{"url_path":"/sec/jxg/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 INFORMATION ON THE COMPANY**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1546383/0001213900-26-057231-index.html","accession_number":"0001213900-26-057231","cik":"0001546383","ticker":"JXG","issuer_name":"JX Luxventure Group Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1546383/0001213900-26-057231-index.html","primary_entity_key":"0001546383","primary_entity_name":"JX Luxventure Group Inc."},"word_count":18211,"has_tables":true,"body_markdown":"**ITEM 4. INFORMATION ON THE COMPANY**\n\n \n\n**A. History and Development of the Company**\n\n \n\nWe are a Republic of the Marshall Islands company\nincorporated under the Marshall Islands Business Corporations Act (“BDA”) on January 26, 2012. We were originally organized\nunder the name “Acquisition Corp.” for the purpose of acquiring through a merger, capital stock exchange, asset acquisition,\nstock purchase, or similar acquisition transaction, one or more operating businesses or assets.\n\n \n\nThe address of the Company’s principal executive\noffice is Bin Hai Da Dao No. 270, Lang Qin Wan Guo Ji Du Jia Cun Zong He Lou, Xiu Ying District, Haikou City, Hainan Province 570100,\nPeople’s Republic of China.\n\n \n\nOn March 24, 2014, we entered into a share exchange\nagreement and plan of liquidation (the “Exchange Agreement”), as amended on June 21, 2014, with KBS International Holding\nInc., (“KBS International”), Hongri International Holdings Limited (“Hongri International”), a then wholly owned\nsubsidiary of KBS International and Cheung So Wa and Chan Sun Keung, each an individual and shareholder of KBS International. At the closing\nof the transactions contemplated in the Exchange Agreement, occurred on August 1, 2014, we acquired 100% of the issued and outstanding\nequity interest in Hongri International from KBS International. Pursuant to the Exchange Agreement, KBS International was liquidated and\ndissolved in August 2014 and the shares of Common Stock of the Company were distributed to each shareholder of KBS International according\nto their respective ownership of KBS International.\n\n \n\nOn October 31, 2014, we amended our Articles of\nIncorporation to change our name to KBS Fashion Group Limited.\n\n \n\nOn February 3, 2017, the Company effected a one-for-fifteen\n(1-for-15) reverse stock split of the Company’s issued and outstanding Common Stock. Our Common Stock began trading on Nasdaq on\na split-adjusted basis when the market opened on February 9, 2017. \n\n \n\nOn December 9, 2020, we entered into a Share Exchange\nAgreement with Flower Crown Holding, a corporation organized under the laws of the Cayman Islands (the “Flower Crown”), and\nthe shareholders of Flower Crown (each a “FC Shareholder” and collectively the “FC Shareholders”), to acquire\nall the issued and outstanding ordinary shares of Flower Crown in exchange for the issuance to the FC Shareholders an aggregate of 6,478\nshares of our Common Stock (the “Share Exchange”). The Share Exchange transaction was closed on December 21, 2020 and since\nthe closing of the Share Exchange, Flower Crown became our wholly-owned subsidiary.\n\n \n\nFlower Crown is a holding company incorporated\non August 7, 2020 in Cayman Islands, directly owns 100% share capital in Flower Crown (China) Holding Group Co., Limited, a limited company\nincorporated in Hong Kong on May 24, 2018 (“Flower Crown HK”).\n\n  \n\nConcurrently with the closing of the Share Exchange\nAgreement on December 9, 2020, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Ms. Sun Lei,\nour Chief Executive Officer and a director of the Company, which closed on December 21, 2020. Pursuant to the Stock Purchase Agreement,\nthe shares issued to Ms. Lei were held in escrow for the two years by an escrow agent to secure her obligations under the Stock Purchase\nAgreement and were released in every 6 months, pursuant to a vesting schedule set forth in the Stock Purchase Agreement. On December 21,\n2022, all shares that were held in escrow were released under this Stock Purchase Agreement.\n\n \n\nOn June 21, 2021, the Company further amended\nits Restated Articles by filing the Articles of Amendment with the Registrar of the Corporation, to permit holders of a majority of the\ntotal voting power of the outstanding capital stock to take any action that is required or permitted to be taken at a meeting of the shareholders,\nby written consent.\n\n \n\nOn October 4, 2021, the Company changed its name\nfrom “KBS Fashion Group Limited” to “JX Luxventure Limited” by filing another Articles of Amendment to the Restated\nArticles with the Registrar of the Corporation.\n\n \n\n42\n\n \n\n \n\nEffective December 13, 2021, we reorganized our\ncorporate subsidiary structure in the PRC under Flower Crown Holding (“FLH”). On December 21, 2021, we closed a Share Exchange\nAgreement with FLH, which operated its China subsidiaries, Jin Xuan Luxury Tourism (Hainan) Digital Technology Co., Ltd. (“JX Hainan\nDigital”), Beijing Heyang International Travel Service Co., Ltd. (“Heyang Travel”) and Flower Crown (Hainan) Cross-Border\nE-Commerce Co., Ltd. (“FCEC”) through a variable interest structure (“VIE”). As a result of the FLH’s China\nsubsidiaries restructuring, we terminated the original VIE contractual agreements and we no\nlonger operate those entities through a VIE structure and became the indirect sole shareholder of JX Hainan and Heyang Travel. As part\nof the restructuring, due to the restriction of foreign ownership by the relevant laws and regulations of the People’s Republic\nof China, namely Provisions on Administration of Foreign Invested Telecommunications Enterprise (外商投资电信企业管理规定),\nwe divested FCEC under a Shares Transfer Agreement with a third party. FCEC represented less than 5% of our total revenues.  The\nreorganization was approved by the unanimous consent of our Board of Directors and the affirmative vote of the holders of approximately\n60.4% of our total issued and outstanding capital stock.\n\n \n\nFollowing the reorganization, we had the following\ncorporate structure between December 13, 2021 and October 19, 2022:\n\n \n\n \n\nOn April 25, 2022, the Company filed the Certificates\nof Designation with the Registrar of Corporations under the Company’s former name, KBS Fashion Group Limited (except for the Certificate\nof Designation of Series D Preferred), and on April 27, 2022, the Company filed with the Registrar of Corporations the First Amended and\nRestated Certificate of Designation of Series A Preferred, the Amended and Restated Certificate of Designation of Series B Participating,\nthe Amended and Restated Certificate of Designation of Series C Preferred, and the Amended and Restated Certificate of Designation of\nSeries D Preferred, reflecting the Company’s name “JX Luxventure Limited” and restating all provisions set forth in\nthe Certificates of Designation of Preferred Stock.\n\n \n\nOn May 10, 2022, the Company filed the Second\nAmended and Restated Certificate of Designation of Series A Preferred, which amended the timing of the conversion of Series A Preferred\ninto Common Stock and restated all other provisions set forth in the First Amended and Restated Certificate of Designation of Series A\nPreferred.\n\n  \n\nOn June 22, 2022, the\nBoard authorized a share repurchase program of up to US$5,000,000 of the Company’s common stock from time to time during a 12-month\nperiod by Mr. Lei, our Chief Executive Officer of Company (the “Share Repurchase Program”). Pursuant to the Repurchase Program,\nMrs. Lei acquired in private negotiated transactions 2,533shares of Common Stock, at the total purchase price of $1,780,000; 1,240,000\nshares of Series A Convertible Preferred Stock, convertible into 2,067 shares of Common Stock at the total purchase price of $1,240,000;\nand 80,000 shares of Series D Convertible Preferred Stock, convertible into 1,733 shares of Common Stock at the purchase price of $2,080,000.\n\n \n\n43\n\n \n\n \n\nOn July 12, 2022, the Company entered into a new\nEmployment Agreement with Sun Lei (the “2022 Employment Agreement”) for a one (1) year term, pursuant to which Sun Lei received\ncompensation of USD1.00 but no stock compensation. The 2022 Employment Agreement has expired, and the Company did not enter into a new\nemployment agreement with Sun Lei in 2023 and in 2024.\n\n \n\nOn October 26, 2022, the Board, acting by unanimous\nconsent, in accordance with applicable provisions of the Marshall Island Business Corporations Act (“BCA”) and the Company’s\nBylaws, terminated the 2022 Plan and adopted a new 2022 Equity Incentive Plan (the “New 2022 EIP”), replacing the 2022 Plan,\neffective immediately. On the same date, the holders of 75% of the total issued and outstanding capital stock of the Company entitled\nto vote therein, acting by written consent, approved and authorized the terms and provisions of the New 2022 EIP, in accordance with the\napplicable provisions of the BCA and the Company’s Bylaws.\n\n  \n\nThe New 2022 Plan provided\nfor a maximum of 66,667 shares authorized for issuance, subject to adjustments in the event of certain reorganizations, mergers, combinations,\nrecapitalizations, share splits, share dividends, or other similar events which change the number or kind of shares outstanding. All shares\nof Common Stock authorized for issuance under the New 2022 Plan were issued by December 2022.\n\n  \n\nOn October 19, 2022, the Company entered into\na stock purchase agreement (the “Stock Purchase Agreement”) with Shenzhen Zhongjiyingfeng Investment Co., Ltd. (the “Purchaser”),\npursuant to which on the same date it closed the transaction (the “Closing”) Company’s sold 20,000 shares of common\nstock of Hongri International, constituting all of the issued and outstanding capital stock of Hongri International, to the Purchaser,\nin consideration for $10,000,000 (the “Purchase Price”).\n\n \n\nAt the Closing, the Purchaser issued to the Company\na 5% promissory note in the principal amount of $10,000,000, in payment of the Purchase Price (the “Note”), payable in four\ninstallments, on the following dates and in the following amounts: (a) $1,000,000, together with an accrued interest, is payable on or\nbefore November 19, 2022; (b) $2,000,000, together with an accrued interest, is payable on or before April 19, 2023; (c) $3,000,000, together\nwith an accrued interest, is payable on or before April 19, 2024, and (d) the remaining $4,000,000, together with an accrued interest,\nis payable on or before October 19, 2024. As further inducement of the Company to enter into the Stock Purchase Agreement and to sell\nthe Shares to the Purchaser on the terms of the Stock Purchase Agreement, on the Closing, the Purchaser and the Company entered into and\nexecuted a Pledge and Security Agreement (the “Pledge Agreement”), pursuant to which the Purchaser, as the Borrower under\nthe Note, granted the Company a first priority security interest in the Shares of Hongri.\n\n \n\nOn April 15, 2024, Jinxuan (Hainan) Digital Technology\nCo., Ltd, the Company’s indirect wholly-owned subsidiary, acquired 100% share capital of Tianjin Baoliting Intelligent Technology\nCo., Ltd., a subsidiary of the Purchaser, in consideration of the remaining $7,0000,000 due by the Purchaser to the Company under the\nNote. As a result of the sale of Hongri International, the Company disposed its menswear business segment, and Hongri International and\nall its wholly-owned subsidiaries are no longer subsidiaries of the Company.\n\n \n\n44\n\n \n\n \n\nFollowing the Closing of Hongri, the Company’s\ncorporate structure changed as follows:\n\n \n\n** **\n\nOn April 26, 2023, the Company effected the 1-for-10\nreverse stock split of its Common Stock. On May 23, 2023, Nasdaq Staff notified the Company that the Company regained compliance with\nthe Minimum Bid Requirement and that the hearing previously scheduled for May 25, 2023 (the hearing was related to regaining compliance\nwith the Minimum Bid Requirement) has been canceled. The letter from Nasdaq also stated that the Company is in compliance with all applicable\nlisting standards and that its stock will continue to be listed and traded on Nasdaq. \n\n \n\nOn August 23, 2024, the Company issued a negotiable,\ntransferrable, due on demand, promissory note, without an interest (the “2024 Original Note”), in the principal amount of\n$3,000,000 (the “Principal Amount”) to Huidan Li, the Co-Chairman of the board of directors of the Company, in consideration\nof the continuous advances of funds to the Company by the Co-Chairman for a period of over two (2) years.