayton and the then PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement\nhighlighting the risks associated with investing in companies based in or that have substantial operations in emerging markets including\nChina. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers\nin China and higher risks of fraud in emerging markets.\n\n \n\nOn May 18, 2020, Nasdaq filed\nthree proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive\nMarket”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies,\nand (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s\nauditors.\n\n \n\n36\n\n \n\n \n\nOn May 20, 2020, the U.S. Senate\npassed the HFCAA requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to\naudit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. On December 2, 2020, the U.S. House\nof Representatives approved the HFCAA. On December 18, 2020, the HFCAA was signed into law. Under the HFCAA, if the PCAOB is unable to\ninspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited from trading on a national\nexchange. On December 29, 2022, the AHFCAA was signed into law, which reduced the number of consecutive non-inspection years required\nfor triggering the prohibitions under the HFCAA from three years to two.\n\n \n\nAdditionally, in July 2020, the\nU.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch,\nthe SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S. stock exchanges and their\naudit firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting\ncertain risks, and their implications to U.S. investors, associated with investments in China-based issuers and summarizing enhanced disclosures\nthe SEC recommends China-based issuers make regarding such risks.\n\n \n\nOn December 2, 2021, the SEC\nadopted final amendments to its rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA,\nwhich took effect on January 10, 2022. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection”\nyear, as defined in the rules, under a process to be subsequently established by the SEC. Under the HFCAA and the AHFCAA, our securities\nmay be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for two consecutive\nyears, and this ultimately could result in our shares being delisted. On September 22, 2021, the PCAOB adopted a final rule implementing\nthe HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable\nto inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken\nby one or more authorities in that jurisdiction.\n\n \n\nOur financial statements contained\nin the annual reports on Form 20-F for the fiscal years ended December 31, 2024 and 2023 have been audited by Audit Alliance LLP (“AA”).\nAA is an independent registered public accounting firms headquartered in the United States and is among the public accounting firms that\nare registered with the PCAOB. Our financial statements contained in the annual reports on Form 20-F for the fiscal years ended December\n31, 2025 have been audited by Assentsure PAC (“Assentsure”). Assentsure is an independent registered public accounting firms\nheadquartered in Singapore and is among the public accounting firms that are registered with the PCAOB. Such PCAOB-registered accounting\nfirms are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with\nthe applicable professional standards. On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or\ninvestigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong, because of positions taken\nby PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that\nare headquartered in mainland China or Hong Kong. This list does not include our former auditor, AA, or our current auditor, Assentsure.\nAs of the date of the annual report, we are affected by the HFCAA, and related regulations. However, the recent developments would add\nuncertainties to our listing and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent\ncriteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of\npersonnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial statements.\nWhile our auditor is based in the U.S. and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined\nthat the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction,\nthen such lack of inspection could cause our securities to be delisted from the stock exchange. If, in the future, trading in our ordinary\nshares is prohibited under the HFCAA because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future\ntime, Nasdaq may determine to delist our ordinary shares and trading in our ordinary shares could be prohibited.\n\n \n\nIn August 2022, the PCAOB, the\nCSRC and the Ministry of Finance of the PRC signed a Statement of Protocol, which establishes a specific and accountable framework for\nthe PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and Hong Kong. On December 15,\n2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms\nheadquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB\nwas unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The\nPCAOB continues to demand complete access in mainland China and Hong Kong moving forward and has resumed regular inspections since March\n2023. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting\nfirms headquartered in mainland China and Hong Kong is subject to uncertainties. Should Hong Kong or PRC authorities obstruct or otherwise\nfail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination. If the PCAOB\nis not able to fully conduct inspections of our auditor’s work papers in China, investors may be deprived of the benefits of such\ninspection which could result in limitation or restriction of our access to the U.S. capital markets and trading of our securities may\nbe prohibited under the HFCAA.\n\n \n\n37\n\n \n\n \n\n**Risks Related to Our Ordinary Shares**\n\n \n\n**We have identified material\nweaknesses in our internal control over financial reporting. If we fail to implement and maintain an effective system of internal control,\nwe may be unable to accurately report our operating results, meet our reporting obligations or prevent fraud.**\n\n \n\nPrior to our initial public offering\nin 2020, we were a private company with limited accounting personnel and other resources with which to address our internal controls and\nprocedures. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting, and\nour independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.\n\n \n\nIn the course of auditing our\nconsolidated financial statements as of and for the year ended December 31, 2024, we and our independent registered public accounting\nfirm identified seven material weaknesses in our internal control over financial reporting. As defined in standards established by the\nPublic Company Accounting Oversight Board (United States), a “material weakness” is a deficiency, or a combination of deficiencies,\nin internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or\ninterim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to the absence\nof policies and procedures and related risk mitigations surrounding our IT policies and procedures, including (i) deficiencies in third\nparty vendor management, (ii) deficiencies in backup management and recovery management, (iii) deficiencies in user accounts management,\n(iv) lack of segregation of duties and monitoring of privileged accounts, (v) deficiencies in monitoring access to systems and data, (vi)\ndeficiencies in password management and (vii) deficiencies in vulnerability assessment and patch management. We are currently in the process\nof remediating the material weaknesses described above and we intend to continue implementing the following measures, among others, to\nremediate the material weaknesses. We plan to: (i) prepare a systematic policies and procedures manual for our IT processes in order to\ndevelop enhanced risk assessment procedures and controls related to changes in IT systems; (ii) regularly conduct internal evaluation\nfor IT-related departments and all IT staff; (iii) regularly conduct network security training for IT employees to provide employees with\nsecurity awareness; (iv) establish a qualification assessment procedure for third-party service providers; (v) improve demand analysis\nand detailed design/specification of new IT projects, and all new IT projects undergo user acceptance testing and implementation approval;\n(vi) ensure system and information security, strictly control the approval of system permissions and review them regularly, enforce password\ncomplexity policies, and regularly audit and analyze logs; and (vii) enforce and monitor IT standard procedures and safety management\nspecifications.\n\n \n\nWe are now a public company in\nthe United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a\nreport of management on our internal control over financial reporting in our annual report on Form 20-F beginning with the annual report\nfor the fiscal year ending December 31, 2021. See “Item 15. Disclosure Controls and Procedures” for further information. In\naddition, once we cease to be an “emerging growth company” as such term is defined under the JOBS Act, our independent registered\npublic accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management\nmay conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our\ninternal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent\ntesting, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are\ndocumented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting\nobligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future.\nWe may be unable to timely complete our evaluation testing and any required remediation.\n\n \n\nDuring the course of documenting\nand testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we\nmay identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the\nadequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time,\nwe may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with\nSection 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment,\nwe could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations, which would\nlikely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets,\nand harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk\nof fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations\nand civil or criminal sanctions.\n\n \n\n38\n\n \n\n \n\n**An active trading market\nfor our ordinary shares may not be sustained.**\n\n \n\nOur ordinary shares have been\nlisted on Nasdaq only since April 20, 2021, and we cannot assure you that an active trading market for our ordinary shares will be sustained\nor maintained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time\nyou wish to sell them. An inactive trading market may also impair our ability to raise capital by selling our ordinary shares and entering\ninto strategic partnerships or acquiring other complementary products, technologies or businesses by using our ordinary shares as consideration.\nIn addition, if we fail to satisfy exchange listing standards, we could be delisted, which would have a negative effect on the price of\nour ordinary shares.\n\n \n\nWe expect that the price of our\nordinary shares will fluctuate substantially and you may not be able to sell your shares at or above the price you purchased the shares\nat.\n\n \n\nThe market price of our ordinary\nshares is likely to be highly volatile and may fluctuate substantially due to many factors, including:\n\n \n\n \n●\nthe volume and timing of sales of our products;\n\n \n \n \n\n \n●\nthe introduction of new products or product enhancements by us or others in our industry;\n\n \n \n \n\n \n●\ndisputes or other developments with respect to our or others’ intellectual property rights;\n\n \n\n \n●\nour ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis;\n\n \n \n \n\n \n●\nproduct liability claims or other litigation;\n\n \n \n \n\n \n●\nquarterly variations in our results of operations or those of others in our industry;\n\n \n \n \n\n \n●\nmedia exposure of our products or of those of others in our industry;\n\n \n \n \n\n \n●\nchanges in governmental regulations or in reimbursement;\n\n \n \n \n\n \n●\nchanges in earnings estimates or recommendations by securities analysts; and\n\n \n \n \n\n \n●\ngeneral market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.