\n\n \n\nOn August 26, 2024, the Company entered into the\nNote Transfer and Assignment Agreement (the “Assignment Agreement”) with the Mr. Li and eight (8) investors (the “Assignees”\nor the “Holders”), pursuant to which on the same date Mr. Li sold, transferred, and assigned the 2024 Original Note and, collectively,\nall of his rights, title and interest in, to and under the 2024 Original Note to the Assignees, with each Assignee being assigned all\nof the Original Noteholder’s rights, title and interest in, and to the principal amount of $375,000 (the “Assignment”),\nand the Company recognized each Assignee as the owner of the Assignment, and issued to each Assignee a new promissory note in the principal\namount of $375,000 (the “New Note”) on the same terms as the 2024 Original Note.\n\n \n\nOn August 26, 2024, the Company and the Holders\nentered into a debt exchange agreement (the “2024 Exchange Agreement”), pursuant to which, on September 26, 2024, at the closing,\nthe Company issued to Holders, collectively, an aggregate of 1,000,000 shares (each Holder was issued 125,000 shares) of newly-designated\nSeries E Convertible Preferred Stock (the “Series E Stock”), in exchange of cancellation of $375,000, representing each Holder’s\nportion of the Company’s total indebtedness to the Holders under the New Notes. The shares of Series E Stock were issued pursuant\nto the terms of the Certificate of Designation of Series E Stock, filed by the Company on September 23, 2024 with the Registrar of the\nCorporation under the BCA, establishing the Series E Stock.\n\n \n\n45\n\n \n\n \n\nThe Certificate of Designation of Series E Stock\nfeatures a stated value of $3.00 per share, the conversion rate of 1 for 2.5 (reflecting the 1-for-4 post reverse split ratio), no additional\nconsideration by the Holder for the conversion of Series E Shares into the shares of the Company’s common stock and provided the\nschedule of conversion, such as, (i) up to 30% of the Series E Shares issued to each Holder may be converted by such Holder at any time\nfrom the date of the issuance; (ii) up to additional 30% of the Series E Shares counted on the date of the issuance may be converted by\nsuch Holder at any time after 90 days from the date of the issuance; (iii) up to 40% of the Series E Shares counted on the date of the\nissuance may be converted by such Holder after six (6) months from the date of the issuance. Pursuant to the Certificate of Designation\nof Series E Stock, on April 3, 2025, the Company required holders to convert all Series E Shares that remained outstanding on or after\nMarch 14, 2025 into shares of common stock. As a result, as of the date of this Annual Report, all of 1,000,000 Series E Shares were converted\ninto 166,667 shares of Common Stock, and the Company does not have any outstanding shares of Series E Preferred Stock.\n\n \n\nOn December 20, 2024, the Company changed its\ntrading symbol from “JXJT” to “JXG.”\n\n \n\nOn December 27, 2024 the Company filed the Amendment\nwith the Registrar or Deputy Registrar of Corporations in the Marshall Islands, implementing the 1-for-4 reverse stock split and the change\nof the Company’s name to “JX Luxventure Group Inc.” The Company began trading under its new name and on a post-reverse\nstock split basis on January 8, 2025.\n\n \n\nOn February 17, 2025, the Company issued a new\npromissory note (the “2025 Original Note”) to Mr. Li in the principal amount of $3,500,000, in consideration of funds advanced\nby Mr. Li to the Company. On April 21, 2025, Mr. Li transferred and assigned to six (6) investors (the “Assignees”) an aggregate\nof $1,380,000, representing a portion of the principal amount under the 2025 Original Note (the “Total Assigned Debt”), with\neach Assignee to be assigned a portion of the Total Assigned Debt equal to $230,000 (the “Assignment”), in consideration of\nthe purchase price of $230,000 from each Assignee. Upon Mr. Li’s assignment of the Total Assigned Debt to Assignees, the Company\nissued to Mr. Li a new promissory note in principal amount of $2,120,000, representing the total remaining outstanding amount due to Mr.\nLi under the 2025 Original Note, on the terms of the 2025 Original Note. The Company also issued promissory notes to each Assignee in\nthe principal amount of $230,000 (the “Investor Note”), recognizing each Assignee as the legal holder of the Assignment and\nthe noteholder of the Investor Note. The terms of the Investor Note are the same as the terms of the 2025 Original Note issued by the\nCompany to Mr. Li.\n\n \n\nOn April 22, 2025, the Assignees entered into\na debt exchange agreement with the Company (the “2025 Exchange Agreement”), pursuant to which, the Assignees agreed to cancel\nan aggregate of $1,380,000, the total amount of the Company’s indebtedness (each Assignee to cancel $230,000 under the promissory\nnote issued to such Assignee) in exchange for the issuance of 69,000 shares (each Assignee was issued 11,500 shares) of a new series of\nthe Company’s preferred stock, designated as Series F Convertible Preferred Stock (the “Series F Preferred Stock”),\npursuant to the terms and subject to conditions set forth in the 2025 Exchange Agreement.\n\n \n\nOn May 23, 2025, the Company filed the Certificate\nof Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock (the “Certificate of Designation of\nSeries F Stock”) with the Registrar of the Corporation under the Marshall Island Business Corporations Act, establishing the Series\nF Stock. \n\n \n\nSeries F Shares feature a stated value of $20.00\nper share and are convertible into shares of the Company’s Common Stock at the conversion rate of 1 for 100 (prior to the 1-for-15\nreverse stock split), without payment or any additional consideration by the holder thereof. The conversion is subject to the following\nschedule: (i) up to 2,000 of the Series F Shares issued to each holder may be converted by such holder at any time from the date of the\nissuance; (ii) up to additional 2,500 of the Series F Shares may be converted by such Holder at any time after 90 days from the date of\nthe issuance; (iii) up to 3,000 of Series F Shares counted on the date of the issuance may be converted by such Holder after six (6) months\nfrom the date of the issuance; and (iv) the remaining 4,000 of the Series F Shares may be converted by such holder after nine (9) months\nfrom the date of the issuance. If any Series F Shares remain outstanding on or after one (1) year from the date of the issuance, the Company\nwill have the right, but not the obligations, to require the holders of such Series F Shares to convert them into the number of fully\npaid and non-assessable shares of common stock.\n\n \n\n46\n\n \n\n \n\nOn May 29, 2025, at the closing of the Exchange\nAgreement, the Company issued to the Holders an aggregate of 69,000 shares of Series F Stock in cancellation of the Total Amount Due (each\nHolder received 11,550 shares of Series F Stock) in cancellation of $230,000 principal amount under the Note issued to each Holder). As\nof the date of this Annual Report, all of the 69,000 shares of Series F Stock were converted into shares of Common Stock, and there are\nno outstanding shares of Series F Stock.\n\n \n\n**Recent Developments**\n\n \n\nOn May 7, 2025, the Company amended the New 2022\nEIP by Amendment #1 to, among other things, (i) change the name of the plan from “JX Luxventure Limited New 2022 Equity Incentive\nPlan” to “JX Luxventure Group Inc. New 2022 Equity Incentive Plan”, to reflect the current name of the Company; (ii)\nincrease the maximum number of shares authorized under the New 2022 EIP to 1,666,667 shares of Common Stock, and (ii) eliminate limitation\non the maximum number of shares to be issued under the New 2022 EIP to any individual participant in any one fiscal year of the Company.\nOn August 1, 2025, the Company further amended the New 2022 EIP by Amendment #2, which reduced the maximum number of shares of Common\nStock authorized for issuance under the New 2022 EIP from 1,666,667 to 666,667 shares of Common Stock. Amendment #2 was approved by the\nunanimous written consent of the Board and by written consent of the holders of 52% of the total issued and outstanding capital stock\nof the Company.\n\n \n\nOn July 14, 2025, the Company and Sun Lei, the\nCompany’s Chief Executive Officer, entered into the Debt Exchange Agreement, pursuant to which on the same date, the Company issued\n33,337 shares of Common Stock to Ms. lei in exchange for cancellation of $510,000, representing a portion of the total outstanding amount\ndue owed by the Company to Ms. Lei.\n\n \n\nOn September 3, 2025, the Company and Sun\nLei entered into another debt exchange agreement (the “Debt Exchange Agreement”), pursuant to which on September 25, 2025,\nat the closing of the Debt Exchange Agreement, Company issued her an aggregate of 2,352,941 shares of Common Stock at the purchase price\nof $0.85 per share in exchange for her cancellation of $2,000,000, representing a portion of the total outstanding amount of her loans\nto the Company.\n\n \n\nOn December 16, 2025, the Company and Sun Lei\nentered into another debt exchange agreement (the “Debt Exchange Agreement”), pursuant to which the Company on January 2,\n2026, at the closing of the Debt Exchange Agreement, the Company issued to Ms. Lei an aggregate of 300,000 shares of Common Stock in exchange\nof her cancellation of $1,470,000, representing a portion of the total outstanding amount of her loans to the Company.\n\n \n\nOn March 6, 2026, the Company and Mr. Li, the\nCo-Chairman of the Board, entered into the Debt Exchange Agreement, pursuant to which on March 26, 2026, the Company issued to Mr. Li\n650,307 shares of Common Stock, at the price of $3.23 per share, in exchange for Mr. Li’s cancellation of $2,120,000, the outstanding\namount under the promissory note, dated April 21, 2025.\n\n \n\nOn March 26, 2026, the Company and Ms. Lei entered\ninto a new debt exchange agreement, pursuant to which on April 10, 2026, the Company issued to Ms. Lei 2,100,000 shares of Common Stock,\nat the price of $2.986 per share, in exchange for her cancellation of $6,270,600, representing a portion of the total outstanding amount\ndue by the Company to Ms. Lei.\n\n \n\nOn January 3, 2026, the Company issued an aggregate\nof 140,000 shares of its common stock (the “Bonus Shares”) to the four members of the Board, including the Co-Chairman, Huidan\nLi, and the three independent directors, Baojun Zhu, Mu Ruifeng and Jin Yan. Each such director received 35,000 shares of Common Stock\nas compensation for such director’s services for the fiscal year ended 2025.\n\n \n\nOn April 13, 2026, the Company entered into a\nshare exchange agreement (the “Share Exchange Agreement”) with Dazzly Investment, Inc., a privately held corporation organized\nunder the laws of the Marshall Island (“Dazzly” or “Seller”), and all shareholders of the Seller (the “Seller\nShareholders”). Subject to the closing conditions set forth in the Share Exchange Agreement, the Company will acquire from the Seller\nShareholders an aggregate of 3,500 shares of capital stock of Dazzly (the “Purchased Shares”), constituting 10% of the total\noutstanding capital stock of the Seller, on the pro-rata basis, where each Seller Shareholder irrevocably agreed to sell and assign to\nthe Company 10% of the Purchased Shares held by such Seller Shareholder in exchange for an aggregate of 2,783,046 shares (the “Exchange\nShares”) of the Company’s Common Stock on a pro rata basis.\n\n \n\n47\n\n \n\n \n\nDazzly, through Lang Hui Trade Limited (“Lang\nHui”), a Hong Kong company and its wholly-owned subsidiary, is a business-to-business (B2B) pharmaceutical distributor and wholesaler\nin the Hong Kong pharmaceutical supply chain. It acts as an intermediary between pharmaceutical manufacturers (local and international)\nand downstream buyers. The key elements of its day-to-day mode of operations include: (a) sourcing and procurement; (b) import, export\nand local distribution; and (c) sales and supply process.\n\n \n\nThe closing of the Share Exchange Agreement will\noccur upon satisfaction of certain conditions, including, among other things: (a) the accuracy of the parties’ respective representations\nand warranties in the Share Exchange Agreement, subject to specified materiality qualifications; (b) compliance by the parties with their\nrespective pre-closing obligations in the Share Exchange Agreement in all material respects; and (c) submission by the Company of the\nListing of Additional Shares notification to the Nasdaq Capital Market at least 15 calendar days before the issuance of the Exchange Shares.\n\n \n\nThe terms of the Share Exchange Agreement and\nthe Exchange Shares were approved by the Seller Shareholders, the board of directors of each Dazzly and the Company, and the holders of\na majority of capital stock of the Company, as being fair and in the best interests of the Company and its shareholders.\n\n \n\n*Current Corporate Structure.*\n\n \n\nSince August 2023, the Company has been further\nchanging its corporate structure, resulting in the sale of 100% ownership of Heyang Travel and incorporation of new entities, without\nchanging the core of its business operations.\n\n \n\nOn October 8, 2023, the Company sold 100% ownership\nin Beijing Heyang International Travel Services Co., Ltd, a PRC subsidiary of JX Luxury Tourism, and its indirect PRC operating subsidiary,\nto a non-related third party for RMB1.\n\n \n\nOn August 3, 2023, Flower Crown acquired 100%\nshare capital of Billion Place Limited (Hong Kong) Co., Limited (“Billion Place HK”), a limited company incorporated in Hong\nKong on March 13, 2023. This Hong Kong holding company became a wholly-owned subsidiary of Flower Crown and our indirect wholly-owned\nsubsidiary.\n\n \n\nOn March 7, 2024, Baofu (Zhuhai) Technology Co.,\nLtd. (“Baofu Technology”) was incorporated, under the PRC laws. This entity became a direct wholly-owned subsidiary of Billion\nPlace HK and is engaged in Technology Solution for Tourism Cross-Border Operations business\nsegment.\n\n \n\nOn August 6, 2025, JX Luxury Tourism sold its\nentire 51.0% equity interest in Hefei Aitong Culture Tourism Development Co., Ltd., a company incorporated in the PRC on December 27,\n2023, to the entity’s minority shareholder. The transaction was consummated for nominal consideration. \n\n \n\nJin Xuan (Shenzhen) International Trade Co., Ltd.\n(“JX Shenzhen”) was incorporated on Feb 6, 2024 under PRC laws. It became a wholly-owned subsidiary of Flower Crown HK and\nis engaged in Cross-border Merchandise business segment.\n\n \n\nShenzhen Siquanrun Technology Co., Ltd was incorporated\nunder the PRC laws on September 9, 2024. On September 10, 2025 it became a wholly owned subsidiary of Flower Crown HK and is engaged in\nsoftware development and technology support services.\n\n \n\nHainan Si Quan Run Hang International travel agency\nCo., Ltd. (“Hainan Travel”) was incorporated under PRC laws on August 9, 2023. On March 7, 2024, Hainan Travel became an indirect\nwholly-owned subsidiary of Billion Place HK when Baofu Technology was acquired by Billion Place HK. It is engaged in Airline Tickets and\nTourism Services business segment.\n\n \n\nOn April 15, 2024, JX Hainan acquired 100% share\ncapital of Tianjin Baoliting Intelligence Technology Co., Ltd (“Baoliting”), a company incorporated under PRC laws on August\n11, 2023 It became a wholly-owned subsidiary of and is engaged in software development and technology support services.\n\n \n\nOn May 31, 2024, Hefei Si Quan Run Hang International\ntravel agency Co., Ltd. (“Hefei Travel”) was incorporated under PRC laws wholly-owned subsidiary of Baofu Technology. It is\nengaged in Airline Tickets and Tourism Services business segment.\n\n \n\n48\n\n \n\n \n\nThe Securities and Exchange Commission, or SEC,\nmaintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically\nwith the SEC at http://www.sec.gov.\n\n \n\nSee “*Item\n5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures*” for a discussion\nof our capital expenditures. Our web site address is http:// www.jxluxventure.com/en/. Information contained on, or that can be\naccessed through, our website does not constitute a part of this Annual Report.\n\n \n\nThe following diagram illustrates our corporate\nstructure and our subsidiaries as of the date of the Annual Report:\n\n \n\n \n\n**B. Business Overview**\n\n \n\nWe are a holding company incorporated in Marshall\nIslands that conducts substantially all of its business operations in China. Following the sale of our wholly-owned subsidiary, Hongri\nInternational and its wholly-owned subsidiaries, through which the Company previously operated its menswear business, we divested our\nmenswear business and have consistently focused our business operations on the tourism sector and supplying related products, including\ntechnology solutions, to business partners in China, both online and offline.\n\n \n\n49\n\n \n\n \n\nWe believe\nthat the significant growth and success of our business operations since 2020 can be attributed to the high quality of our employees,\nour ability to offer our business clients high-end travel products full range of services related to luxury tourism and supplemental\nservices to reduce their total cost of procurement and ensuring that our clients receive\nthe high-quality professional assistance they need. \n\n \n\nWe operate in the following operating segments of business:\n\n \n\n \n1)\nAirline tickets and tourism services.\n\n \n\n \n2)\nSoftware Solution for Tourism Cross-border operation and\n\n \n\n \n3)\nTourism Cross-border Merchandise. The focus on our technology solution has enabled us to achieve significant growth since 2020 by facilitating tourism cross-border commerce and offering services in tourism and airline tickets.\n\n \n\nIn 2024, the Company expanded its business operations in cross-border\nmerchandize segment, and during 2025, it continues focusing on wholesale trade sector and specializing in duty-free and cross-border consumer\ngoods. We also continue providing integrated solutions in wholesale trade, including logistics, supply chain management, and technology\nsolutions to support the efficient distribution of tourism-related products.\n\n \n\n**Our Mission**\n\n \n\nOur mission is to provide outstanding value to\nour clients and to enhance their satisfaction. We believe that we have and will maintain a competitive edge in the evolving travel industry\nthat will help us to remain at the forefront of the evolving travel industry. based on our reliability, our dedication to deliver professional\nhigh-quality value that contributes to the success and growth of our clients and our comprehensive approach to procurement, package design,\nand distribution of our products and services.\n\n \n\n**Our Strategy**\n\n \n\nTo achieve this goal, we implement the following\nstrategy:\n\n \n\n \n●\nStrategic Partnerships: We continuously seek new opportunities to forge mutually beneficial partnerships with airlines and other stakeholders in the travel industry, further enhancing our service offerings.\n\n \n\n \n●\nTechnology Advancements: Our investment in cutting-edge software solutions enables us to streamline processes, optimize pricing, and ultimately deliver superior travel experiences to our clients’ end-users.\n\n \n\n \n●\nCustomer Support: We prioritize providing high-quality customer support, ensuring that our business clients receive the assistance they need to address any challenges that may arise during their partnership with us.\n\n \n\n \n●\nMarket Analysis: Our team of experts constantly monitors market trends and industry developments, allowing us to adapt and innovate our offerings to meet the evolving needs of our clients.\n\n \n\nSince December 2021, our subsidiaries engaged\nin the following transactions related to cross-border merchandise, the software solution for tourism cross-border operations, and travel\nservices and products with our business clients and partners:\n\n \n\nOn December 30, 2021, Flower Crown (China) Holding\nGroup Co., Limited. (“Flower Crown”), entered into a Global Shopping E-Commerce Open Platform Store Service Agreement (the\n“E-Commerce Service Agreement”) with Global Premium Buy (Macau) Limited (“GPBL”). Pursuant to the E-Commerce Service\nAgreement, Flower Crown has opened online stores on GPBL’s platform and engages in product sharing on content platforms operated\nby GPBL’s affiliates, which include “Tik Tok”, “Dou Yin”, “Xigua” and “Tik Tok Volcano\nEdition”.  \n\n \n\nOn December 27, 2021, JX Luxventure (Hainan) Digital\nTechnology Co., Ltd. closed a Real Estate Transaction Contract with a non-affiliate, acquiring a piece of commercial real estate of 240\nsquare meters for cross-border operations for the amount of USD $2,338,464 based upon the appraisal report.\n\n \n\n50\n\n \n\n \n\nOn February 9, 2022, JX Luxury Tourism a subsidiary\nof the Company, entered into and executed a Memorandum of Japanese High-end Life Style Services Strategic Cooperation Agreement (the “Cooperation\nAgreement”) with Xin Hua Fund Co., Ltd. (“XHFC”). Pursuant to the Cooperation Agreement, JX Luxury Tourism and XHFC\nwill cooperate to bring high-end Japanese medical treatment, rehabilitation treatment, precision physical examination, anti-aging beauty\nand other related services to the China market.\n\n \n\nOn March 10, 2022, JX Luxury Tourism entered into\nand executed a Strategic Cooperation Framework Agreement on Cross-border Supply Chain of Duty Free Merchandize (the “Agreement”)\nwith Aikayun Technology (Hainan) Co., Ltd. (“Aikayun”). Pursuant to the Agreement, JX Luxury Tourism will have the exclusive\nright to distribute cross-border products from Japan in the Hainan Island in the amount of up to RMB1,000,000,000.\n\n \n\nOn March 21, 2022, JX Luxury Tourism, entered\ninto and executed a Framework Agreement on Strategic Cooperation (the “Agreement”) with Chongqing E-Pet Technology Co., Ltd.\n(“Chongqing E-Pet”), one of the major operators of online cross-border pet-food shopping platform in China. Pursuant to the\nAgreement, Chongqing E-Pet will purchase from JX Luxury Tourism cross-border pet foods in the amount up to USD60,000,000 to be distributed\non the platforms operated by Chongqing E-Pet.\n\n \n\nOn March 31, 2022, JX Luxury Tourism entered into\nand executed a Framework Agreement on Strategic Cooperation (the “Agreement”) with Ragdoll International Trading Co., Ltd.\n(“Ragdoll”), an E-commerce platform operator. Pursuant to the Agreement, Ragdoll will purchase from JX Luxury Tourism cross-border\npet foods in the amount of up to USD30,000,000 to be distributed on the platforms operated by Ragdoll. \n\n \n\nOn June 1, 2022, JX Luxury Tourism entered into\nand executed a Technology Consulting Agreement (the “Agreement”) with Tianjin City Wei Ka Technology Co., Ltd. (“Tianjin\nWei Ka”). Pursuant to the Agreement, JX Luxury Tourism will provide technology consulting services to Tianjin Wei Ka by delivering\na solution for a non-fungible token (NFT)-based virtual human host to be used on live stream platforms.\n\n \n\nOn June 17, 2022, JX Luxury Tourism entered into\nand executed a Framework Agreement on Strategic Cooperation (the “Agreement”) with Hainan Douxing Cultural Media Co., Ltd.\n(“Hainan Douxing”), one of the major live stream content providers with over 30 A list live streamers and reaches over 30,000,000\nfollowers in China. Pursuant to the Agreement, Hainan Douxing will sell JX Luxury Tourism cross-border merchandise, including cosmetics\nand skincare products, in the amount up to USD30,000,000 on the live-stream E-commerce shows hosted by Hainan Douxing.\n\n \n\nOn July\n26, 2022, Jin Xuan (Hainan) Holding Co., Ltd. (“JX Hainan”), entered into and executed a Cooperation Agreement (the “Agreement”)\nwith Kaiwo International Trading Co. Ltd. (“Kaiwo”). Pursuant to the Agreement, Kaiwo will sell high-end foreign luxury\nautomobiles supplied by JX Hainan in the amount of up to USD50,000,000.\n\n \n\nOn October 3, 2022, Flower Crown (China) Holding\nGroup Co., Ltd. (“JXFC”) entered into and executed a Strategic Cooperation Agreement (the “Agreement”) with Hainan\nHang Seng Zhongli Commercial Holding Co., Ltd. (“HS Zhongli”), a leading distributor of pet products in China, for the sale,\nmarketing and distribution of JXFC’s pet food products by HS Zhongli. The Agreement provides that the target annual sales amount\nof JXFC’s pet food products is $20,000,000 and if HS Zhongli achieves this targeted annual sales amount, the Agreement will be automatically\nrenewed for an additional year.\n\n \n\nOn July 17, 2023, JX Luxury Tourism entered into\nand executed Technology Development and Promotion Commission Contract (the “Technology Development Agreement”) with Tianjin\nBaixing Pharmaceutical Wholesale Co., Ltd. The Technology Development Agreement provides for the development of a medical ERP management\nplatform, which will utilize a Chatgpt-type technology.