\n\n \n\nIn recent years, the stock markets\ngenerally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance\nof those companies. Broad market and industry factors may significantly affect the market price of our ordinary shares, regardless of\nour actual operating performance.\n\n \n\nIn addition, in the past, class\naction litigation has often been instituted against companies whose securities have experienced periods of volatility in market price.\nSecurities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such\nlitigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s\nattention and resources from our business.\n\n \n\n39\n\n \n\n \n\n**Our stock currently trades\nbelow $5.00 per ordinary share and thus could be known as a penny stock, subject to certain exceptions. Trading in penny stocks has certain\nrestrictions and these restrictions could negatively affect the price and liquidity of our ordinary shares.**\n\n \n\nOur stock currently trades below\n$5.00 per share. As a result, our stock could be known as a “penny stock,” subject to certain exceptions, which is subject\nto various regulations involving disclosures to be given to you prior to the purchase of any penny stock. The SEC has adopted regulations\nwhich generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share, subject\nto certain exceptions. Depending on market fluctuations, our ordinary shares could be considered to be a “penny stock”, subject\nto certain exceptions. A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell\nthese securities to persons other than established members and accredited investors. For transactions covered by these rules, the broker/dealer\nmust make a special suitability determination for the purchase of these securities. In addition, a broker/dealer must receive the purchaser’s\nwritten consent to the transaction prior to the purchase and must also provide certain written disclosures to the purchaser. Consequently,\nthe “penny stock” rules may restrict the ability of broker/dealers to sell our ordinary shares, and may negatively affect\nthe ability of holders of shares of our ordinary shares to resell them, if the “penny stock” rules apply. These disclosures\nrequire you to acknowledge that you understand the risks associated with buying penny stocks and that you can absorb the loss of your\nentire investment. Penny stocks generally do not have a very high trading volume. Consequently, the price of the stock is often volatile\nand you may not be able to buy or sell the stock when you want to.\n\n \n\n**If we fail to meet applicable\nlisting requirements, Nasdaq may delist our ordinary shares from trading, in which case the liquidity and market price of our ordinary\nshares could decline.**\n\n \n\nWe cannot assure you that we\nwill be able to meet the continued listing standards of Nasdaq. On May 20, 2024, Nasdaq notified us that it was not in compliance with\nNasdaq Listing Rule 5250(c)(1) due to its failure to timely file the 2023 Form 20-F Annual Report with the SEC. On July 11, 2024, we filed\n2023 Form 20-F Annual Report with the SEC. If we fail to meet applicable listing requirements, Nasdaq may delist our ordinary shares from\ntrading, in which case the liquidity and market price of our ordinary shares could decline.\n\n \n\nIn addition, legislative\nor other regulatory action in the United States could result in listing standards or other requirements that, if we cannot meet, may result\nin delisting and adversely affect our liquidity or the trading price of our shares that are listed or traded in the United States. If\nwe fail to comply with the applicable listing standards and Nasdaq delists our ordinary shares, we and our shareholders could face significant\nmaterial adverse consequences, including:\n\n \n\n \n●\na limited availability of market quotations for our ordinary shares;\n\n \n \n \n\n \n●\nreduced liquidity for our ordinary shares;\n\n \n \n \n\n \n●\na determination that our ordinary shares are “penny stock”, which would require brokers trading in our ordinary shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our ordinary shares;\n\n \n \n \n\n \n●\na limited amount of news about us and analyst coverage of us; and\n\n \n \n \n\n \n●\na decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.\n\n \n\nThe National Securities Markets\nImprovement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which\nare referred to as “covered securities.” Because we expect that our ordinary shares will be listed on Nasdaq, such securities\nwill be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow\nthe states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states\ncan regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities\nwould not be covered securities and we would be subject to regulations in each state in which we offer our securities.\n\n \n\n40\n\n \n\n \n\n**A significant portion of\nour total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause\nthe market price of our ordinary shares to drop significantly, even if our business is doing well.**\n\n \n\nSales of a substantial number\nof our ordinary shares in the public market could occur at any time. We had 8,188,574 issued and outstanding ordinary shares as of March\n31, 2026. Of that amount, 3,471,828 shares were restricted as a result of securities laws and/or lock-up agreements, but such shares\nwill be able to be sold in the future subject to securities laws and/or lock-up agreements. If held by one of our affiliates, the resale\nof those securities will be subject to volume limitations under Rule 144 of the Securities Act.\n\n \n\n**We have broad discretion\nin the use of proceeds from our offerings designated for working capital and general corporate purposes, and may spend the proceeds in\nways with which you may disagree or that may not be profitable.