\n\n \n\nOn July 1, 2024, Jin Xuan (Hainan) Holding Co.,\nLtd. (“JX Hainan”) entered into and executed a Cooperation Agreement (the “Agreement”) with Tianjin\nZhongsheng United Automobile Trading Co., Ltd. (“Tianjin Auto Trading”). Pursuant to the terms of the Agreement, Tianjin Auto\nTrading is required to sell high-end foreign luxury automobiles supplied by JX Hainan in the amount not less than USD100,000,000.\n\n \n\n51\n\n \n\n \n\nOn July 17, 2025, JX Hainan. entered into and\nexecuted the 2025 Strategic Cooperation Framework Agreement (the “Agreement”) with Qingxiang (Hainan) Cross-Border E-Commerce\nCo., Ltd., which provides for the in-depth market development, customer relationship maintenance, and technical service cooperation between\nthe parties in the cross-border duty-free supply chain and related fields.\n\n \n\nOn September 22, 2025, JX Hainan entered\ninto a System Equipment Sales and System Research and Development Exclusive Project Service Agreement (the “Agreement”) with  Beijing\nShuhangtong Information Technology Co., Ltd (“BSITC”), pursuant to which BSITC commits to purchasing from JX Hainan customized\nAI intelligent cross-border pharmacy equipment, ERP comprehensive management systems, and SBBC store distribution systems, along with\nassociated secondary development, specialized technical research, and three-year maintenance services, for up to approximately $5,000,000\nin value.\n\n \n\n**Competition:**\n\n \n\nWe face intense competition in the cross-border merchandise\nand tourism industries from large suppliers and wholesalers of a broad range of services, including tourism and travel-related products.\nThese companies maintain or develop self-distribution systems for their businesses and have greater brand recognition and financial and\nother resources than we do, which may make it more difficult for us to maintain or gain market share. We also face intense competition\nfrom mass merchandisers and rapidly growing alternative retail channels, such as Internet-based retailers that offer a broad range of\nproducts and services and home delivery services. Among our competitors are FASTENAL (NYSE:FAST), SYSCO (NYSE:SYY) and United Natural\nFoods (NASDAQ: UNFI).\n\n \n\nThe primary competitive factors in the tourism\nservices and cross-border merchandise business include price, service level, product quality, variety, convenience, and consistency of\nservice, availability and other value-added services. Competitive strategies vary based on many factors, such as the competitor’s\nformat, strengths, weaknesses, pricing, and sales focus.\n\n \n\n**Our Revenue Model Business Segments**\n\n \n\n*Airline Tickets and Tourism Services*\n\n \n\nWe are a well-known supplier of airline tickets,\ncatering to the needs of our esteemed business customers. Our tourism products provide luxury travel experience packages, designed exclusively\nfor online platforms operated by our distinguished business clients. Our current roster of prominent partners includes industry frontrunners\nsuch as 51book.com. We have successfully forged agreements with 37 airline operators within China, encompassing a significant portion\nof the market.\n\n \n\nWe provide more compelling, bundled travel experience\npackages that cater to a diverse range of our business customer needs, among which are travel packages that are designed exclusively for\nonline platforms operated by our distinguished business clients, to ensure seamless integration with their online platforms and streamlined\ndistribution to their end-users.\n\n \n\nOur comprehensive process for curating these luxury\ntravel packages includes the following key steps:\n\n \n\n \n●\nTailored Travel Packages: We carefully design travel packages that cater to diverse consumer interests and preferences, ensuring our clients can offer unique, memorable experiences to their end-users.\n\n \n\n \n●\nStrategic Partnerships: We forge strong relationships with airlines and other travel industry stakeholders, enabling us to secure competitive pricing for our clients.\n\n \n\n \n●\nCutting-Edge Technology: Our software solution streamlines the booking and management processes for our clients, enhancing the overall travel experience for their end-users.\n\n \n\n \n●\nProcurement of Luxury Assets: We carefully select and procure non-refundable time allocations from our exclusive network of luxury service providers, including top-tier automobile and yacht companies.\n\n \n\n52\n\n \n\n \n\n \n●\nPackage Design and Curation: Our team of experienced professionals thoughtfully combines these luxury assets to create unique, all-encompassing luxury experiences tailored to the diverse preferences and expectations of our clients’ end-users.\n\n \n\n \n●\nSupply and Distribution: We efficiently supply these high-end travel products to our business clients, ensuring seamless integration with their online platforms and streamlined distribution to their end-users.\n\n \n\nIn our commitment to maintaining strong relationships\nwith our business clients and partners, we assume all risks associated with the non-refundable nature of our purchases, making it easier\nfor our business clients to offer luxury experiences to their end-user customers. That process evidences our dedication to the success\nof our business clients and ensures seamless customer experience for their end-users. For example, if end-users of our business clients\nfail to complete a purchase or request a return, we are fully committed to providing a full refund of the purchase price and assuming\nall risks associated with this return.\n\n \n\n*Technology Solution for Tourism Cross-Border\nOperations:*\n\n \n\nOur software solution for tourism cross-border\noperations management is a comprehensive, innovative, and reliable tool for businesses engaged in international commerce. By combining\nadvanced features with a client-centric revenue model, we can foster long-lasting relationships with our business partners while positioning\nourselves as a software solution provider uniquely tailored for tourism cross-border operations management, designed to provide businesses\nwith a robust, user-friendly, and efficient platform for managing their international commerce activities. The software solution streamlines\nproduct monitoring and distribution processes and offers a range of features and capabilities that enhance overall operational efficiency.\n\n \n\nOur software solution comprises two primary components:\n\n \n\n \n1)\nthe Sourcing Solution which empowers us to accurately forecast market trends and offer competitive pricing to our business clients; and\n\n \n\n \n2)\nBusiness Solution which provides small to medium-sized business partners with a comprehensive platform to streamline merchandise operations and enhance customer engagement.\n\n \n\nOur Business Solution has been recognized by the\nHainan Province’s Cross-border Merchandise Association (CMA) as the standard solutions for its members, thus further solidifying\nits status as a reliable and innovative solution for businesses engaged in tourism cross-border commerce. Our current largest client is\nHainan Province’s Cross-border Merchandise Association, a testament to the software’s efficacy and value in the marketplace.\n\n \n\nOur Software Solution provides the following benefits:\n\n \n\n \n●\nReal-Time Inventory Management: Our software solution allows merchants to track product inventory levels in real-time, enabling them to make informed decisions regarding procurement and distribution, ultimately minimizing stockouts and excess inventory.\n\n \n\n \n●\nOrder Processing and Fulfillment: The software solution facilitates seamless order processing and fulfillment, ensuring timely delivery of products to customers and enhancing customer satisfaction.\n\n \n\n \n●\nCompliance and Regulatory Support: Our software solution is equipped with tools to help businesses navigate complex cross-border regulatory requirements, ensuring compliance with various international trade laws and regulations.\n\n \n\n \n●\nData Analytics and Reporting: The software solution provides advanced data analytics and reporting capabilities, empowering merchants with valuable insights into their cross-border operations. These insights can be used to identify areas for improvement, optimize processes, and drive overall business growth.\n\n \n\n53\n\n \n\n \n\n \n●\nScalability and Flexibility: Our software solution is designed to scale alongside businesses as they grow, allowing them to easily expand their cross-border operations without being hindered by software limitations.\n\n \n\nOur revenue model is strategically structured\nto promote widespread adoption of our software and encourage long-term customer commitment. The first year of use is offered free of charge,\nallowing clients to fully experience the benefits of our platform without incurring upfront costs. Following this trial period, clients\ntransition to a licensing payment model, which generates a steady, recurring revenue stream for our company while providing ongoing support,\nupdates, and enhancements for our clients. \n\n \n\n*Tourism Cross-border merchandise*\n\n \n\nThe Company is a supplier\nof a broad range of high-quality tourism cross-border merchandise to business clients that operate online and offline platforms, while\nsimultaneously leveraging cutting-edge technology to optimize operations and support their ongoing success. The Company specializes in\nsourcing unique, high-quality Flower Crown Products from a diverse network of international and domestic third-party suppliers. We have\nadopted a strategic approach to managing tourism cross-border merchandise, ensuring that our business customers have access to a diverse\nrange of high-quality products. By adopting advanced solutions such as AI-based analysis and state-of-the-art warehouse management software,\nwe can create a more efficient supply chain, mitigate risks associated with excess inventory, and ultimately ensure our clients’\nsustained growth in the competitive market. \n\n \n\nOur current top two business customers are: Hefei\nLiantuo Tianji E-commerce Co., Ltd. and Hainan Sanhai Gold International Trade Group,\n\n \n\nOur diverse product portfolios encompass\n\n \n\n \n1)\nhealth care products;\n\n \n\n \n2)\npersonal care products;\n\n \n\n \n3)\ncosmetics;\n\n \n\n \n4)\nmaternal and child products;\n\n \n\n \n5)\npet-related products;\n\n \n\n \n6)\nuniversal cuisine,\n\n \n\n \n7)\nuniversal household products and\n\n \n\n \n8)\nPre-owned Electric Cars.\n\n \n\nOur comprehensive process involves procuring items\nfrom reputable third-party suppliers, storing them securely in our warehouse facilities, and then efficiently distributing these products\nto our valued business clients. We implement the same approach to our customers as the approach purchases made from third-party manufacturers\nare non-refundable, which means that we assume all risks associated with the tourism cross-border merchandise we acquire. We believe that\nwe have a niche in this area of cross-border merchandise, which is based on our significant experience in meticulously curating and offering\ncustomized high-end luxury products and services to our clients that encompass various offerings, such as exclusive access to our extensive\nnetwork of luxury automobiles and yachts.\n\n \n\nOur Competitive Strengths and Growth Strategy\n\n \n\nThe key aspects of our cross-border Products Supply strategy include:\n\n \n\n \n●\nRigorous Supplier Selection: We prioritize building relationships with reputable suppliers that consistently deliver high-quality products.\n\n \n\n54\n\n \n\n \n\n \n●\nExtensive Product Offerings: Our diverse product range is designed to cater to the varying needs and preferences of our clients’ end-users.\n\n \n\n \n●\nCompetitive Pricing: Our focus on maintaining cost-effective supply chains enables us to provide our clients with attractive pricing structures, ensuring their success in the market.\n\n \n\nTo maintain our competitive edge in the rapidly\nevolving market, we have implemented several advanced technologies and innovative strategies, including:\n\n \n\n*AI-Based Analysis Program:* This\ncutting-edge system identifies emerging trends in tourism cross-border merchandise, enabling us to stay ahead of the curve and ensure\nour business customers have access to the latest, most sought-after products available in the market. By leveraging artificial intelligence,\nwe can make more informed decisions about which products to source and supply, ultimately driving the success of our clients.\n\n \n\n*State-of-the-Art\nWarehouse Management Software*: Our custom-developed warehouse management system allows our business customers to monitor real-time\ninventory levels, streamlining the supply chain process and ensuring optimal efficiency. This advanced software solution not only enhances\ntransparency but also fosters trust and collaboration between our company and our clients.\n\n \n\n*Innovative Excess\nInventory Management:* Our unique approach to addressing the challenge of surplus inventory involves a dynamic warehouse management\nsystem that facilitates the sharing of unsold merchandise among our business clients. If a client is unable to sell the full amount of\ntourism cross-border merchandise supplied by us during a single live stream event, as an example, our system enables other customers to\nview the unsold items and place orders accordingly. This strategic use of technology significantly reduces the risks associated with excess\ninventory, resulting in a more efficient and streamlined supply chain for all parties involved.\n\n \n\n**Description of Property**\n\n \n\n*Properties We Lease*\n\n \n\nWe currently lease additional spaces as indicated\nbelow:\n\n \n\n**Lessor/Rental Cost\nper month**\n \n**Lessee**\n \n**Location**\n \n**Area\n(Square\nMeter)**\n \n**Annual Rent**\n \n \n**Term**\n \n**Use**\n\nLi Jinping\n \nJin Xuan\n\nLuxury\n\nTourism\n \nBuilding 5, Entrance 1, Room 101, Baofu 9th Courtyard Project, Intersection of Weijin\n\nSouth Road and Suijiang\n\nRoad, Xiqing District,\n\nTianjin\n \n336\n \n$\n0\n \n \nJune 29, 2022 to June 30 2027\n \nOffice\n\n \n\n**Business Employees**\n\n \n\nAs of the date of this Annual Report, the Company\nand its subsidiaries have a total of 127 employees, including 95 full-time employees and 32 part-time employees. We do not have independent\ncontractors.\n\n \n\n55\n\n \n\n \n\nWe believe our employees’ compensation packages\nare competitive and we have created a merit-based work environment that encourages initiative. As a result, we have generally been able\nto attract and retain qualified personnel and maintain a stable core management team.\n\n \n\nAs required by regulations in China, we participate\nin various employee social security plans that are organized by local governments, including pension, unemployment insurance, childbirth\ninsurance, work-related injury insurance, medical insurance and housing insurance. Pursuant to PRC regulations, we are required to contribute\nspecific percentage of salaries, bonuses, and allowances (up to a maximum amount, specified by local governmental regulations) to the\nemployee benefit plan. As of the date of this Annual Report, we have made adequate social insurance and housing fund contributions for\nall employees as required by PRC regulations.\n\n \n\nWe enter into standard labor agreements with our\nfull-time employees with standard confidentiality and non-compete provisions. We believe that we maintain a good working relationship\nwith our employees, and we have not experienced any major labor disputes, which may have, or have had in the recent past, material adverse\neffects on our financial position or profitability. \n\n \n\n**Intellectual Property**\n\n \n\nOur business is dependent on a combination of\ntrademarks, domain names, trade names, trade secrets and other proprietary rights in order to protect our intellectual property rights.\nUpon acquisition of Flower Crown, we have applied for several trademarks, all of which are pending approval by the Trademark Office of\nChina National Intellectual Property Administration (“Trademark Office”). Set forth below is a detailed description of our\ntrademarks:\n\n \n\n**Country**\n \n**Trademark**\n \n**Trademark\nNo.**\n \n \n**Trademark\nName**\n \n**Trademark\nApplication Date**\n \n**Trademark\nClasses**\n \n \n**Trademark\nOwner**\n \n**Trademark Term**\n \n**Trademark\nStatus**\n\nChina\n \n\n \n \n51872718\n \n \nBu Fan Xing\n\nJing\n \n12/04/2020\n \n \n35\n \n \nBeijing\n\nHeyang\n \n10 years\n \nApproved\n\nChina\n \n****\n \n \n50933195\n \n \n \n \n11/03/2020\n \n \n35\n \n \nFlower\n\nCrown\n\n(Hainan)\n \n10 years\n \nApproved\n\nChina\n \n\n \n \n50941310\n \n \nQuanqiu\n\nYixianghui\n \n11/03/2020\n \n \n35\n \n \nFlower\n\nCrown\n\n(Hainan)\n \n10 years\n \nApproved\n\nChina\n \n\n \n \n49572627\n \n \nJinxuan Pinlv\n \n09/08/2020\n \n \n41\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49572624\n \n \nJinxuan Pinlv\n \n09/08/2020\n \n \n43\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49567840\n \n \n \n \n09/08/2020\n \n \n35\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49580237\n \n \nLUXVENTFURE\n \n09/08/2020\n \n \n43\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n\n \n \n49563070\n \n \n \n \n09/08/2020\n \n \n41\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n \n \nApproved\n\nChina\n \n  \n \n \n49592112\n \n \nLUXVENTFURE\n \n09/08/2020\n \n \n41\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\n \n\n56\n\n \n\n \n\nChina\n \n** **\n \n \n49563061\n \n \n \n \n09/08/2020\n \n \n43\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49563090\n \n \nLUXVENTFURE\n \n09/08/2020\n \n \n35\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49572631\n \n \nJinxuan Pinlv\n \n09/08/2020\n \n \n39\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49583228\n \n \nJinxuan Pinlv\n \n09/08/2020\n \n \n35\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49593405\n \n \n \n \n09/08/2020\n \n \n39\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nChina\n \n \n \n \n49580225\n \n \nLUXVENTURE\n \n09/08/2020\n \n \n39\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nHong Kong\n \n\n \n \n305384304\n \n \n \n \n09/08/2020\n \n \n \n \n \n \n \n10 years\n \nApproved\n\nHong Kong\n \n\n \n \n305384313\n \n \nJinxuan Pinlv\n \n09/08/2020\n \n \n \n \n \n \n \n10 years\n \nApproved\n\nHong Kong\n \n\n \n \n305384322\n \n \nLUXVENTURE\n \n09/08/2020\n \n \n \n \n \n \n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173434(304)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173435(975)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173436(747)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173437(132)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173438(333)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\n \n\n57\n\n \n\n \n\nMacao\n \n\n \n \nN/173439(206)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years \n \nApproved\n\nMacao\n \n\n \n \nN/173440(834)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173441(540)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173442(418)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173443(343)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173444(867)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nMacao\n \n\n \n \nN/173445(578)\n \n \n \n \n09/18/2020\n \n \n \n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063176\n \n \nJinxuan Pinlv\n \n09/10/2020\n \n \n35\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063175\n \n \nJinxuan Pinlv\n \n09/10/2020\n \n \n39\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063173\n \n \nJinxuan Pinlv\n \n09/10/2020\n \n \n43\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063186\n \n \nLUXVENTURE\n \n09/10/2020\n \n \n41\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063178\n \n \n \n \n09/10/2020\n \n \n41\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063177\n \n \n \n \n09/10/2020\n \n \n43\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\n \n\n58\n\n \n\n \n\nTaiwan\n \n\n \n \n109063183\n \n \n \n \n09/10/2020\n \n \n39\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063184\n \n \n \n \n09/10/2020\n \n \n35\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063187\n \n \nLUXVENTURE\n \n09/10/2020\n \n \n39\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063188\n \n \nLUXVENTURE\n \n09/10/2020\n \n \n35\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063174\n \n \nJinxuan Pinlv\n \n09/10/2020\n \n \n41\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\nTaiwan\n \n\n \n \n109063185\n \n \nLUXVENTURE\n \n09/10/2020\n \n \n43\n \n \nJinxuan\n\nLuxury\n\nTourism\n \n10 years\n \nApproved\n\n \n\n**Insurance**\n\n \n\nWe do not have any business liability, interruption\nor litigation insurance coverage for our operations in China. Insurance companies in China offer limited business insurance products.\nWhile business interruption insurance is available to a limited extent in China, we have determined that the risks of interruption, cost\nof such insurance and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for\nus to have such insurance. Therefore, we are subject to business and product liability exposure. See “Risk Factors—Risks Related\nto Our Business—We have limited insurance coverage in China and may not be able to recover insurance proceeds if we experience uninsured\nlosses.” \n\n \n\n59\n\n \n\n \n\n**RegulationS**\n\n \n\nThis section sets forth a summary of the most\nsignificant rules and regulations that affect our business activities in the PRC.\n\n \n\n**REGULATIONS RELATING TO FOREIGN INVESTMENT**\n\n** **\n\nThe establishment, operation and management of\ncompanies in China are mainly governed by the PRC Company Law, as most recently amended in 2018, which applies to both domestic companies\nand foreign-invested companies. Prior to January 1, 2020, the fundamental laws governing the foreign-invested enterprises were the Sino-foreign\nEquity Joint Venture Enterprise Law of the PRC, the Sino-foreign Cooperative Joint Venture Enterprise Law of the PRC, and the Wholly Foreign-invested\nEnterprise Law of the PRC, together with their implementation rules and regulations. On March 15, 2019, the National People’s Congress\nof the PRC approved the Foreign Investment Law of the PRC, which came into effect on January 1, 2020 and replaced the Sino-foreign Equity\nJoint Venture Enterprise Law of the PRC, the Sino-foreign Cooperative Joint Venture Enterprise Law of the PRC and the Wholly Foreign-invested\nEnterprise Law of the PRC. Pursuant to the Foreign Investment Law, “foreign investment” refers to investment activities conducted\nby foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in\nthe PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely\nor jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights\nand interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other\ninvestors, and (ⅳ) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council.\n\n \n\nOn December 26, 2019, the State Council promulgated\nthe Implementing Regulations of the Foreign Investment Law of the PRC (the “Implementing Rules”), with effect from January\n1, 2020 to ensure the effective implementation of the Foreign Investment Law. The Implementing Rules provide that foreign-invested enterprises\nthat invest in the PRC shall be governed by the Foreign Investment Law and the Implementing Rules.\n\n \n\nThe Foreign Investment Law and the Implementing\nRules stipulate that the PRC implements a system of pre-entry national treatment plus negative list for the administration of foreign\ninvestment. “Pre-entry national treatment” means the treatment given to foreign investors and their investment at the market\naccessing stage being not less favorable than that given to domestic investors and their investment. “Negative list” means\nthe special administrative measures stipulated by the State for foreign investment’s access to specific areas. Foreign investors\nshould not invest in any area where foreign investment is prohibited as set out in the negative list; foreign investors shall meet the\nconditions prescribed in the negative list before investing in any area where foreign investment is restricted. Thus, the PRC grants national\ntreatment to foreign investment outside the negative list. The currently effective negative list is published by the National Development\nand Reform Commission and the Ministry of Commerce on December 27, 2021, which became effective on January 1, 2022 (the “2021 Negative\nList”).