**\n\n \n\nA significant portion of our\nproceeds from our initial public offering in April 2021 and follow-on offerings in November 2022, February 2023, July 2023, August 2023,\nand December 2023 were for working capital and general corporate purposes. Our management has broad discretion over the use and investment\nof the net proceeds within those categories may spend the proceeds in ways with which you may disagree or that may not be profitable.\nInvestors have only limited information concerning management’s specific intentions and will need to rely upon the judgment of our\nmanagement with respect to the use of proceeds.\n\n \n\n**We expect to incur significant\nadditional costs as a result of being a public company, which may materially and adversely affect our business, financial condition and\nresults of operations.**\n\n \n\nAs a public company, we incur\nsignificant additional costs associated with corporate governance requirements, including rules and regulations of the SEC, under the\nSarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Exchange Act, as well as the rules\nof the Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs\nand make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to obtain and\nmaintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain\nqualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of\nbecoming a publicly traded company may materially and adversely affect our business, financial condition and results of operations.\n\n \n\n41\n\n \n\n \n\n**Our disclosure controls\nand procedures may not prevent or detect all errors or acts of fraud.**\n\n \n\nWe are subject to the periodic\nreporting requirements of the Exchange Act. We maintain our disclosure controls and procedures to provide reasonable assurance that information\nwe must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed,\nsummarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and\nprocedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the\ncontrol system are met.\n\n \n\nThese inherent limitations include\nthe realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,\ncontrols can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override\nof the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur\nand not be detected.\n\n \n\nOur management has concluded\nthat, due to the material weaknesses described below under “Item 15. Disclosure Controls and Procedures—Management’s\nAnnual Report on Internal Control over Financial Reporting,” as of the end of the period covered by this annual report, our disclosure\ncontrols and procedures were not effective in ensuring that the information required to be disclosed by us in this annual report is recorded,\nprocessed, summarized and reported to them for assessment, and required disclosure is made within the time period specified in the rules\nand forms of the SEC.\n\n \n\n**Because we do not anticipate\npaying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.**\n\n \n\nWe have never declared or paid\ncash dividends. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.\nAs a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain for the foreseeable future.\n\n \n\n**Securities analysts may\nnot publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or\ntrading volume to decline.**\n\n \n\nIf a trading market for our ordinary\nshares develops, the trading market will be influenced to some extent by the research and reports that industry or financial analysts\npublish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage\nand the analysts who publish information about our ordinary shares will have had relatively little experience with us or our industry,\nwhich could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.\nIn the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable\nresearch or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease\ncoverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our\nstock price or trading volume to decline and result in the loss of all or a part of your investment in us.\n\n \n\n**Cayman Islands economic\nsubstance requirements may impact us and our operations.**\n\n \n\nThe Cayman Islands, together\nwith several other non-European Union jurisdictions, has recently introduced legislation aimed at addressing concerns raised by the Council\nof the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. Pursuant\nto the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands, or the ES Act, that came into force on January\n1, 2019, a “relevant entity” conducting a “relevant entity” is required to satisfy the economic substance test\nset out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is Infobird\nCayman, however it does not include an entity that is a tax resident outside of the Cayman Islands. There are nine designated “relevant\nactivities” under the ES Act, and for so long as Infobird Cayman is carrying on activities which falls within any of the designated\nrelevant activities, it shall comply with all applicable requirements under the ES Act. If the only business activity that Infobird Cayman\ncarries on is to hold equity participation in other entities and only earns dividends and capital gains, then based on the current interpretation\nof the ES Act, Infobird Cayman is a “pure equity holding company” and will therefore only subject to the minimum substance\nrequirements, which require us to (i) comply with the all applicable requirements under the Companies Act and (ii) have adequate human\nresources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there\ncan be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation and implementation\nof the ES Act may have an adverse impact on our business and operations.\n\n \n\n42\n\n \n\n \n\n**You may face difficulties\nin protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated\nunder Cayman Islands law.