\n\n** **\n\nExcept for the regulations on market entry, the\nForeign Investment Law and the Implementing Rules undertake to protect the investment, incomes and other legitimate rights and interests\nof foreign investors in China. The Foreign Investment Law and the Implementing Rules allow foreign investors’ profits, capital gains,\nintellectual property royalties and other gains to be freely remitted outward in accordance with the law. It also contains provisions\naiming to promote foreign investment, including that the State’s policies supporting enterprise development are equally applicable\nto foreign-invested enterprises in accordance with the law.\n\n \n\nIn terms of foreign-invested enterprises established\naccording to the Sino-foreign Equity Joint Venture Enterprise Law of the PRC, the Sino-foreign Cooperative Joint Venture Enterprise Law\nof the PRC or the Wholly Foreign-invested Enterprise Law of the PRC before the implementation of the Foreign Investment Law, the Foreign\nInvestment Law provides that they may maintain their original organization forms within five years after the implementation of the Foreign\nInvestment Law.\n\n \n\n60\n\n \n\n \n\nPursuant to the Foreign Investment Law and the\nImplementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated by the Ministry of Commerce and\nthe State Administration for Market Regulation, which took effect on January 1, 2020, a foreign investment information reporting system\nshall be established and foreign investors or foreign-invested enterprises shall report investment information to competent commerce departments\nof the government through the enterprise registration system and the enterprise credit information publicity system, and the administration\nfor market regulation shall forward the above investment information to the competent commerce departments in a timely manner. In addition,\nthe Ministry of Commerce shall set up a foreign investment information reporting system to receive and handle the investment information\nand inter-departmentally shared information forwarded by the administration for market regulation in a timely manner. The foreign investors\nor foreign-invested enterprises shall report the investment information by submitting reports including initial reports, change reports,\nderegistration reports and annual reports.\n\n \n\n**REGULATIONS RELATING TO OVERSEAS LISTING**\n\n** **\n\nOn August 8, 2006, six PRC regulatory agencies,\nincluding the China Securities Regulatory Commission (the “CSRC”), promulgated the Rules on the Merger and Acquisition of\nDomestic Enterprises by Foreign Investors (the “M&A Rules”), which took effect on September 6, 2006 and was amended on\nJune 22, 2009. The M&A Rules, among other things, requires offshore special purpose vehicles formed for overseas listing purposes\nthrough acquisitions of PRC domestic companies and controlled by PRC domestic enterprises or individuals to obtain the approval of the\nCSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006,\nthe CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles.\n\n \n\nOn July 6, 2021, the State Council and General\nOffice of the CPC Central Committee issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.\nThe opinions emphasize the need to strengthen the administration over illegal securities activities and the supervision on overseas listings\nby China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to\ndeal with the risks and incidents faced by China-based overseas-listed companies.\n\n \n\nOn February 17, 2023, the CSRC promulgated the\nTrial Administrative Measures of the Overseas Securities Offering and Listing by Domestic companies (the “Overseas Listing Trial\nMeasures”) and relevant five guidelines, which will become effective on March 31, 2023. The Overseas Listing Trial Measures will\ncomprehensively improve and reform the existing regulatory regime for overseas securities offering and listing of PRC domestic companies\nby adopting a filing-based regulatory regime. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer\nand list securities in overseas markets, either directly or indirectly, are required to fulfill the filing procedure with the CSRC and\nreport relevant information.\n\n \n\nThe Overseas Listing Trial Measures provide that\nif the issuer meets both of the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed\nas an indirect overseas offering and listing by PRC domestic companies: (i) more than 50% of any of the issuer’s operating revenue,\ntotal profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year\nis accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China,\nor its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations\nand management are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application\nfor initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such\napplication is submitted. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events,\nsuch as change of control, having been investigated or penalized by overseas securities regulatory authorities or other competent authorities,\nconverting the listing status or listing board, or voluntary or forced delisting of the issuer(s) which have completed overseas offerings\nand listings.\n\n \n\nIn addition, the Overseas Listing Trial Measures\nprovide that an overseas listing or offering is explicitly prohibited under any of the following circumstances: (i) such securities offering\nand listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities\noffering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance\nwith law; (iii) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the\nactual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining\nthe order of the socialist market economy during the latest three years; (iv) the domestic company intending to make the securities offering\nand listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion\nhas yet been made thereof; or (v) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s)\nor by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.\n\n \n\n61\n\n \n\n \n\nAt a press conference held for these new regulations,\nofficials from the CSRC clarified that the domestic companies that have already been listed overseas before the effective date of the\nOverseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers, or the Existing Issuers. Existing Issuers are\nnot required to complete the filling procedures immediately, and they shall be required to file with the CSRC when subsequent matters\nsuch as refinancing are involved. Furthermore, according to the officials from the CSRC, domestic companies that have obtained approval\nfrom overseas regulatory authorities or securities exchanges (for example, a contemplated offering and/or listing on the U.S. stock exchange\nhas been declared effective) for their indirect overseas offering and listing prior to the effective date of the Overseas Listing Trial\nMeasures (i.e. March 31, 2023) but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition\nperiod from March 31, 2023. Those who complete their overseas offering and listing within such six months are deemed as Existing Issuers.\nWithin such six-month transition period, however, if such domestic companies need to reapply for offering and listing procedures to the\noverseas regulatory authority or securities exchanges, or if they fail to complete their indirect overseas issuance and listing, such\ndomestic companies shall complete the filling procedures with the CSRC.\n\n \n\nAccording to the Overseas Listing Trail Measures,\nwhere a PRC domestic company fails to fulfill filing procedure in respect of its overseas offering and listing, the CSRC may order rectification,\nissue warnings to such PRC domestic company, and impose a fine ranging from RMB1,000,000 to RMB10,000,000. Also the directly responsible\nperson-in-charge and other directly responsible persons of such PRC domestic company may be warned and imposed a fine up to RMB 5,000,000,\nand the controlling shareholders and the actual controllers of such PRC domestic company that organize or instruct the aforementioned\nviolations shall be imposed a fine up to RMB10,000,000. Further, if the PRC domestic company that is not an Existing Issuer fails to fulfill\nthe required filing procedure, such an issuer may ultimately be forced to delist its securities that have already been listed. In addition,\nsince the Overseas Listing Trial Measures and relevant guidelines were newly promulgated, their interpretation, application and enforcement\nremain unclear. Any failure of us to fully comply with the Overseas Listing Trail Measures may significantly limit or completely hinder\nour ability to offer or continue to offer our securities, hinder our ability to remain listed on Nasdaq or any other U.S. securities exchange,\ncause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect\nour financial condition and results of operations and cause shares of our Common Stock to significantly decline in value or become worthless.\n\n \n\nOn February 24, 2023, the CSRC, the Ministry of\nFinance, the National Administration of State Secrets Protection and the National Archives Administration jointly issued the Provisions\non Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the\nConfidentiality and Archives Provisions, which will take effective from March 31, 2023. The Confidentiality and Archives Provisions specify\nthat during the overseas issuance of securities and listing activities of domestic enterprises, domestic enterprises and securities companies\nand securities service institutions that provide relevant securities services shall, by strictly abiding by the relevant laws and regulations\nof the PRC and the requirements therein, establish sound confidentiality and archives management systems, take necessary measures to implement\nconfidentiality and archives management responsibilities, and shall not leak national secrets, work secrets of governmental agencies and\nundermine national and public interests. Work manuscripts generated in the PRC by securities companies and securities service institutions\nthat provide relevant securities services for overseas issuance and listing of securities by domestic enterprises shall be kept in the\nPRC. Without the approval of relevant competent authorities, it shall not be transferred overseas. Where archives or copies need to be\ntransferred outside of the PRC, it shall be subject to the approval procedures in accordance with relevant PRC regulations.\n\n \n\n**REGULATIONS RELATING TO CYBERSECURITY AND DATA\nSECURITY**\n\n \n\nAccording to the Cybersecurity Law of the PRC\n(the “Cybersecurity Law”) which was promulgated by the Standing Committee of the National People’s Congress of the PRC\n(the “SCNPC”) on November 7, 2016 and came into effect on June 1, 2017, network operators shall take all necessary measures\nin accordance with applicable laws, regulations and compulsory national requirements to safeguard the safe and stable operation of networks,\nrespond to cybersecurity incidents effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and\nusability of network data. The Cybersecurity Law also stipulates that the China adopts classified system for cybersecurity protection,\nunder which network operators are required to fulfil relevant obligations of security protection to ensure that the network is free from\ninterference, disruption or unauthorized access, and to prevent network data from being disclosed, stolen or tampered.\n\n \n\n62\n\n \n\n \n\nOn September 22, 2020, the Ministry of Public Security issued the Guiding\nOpinions on Implementing the Cyber Security Protection System and Critical Information Infrastructure Security Protection System to further\nimprove the national cyber security prevention and control system. On December 28, 2021, the Cyberspace Administration of China (the **“CAC”**)\nand several other government authorities published the Revised Cybersecurity Review Measures, which came into effect on February 15, 2022\nand replaced the previous version. Pursuant to these measures, the purchase of network products and services by a critical information\ninfrastructure operator or the data processing activities of a network platform operator that affect or may affect national security will\nbe subject to a cybersecurity review. In addition, network platform operators with personal information of over one million users shall\nbe subject to cybersecurity review before listing in foreign countries. The competent governmental authorities may also initiate a cybersecurity\nreview against the operators if the authorities believe that the network product or service or data processing activities of such operators\naffect or may affect national security. Article 10 of the Revised Cybersecurity Review Measures also sets out certain general factors\nwhich would be the focus in assessing the national security risk during a cybersecurity review, including (i) risks of critical information\ninfrastructure being illegally controlled or subject to interference or destruction; (ii) the harm caused by the disruption of the supply\nof the product or service to the business continuity of critical information infrastructure; (iii) the security, openness, transparency\nand diversity of sources of the product or service, the reliability of supply channels, and risks of supply disruption due to political,\ndiplomatic, trade and other factors; (iv) compliance with PRC laws, administrative regulations and departmental rules by the provider\nof the product or service; (v) the risk of core data, important data or a large amount of personal information being stolen, leaked, damaged,\nillegally used, or illegally transmitted overseas; (vi) the risk that critical information infrastructure, core data, important data or\na large amount of personal information being affected, controlled, and maliciously used by foreign governments for a listing, as well\nas network information security risks; and (vii) other factors that may endanger the security of critical information infrastructure,\ncybersecurity and data security.\n\n \n\nOn July 30, 2021, the State Council promulgated\nthe Regulations on Security Protection of Critical Information Infrastructures, which took effect on September 1, 2021 and provide that\n“critical information infrastructures” refer to any important network facilities or information systems of important industries\nor fields such as public communication and information service, energy, communications, water conservation, finance, public services,\ne-government affairs and national defense science, and any other important network facilities or information systems which may endanger\nnational security, people’s livelihood and public interest in case of damage, function loss or data leakage. In addition, relevant\nadministration departments of each critical industry and sector, or Protection Departments, shall be responsible to formulate eligibility\ncriteria and determine the critical information infrastructure operator in the respective industry or field. The operators should be informed\nabout the final determination as to whether they are categorized as critical information infrastructure operators. The regulations further\nrequire critical information infrastructures operators, among others, (i) to report to the competent Protection Departments in a timely\nmanner when the identification result may be affected due to material changes in the critical information infrastructures; (ii) to plan,\nconstruct or put into use the security protection measures and the critical information infrastructures simultaneously; and (iii) to report\nto the competent Protection Departments in a timely manner in the event of merger division or dissolution, and deal with critical information\ninfrastructures as required by the competent Protection Departments. Operators in violation of the regulations may be ordered to rectify,\nsubject to warnings, fines and other administrative penalties or even criminal liabilities, and the directly responsible personnel in\ncharge may also be imposed on fines or other liabilities.\n\n \n\nOn June 10, 2021, the SCNPC promulgated the Data\nSecurity Law of the PRC (the “**Data Security Law**”), with effect from September 1, 2021. The Data Security Law establishes\na data classification and hierarchical protection system depending on the importance of the data in economic and social development, and\nthe damage caused to national security, public interests, or the legitimate rights and interests of individuals and organizations if the\ndata is falsified, damaged, disclosed, illegally obtained or illegally used. Under the Data Security Law, critical information infrastructure\noperators shall be subject to the Cybersecurity Law in connection with the cross-border transfer of important data collected and generated\nthrough their operations in China; and the cross-border transfer of important data collected and generated by other data processors shall\nbe subject to the administrative measures adopted by the CAC in conjunction with other competent departments.\n\n \n\n63\n\n \n\n \n\nOn July 7, 2022, the CAC promulgated the Security\nAssessment Measures for Cross-border Data Transfers with effect from September 1, 2022, a data processor shall declare security assessment\nfor its outbound data transfer if: (i)where a data processor provides critical data abroad;(ii) where a critical information infrastructure\noperator or a data processor processing the personal information of more than one million individuals provides personal information abroad;\n(iii) where a data processor has provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals\nin total abroad since January 1 of the previous year; and (iv) any other circumstances prescribed by the CAC.\n\n \n\n On November 14, 2021, the CAC released the Regulations for the\nAdministration of Network Data Security (Draft for Comments) (the “**Draft Network Data Security Regulations**”). The Draft\nInternet Data Security Regulations cover a wide range of internet data security issues, including the supervision and management of data\nsecurity in the PRC, and apply to situations using networks to carry out data processing activities. The Draft Network Data Security Regulations\nset out general guidelines covering subjects including protection of personal information, security of important data, security management\nof cross-border data transmission, obligations of internet platform operators, supervision and management, and legal liabilities of internet\ndata security. The Draft Network Data Security Regulations also require a data processor to apply to the CAC for cybersecurity review\nif it process the personal information of more than one million individuals and goes listing in foreign countries. As of the date of this\nAnnual Report, the Draft Network Data Security Regulations were released for public comment only, and the provisions and anticipated adoption\nor effective date may be subject to change with substantial uncertainty.\n\n \n\n**REGULATIONS RELATING TO PRIVACY PROTECTION**\n\n** **\n\nThe Civil Code of the PRC, issued by the National\nPeople’s Congress of the PRC on May 28, 2020 and effective from January 1, 2021, provides legal basis for privacy and personal information\ninfringement claims under the Chinese civil laws.\n\n \n\nCriminal Law of the PRC, as amended on December\n26, 2020, prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal\ninformation obtained in performing duties or providing services or obtaining such information through theft or other illegal ways.\n\n \n\nAccording to the Personal Information Protection\nLaw of the PRC which was promulgated by the SCNPC on August 20, 2021 and came into effect on November 1, 2021, personal information shall\nbe handled in accordance with the principles of lawfulness, legitimacy, necessity and good faith, and it is not allowed to handle personal\ninformation by misleading, fraud, coercion or otherwise. It creates a range of compliance obligations and sets forth specific requirements\non protection of electronic and non-electronic information which is related to identified or identifiable natural persons.\n\n \n\nAccording to the Law of the PRC on the Protection\nof Minors (2020 Revision), which was promulgated by the SCNPC on October 17, 2020 and came into effect on June 1, 2021, information processors\nshall obtain consent from minors’ parents or other guardians when processing personal information of minors under the age of 14\nvia the internet. In addition, information processors must promptly take measures to correct or delete the personal information of minors\nif alerted by the minors, parents or other guardians.\n\n \n\n**REGULATIONS ON LAND OR PROPERTY USE**\n\n \n\nIn June 1986, the SCNPC promulgated the Land Administration\nLaw of the PRC, which was last amended on August 26, 2019 and became effective on January 1, 2020. In January 1991, the State Council\npublished Regulations for Implementation of the Land Administration Law of the PRC which was last amended on July 2, 2021 and came into\neffect on September 1, 2021. According to the Land Administration Law and its regulations, enterprises and individuals shall use land\nstrictly in accordance with the purpose stipulated in the land use master plan. Construction entities shall use state-owned land according\nto the stipulations of the land use right assignment contract or according to the provisions of the approval documents relevant to the\nallocation of land use rights. The conversion of the construction purposes of the land shall receive the consent of the competent land\nadministrative authority and be submitted to the people’s governments that originally granted land use approval. When changing the\npurpose of land within urban planning areas, consent shall be obtained from the relevant urban planning administration department before\nsubmission; without such approvals, the use of land specified in the relevant overall land utilization plan shall not be changed. Under\nthese regulations, failure to comply with the approved usage may be subject to fines or other penalties, including potentially being required\nby the relevant land administrative authority to return the land.\n\n \n\n64\n\n \n\n \n\n**REGULATIONS RELATING TO LEASING**\n\n \n\nPursuant to the Law on Administration of Urban\nReal Estate of the PRC which took effect in January 1, 1995 with the latest amendment in August 26, 2019, lessors and lessees are required\nto enter into a written lease contract, containing such provisions as the term of the lease, the use of the premises, liability for rent\nand repair, and other rights and obligations of both parties. Pursuant to Administrative Measures on Leasing of Commodity Housing which\nwere promulgated by the Ministry of Housing and Urban-Rural Development on December 1, 2010 and came into effect on February 1, 2011,\nthe lessor and the lessee shall complete property leasing registration and filing formalities within 30 days from execution of the property\nlease contract with competent authority, otherwise individuals or organizations who violate the provision shall be ordered to make correction\nwithin a stipulated period. Where the individual or organization failed to make correction within the stipulated period, a fine shall\nbe imposed.\n\n \n\n**REGULATIONS RELATING TO INTELLECTUAL PROPERTY**\n\n \n\nRegulations on Copyright\n\n \n\nPursuant to the Copyright Law of the PRC (the\n“Copyright Law”), which was promulgated by the SCNPC and last amended on November 11, 2020 with effect from June 1, 2021,\ncreators of protected works enjoy personal and property rights with respect to publication, authorship, alteration, integrity, reproduction,\ndistribution, lease, exhibition, performance, projection, broadcasting, dissemination via information network, production, adaptation,\ntranslation, compilation and related activities. Under the Copyright Law, the term of protection for copyrighted software is 50 years.\nThe Regulations on the Protection of the Right to Communicate Works to the Public over Information Networks, as most recently amended\non January 30, 2013, provide specific rules on fair use, statutory license, and a safe harbor for use of copyrights and copyright management\ntechnology and specify the liabilities of various entities for violations, including copyright holders, libraries and internet service\nproviders. The Computer Software Copyright Registration Measures, promulgated by the National Copyright Administration on February 20,\n2002, regulate registrations of software copyrights, exclusive licensing contracts for software copyrights and assignment agreements.\nThe National Copyright Administration administers software copyright registration and the Copyright Protection Center of China are designated\nas the software registration authority. The Copyright Protection Center of China grants registration certificates to the computer software\ncopyrights applicants which meet the relevant requirements.