**\n\n \n\nWe are an exempted company incorporated\nunder the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies\nAct (Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against our directors,\nactions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed\nby the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent\nin the Cayman Islands as well as from the common law of England and Wales, the decisions of whose courts are of persuasive authority,\nbut are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under\nCayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United\nStates. In particular, the Cayman Islands have a less developed body of securities laws than the United States. Some U.S. states, such\nas Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman\nIslands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.\n\n \n\nShareholders of Cayman Islands\nexempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and\narticles of association and any special resolutions passed by such companies, and the register of mortgages and charges of such companies)\nor to obtain copies of lists of shareholders of these companies. Our directors have discretion under our amended and restated memorandum\nand articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders,\nbut are not obliged to make them available to our shareholders unless required by the Companies Act of the Cayman Islands or other applicable\nlaw or authorized by the directors or by ordinary resolution. This may make it more difficult for you to obtain the information needed\nto establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.\n\n \n\nAs a result of all of the above,\nour public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members\nof our board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.\n\n \n\n**Certain judgments obtained\nagainst us by our shareholders may not be enforceable.**\n\n \n\nWe are a Cayman Islands company\nand substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted\nin China. In addition, most of our current directors and officers are nationals and residents of countries other than the United States.\nSubstantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible\nfor you to bring an action against us or against these individuals in the United States in the event that you believe that your rights\nhave been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind,\nthe laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors\nand officers.\n\n \n\n**We are an emerging growth\ncompany within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.**\n\n \n\nWe are an “emerging growth\ncompany,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public\ncompanies that are not emerging growth companies, including, most significantly, not being required to comply with the auditor attestation\nrequirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, if we\nelect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem\nimportant.\n\n \n\n43\n\n \n\n \n\nThe JOBS Act also provides that\nan emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private\ncompany is otherwise required to comply with such new or revised accounting standards. We do not plan to “opt out” of such\nexemptions afforded to an emerging growth company. As a result of this election, our financial statements may not be comparable to those\nof companies that comply with public company effective dates.\n\n \n\n**We qualify as a foreign\nprivate issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations\nthat permit less detailed and less frequent reporting than that of a U.S. domestic public company.**\n\n \n\nWe report under the Exchange\nAct as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange\nAct, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the\nsections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under\nthe Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading\nactivities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange\nAct requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information,\nor current reports on Form 8-K upon the occurrence of specified significant events. In addition, our officers, directors and\nprincipal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the\nExchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal\nshareholders purchase or sell our ordinary shares. In addition, foreign private issuers are not required to file their annual report on\nForm 20-F until one hundred twenty (120) days after the end of each fiscal year, while U.S. domestic issuers that are accelerated\nfilers are required to file their annual report on Form 10-K within seventy-five (75) days after the end of each fiscal year. Foreign\nprivate issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material\ninformation. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign\nprivate issuers.\n\n \n\nIf we lose our status as a foreign\nprivate issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers,\nwhich are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our\ncorporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities\nlaws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than\nthe cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase\nour legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were\nrequired to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for\nus to obtain and maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage\nor incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract\nand retain qualified members of our board of directors.\n\n \n\n**As a foreign private issuer,\nwe are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq\ncorporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied\nfully with corporate governance listing standards.**\n\n \n\nAs a foreign private issuer,\nwe are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain\ngovernance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate\ngovernance listing standards.\n\n \n\n44\n\n \n\n \n\nWe do not follow Nasdaq’s\nrequirements regarding shareholder approval for certain issuances of securities under Nasdaq Listing Rule 5635. Under our memorandum and\narticles of association, our board of directors is authorized to issue securities including in connection with certain events such as\nthe acquisition of shares or assets of another company, the establishment of or amendments to equity-based compensation plans for employees,\na change of control of us, rights issues at or below market price, certain private placements and issuance of convertible notes, and the\nissuance of 20% or more of our outstanding ordinary shares.\n\n \n\nIn\naddition, we have elected to follow Cayman Islands practices in lieu of the requirements of (i) having at least three Independent Directors\n(as defined under Nasdaq Listing Rule 5605(a)(2)) as members of the audit committee under the Nasdaq Listing Rule 5605, (ii) having at\nleast two Independent Directors (as defined under Nasdaq Listing Rule 5605(a)(2)) as members of the compensation committee under the Nasdaq\nListing Rule 5605, (iii) having a majority independent board under Nasdaq Listing Rule 5605, (iv) setting up an independent nominations\ncommittee or having independent director oversight of director nominations under Nasdaq Listing Rule 5605, and (v) holding annual meeting\nof shareholders under Nasdaq Listing Rule 5620(a). For more information on our board composition and practices, see “Item 6. Directors,\nSenior Management And Employees—A. Directors and Senior Management” and “—C. Board Practices.”\n\n \n\nOther than those described above,\nthere are no significant differences between our corporate governance practices and those followed by U.S. domestic companies under Nasdaq\ncorporate governance listing standards. We may in the future decide to use the foreign private issuer exemption with respect to some or\nall the other Nasdaq corporate governance rules. As a result, to the extent that we follow other home country practices, our shareholders\nmay be afforded less protection than they otherwise would under the Nasdaq corporate governance listing standards applicable to U.S. domestic\nissuers. We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.\n\n \n\n**There can be no assurance\nthat we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could\nresult in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.**\n\n \n\nA non-U.S. corporation will be\na PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive”\nincome; or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is\nattributable to assets that produce passive income or are held for the production of passive income. For this purpose, cash generally\nis treated as a passive asset. Goodwill is treated as an active asset under the PFIC rules to the extent attributable to activities that\nproduce active income for these purposes. We will be treated as owning our proportionate share of the assets and earning our proportionate\nshare of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock. Although the\nlaw in this regard is not entirely clear, we treat our consolidated variable interest entity as being owned by us for U.S. federal income\ntax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with\nthat entity.\n\n \n\nThe determination of\nwhether we are a PFIC is made annually after the close of each taxable year. This determination is based on the facts and circumstances\nat that time, some of which may be beyond our control, such as the amount and composition of our income and the valuation and composition\nof our assets, including goodwill and other intangible assets, as implied by the market price of our ordinary shares.\n\n \n\nIn particular, because the value\nof our assets for purposes of the PFIC rules may be determined by reference to the market price of our ordinary shares, the recent decline\nin the market price of our ordinary shares has resulted in a significant risk that we were a PFIC for the 2022 taxable year (or, alternatively,\nthat we may become a PFIC for the current or subsequent taxable year). The market price of our ordinary shares may continue to fluctuate\nconsiderably and, consequently, we cannot assure you of our PFIC status for any taxable year. In addition, the composition of our income\nand assets will also be affected by how, and how quickly, we use our liquid assets. If we determine not to deploy significant amounts\nof cash for active purposes, or if it were determined that we do not own the stock of the consolidated variable interest entity for U.S.\nfederal income tax purposes, our risk of being a PFIC may substantially increase.\n\n \n\n45\n\n \n\n \n\nIf we are a PFIC, a U.S. Holder\n(as defined in “Item 10.E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders”) may incur significantly\nincreased U.S. income tax on gain recognized on the sale or disposition of our ordinary shares and on the receipt of distributions on\nour ordinary shares to the extent such distribution is an “excess distribution, and may be subject to burdensome reporting requirements.\nFurther, if we are a PFIC for any year during which the U.S. Holder holds our ordinary shares, the U.S. Holder generally will be required\nto continue to treat us as a PFIC for all succeeding years during which the U.S. Holder holds our ordinary shares even if we cease to\nbe a PFIC in a later taxable year, unless certain elections are made. For more information, see “Item 10.E. Taxation— Passive\nForeign Investment Company Consequences.”\n\n \n\n**We may lose our foreign\nprivate issuer status in the future, which could result in significant additional costs and expenses.**\n\n \n\nAs discussed above, we are a\nforeign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements\nof the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s\nmost recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our ordinary\nshares are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary to maintain\nour foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC\nperiodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available\nto a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors\nand principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange\nAct. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq rules.\nAs a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other\nexpenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing\non a U.S. securities exchange."}