\n\n \n\n**Regulations on Trademark**\n\n \n\nPursuant to the Trademark Law of the PRC, which\nwas promulgated by the SCNPC and last amended on April 23, 2019 with effect from November 1, 2019, registered trademarks refer to trademarks\nthat have been approved and registered by the Trademark Office of China National Intellectual Property Administration. Trademark registrants\nenjoy an exclusive right to use the trademark, which shall be protected by law. The initial effective term of a registered trademark is\nten years and will be granted another ten-year effective term upon request after expiration of the first or any renewed ten-year term.\n\n \n\nAs with patents, Trademark Law has adopted\na first-to-file principle with respect to trademark registration. If a trademark applied for is identical or similar to another trademark\nwhich has already been registered or subject to a preliminary examination and approval for use on the same or similar kinds of products\nor services, such trademark application may be rejected. Any person applying for the registration of a trademark may not injure existing\ntrademark rights first obtained by others, nor may any person register in advance a trademark that has already been used by another party\nand has already gained a “sufficient degree of reputation” through such party’s use.\n\n \n\n**Regulations on Patent**\n\n \n\nPursuant to the Patent Law of the PRC, which was\npromulgated by the SCNPC and last amended on October 17, 2020 with effect from June 1, 2021, after the grant of the patent right for an\ninvention, utility model, or design, unless otherwise provided thereunder, no entity or individual may, without the authorization of the\npatent owner, infringe the patent. A patent is valid for a twenty-year term in the case of an invention, a fifteen-year term in the case\nof a design, and a ten-year term in the case of a utility model, starting from the application date.\n\n \n\n65\n\n \n\n \n\nRegulations on Domain Name\n\n \n\nPursuant to the Administrative Measures for Internet\nDomain Names, which were promulgated by the MIIT on August 24, 2017 with effect from November 1, 2017, the registration of domain names\nadopts the “first to file, first to register” principle and the registrant shall complete the registration via the domain\nname registration service institutions.\n\n \n\n**REGULATIONS RELATING TO LABOR PROTECTION**\n\n** **\n\nPursuant to the Labor Law of the PRC, which was\npromulgated by the SCNPC on July 5, 1994 and most recently amended on December 29, 2018, an employer shall establish a comprehensive management\nsystem to safeguard the rights of its employees, including developing and improving its labor safety and health system, stringently implementing\nnational protocols and standards on labor safety and health, conducting labor safety and health education for workers, guarding against\nlabor accidents and reducing occupational hazards. An employer must provide employees with the necessary labor protection equipment that\ncomply with labor safety and health conditions stipulated under national regulations, as well as provide regular check-ups for workers\nthat engage in operations with occupational hazards.\n\n \n\nThe Labor Contract Law of the PRC, which was promulgated\nby the SCNPC on June 29, 2007 and became effective on January 1, 2008, and was amended on December 28, 2012, and the Implementation Regulations\non Labor Contract Law of the PRC, which were promulgated and became effective on September 18, 2008, regulate employer and employee relations\nand contain specific provisions on the terms of the labor contract. Labor contracts must be made in writing. An employer may legally terminate\na labor contract and dismiss its employees after reaching agreement upon due negotiations with the employee or by fulfilling the statutory\nconditions. Employers in most cases are also required to provide severance payment to their employees after their employment relationships\nare terminated. In addition, if an employer intends to enforce a non-compete provision in an employment contract or non-competition agreement\nwith an employee, it has to compensate the employee on a monthly basis during the term of the restriction period after the termination\nor expiry of the labor contract.\n\n \n\nMoreover, all PRC enterprises are generally required\nto implement a standard working time system of eight hours a day and forty hours a week, and if the implementation of such standard working\ntime system is not appropriate due to the nature of the job or the characteristics of business operation, the enterprise may implement\na flexible working time system or comprehensive working time system after obtaining approvals from the relevant authorities.\n\n \n\nPursuant to the Social Insurance Law of the PRC,\nthe Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations\non Unemployment Insurance, the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in China are required by PRC\nlaws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical\ninsurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and contribute to\nthe plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the\nlocal government from time to time at locations where they operate their businesses or where they are located. According to the Social\nInsurance Law, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the\nrequired contributions within a stipulated deadline, and may be subject to a late payment fine at a daily rate of 0.05% of the outstanding\namount, accruing from the date when the social insurance contributions were due and a fine equal to one to three times the outstanding\namount.\n\n \n\nAccording to the Regulations on the Administration\nof Housing Provident Fund, which were promulgated by the State Council and last amended on March 24, 2019, employers are required to contribute\nto housing provident funds for the benefit of their employees. According to the Regulations on the Administration of Housing Provident\nFund, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions\nwithin a stipulated deadline; if the enterprise fails to rectify the non-compliance with the stipulated deadline, it be may be made to\na local court for compulsory enforcement. In addition, an enterprise that fails to undertake contribution registration of housing provident\nfund or fails to go through the formalities of opening housing provident fund accounts for its employees may be ordered to rectify the\nnoncompliance within a stipulated deadline, where failing to rectify the non-compliance at the expiration of the time limit, it be may\nbe subject to a fine ranging from RMB10,000 or RMB 50,000. \n\n \n\n66\n\n \n\n \n\n**REGULATIONS RELATED TO TAXATION**\n\n** **\n\n**Regulations on Income Tax**\n\n** **\n\nWe and our subsidiaries\nmay be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of our net income and cash flows,\nincluding cash available for dividend payments. Under current Marshall Islands law, there is no income, corporate or profits tax or withholding\ntax, capital gains tax or capital transfer tax, estate or inheritance tax payable by us or our stockholders, other than stockholders ordinarily\nresident in the Republic of the Marshall Islands, if any. We believe that we should not be subject to tax under the laws of various countries,\nother than the United States, in which our subsidiaries’ vessels conduct activities or in which our subsidiaries’ customers\nare located. However, our belief is based on our understanding of the tax laws of those countries, and our tax position is subject to\nreview and possible challenge by taxing authorities and to possible changes in law or interpretation. We cannot determine in advance the\nextent to which certain jurisdictions may require us to pay corporate income tax or to make payments in lieu of such tax. In addition,\npayments due to us from our subsidiaries’ customers may be subject to tax claims. In computing our tax obligation in these jurisdictions,\nwe may be required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which\nwe have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities\nwill agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries,\nfurther reducing the cash available for distribution. In addition, changes in our operations or ownership could result in additional tax\nbeing imposed on us or our subsidiaries in jurisdictions in which operations are conducted.\n\n \n\n*Enterprise Income Tax Law*\n\n \n\nAccording to the Enterprise Income Tax Law of\nthe PRC, which was promulgated by the SCNPC and last amended on December 29, 2018, and the Implementation Rules to the Enterprise Income\nTax Law of the PRC, which were promulgated by the State Council and last amended on April 23, 2019, enterprises are classified as either\nresident enterprises or non-resident enterprises. The income tax rate for resident enterprises, including both domestic-invested and foreign-invested\nenterprises, shall typically be 25%. Non-resident enterprises which have not established agencies or offices in China, or which have established\nagencies or offices in China but whose income has no association with such agencies or offices shall pay enterprise income tax on its\nincome deriving from inside China at the reduced rate of 10%.\n\n \n\nAccording to the Circular of Printing the Administrative\nMeasures for Recognition of High-Tech Enterprises amended by the Ministry of Science and Technology, Ministry of Finance and State Taxation\nAdministration on January 29, 2016 and came into effect since January 1, 2016, upon the accreditation of the qualification of High-tech\nenterprises, such enterprises may apply for the entitlement of the preferential enterprise income tax treatment since the current year\nbeginning from the valid period approved by the accreditation. A High and New Technology Enterprise is entitled to a favorable statutory\ntax rate of 15% and such enterprise should keep all statutory required relevant materials in case of future inspection. This qualification\nis reassessed by relevant government authorities every three years.\n\n \n\nAccording to the Notice on the Implementation\nof Inclusive Tax Concessions for Small and Micro Enterprises which took effect on January 1, 2019, jointly issued by the Ministry of Finance\nand the State Taxation Administration, for the portion of annual taxable income which does not exceed RMB1,000,000, the annual taxable\nincome shall be deducted to 25% and the income tax shall be calculated at the rate of 20%; for the portion of annual taxable income from\nRMB1,000,000 to RMB3,000,000, the taxable income shall be deducted to 50% and the income tax shall be calculated at the rate of 20%, for\nthe period from January 1, 2019 to December 31, 2021. The above-mentioned small and micro-enterprises refer to those enterprises that\nare engaged in industries not restricted or prohibited by the state and meet certain conditions, including annual taxable income not exceeding\nRMB3,000,000, number of employees not exceeding 300, and total assets not exceeding RMB50,000,000. In 2021, the Ministry of Finance and\nState Taxation Administration issued the Notice on the Implementation of Preferential Income Tax for Small and Micro Enterprises and Individual\nEntrepreneurs, which provides a 50% reduction in corporate income tax for small and micro enterprises with annual taxable income not exceeding\nRMB1,000,000, on top of the preferential policies stipulated in the Notice on the Implementation of Inclusive Tax Concessions for Small\nand Micro Enterprises, for the period from January 1, 2021 to December 31, 2022. In 2022, the Ministry of Finance and the State Taxation\nAdministration issued the Notice on the Further Implementation of Preferential Income Tax for Small and Micro Enterprises, according to\nwhich the annual taxable income shall be deducted to 25% and the income tax shall be calculated at the rate of 20% for small and micro\nenterprises with annual taxable income from RMB1,000,000 to RMB3,000,000, on top of the preferential policies stipulated in the Notice\non the Implementation of Inclusive Tax Concessions for Small and Micro Enterprises for the period from January 1, 2022 to December 31,\n2024.\n\n \n\n67\n\n \n\n \n\nRegulations on Value-added Tax\n\n \n\nAccording to the Provisional Regulations of the\nPRC on Value-added Tax which were promulgated by the State Council on December 13, 1993 and last amended on November 19, 2017, and the\nImplementation Rules for the Provisional Regulations the PRC on Value-added Tax, which were promulgated by the Ministry of Finance on\nDecember 25, 1993, and last amended on October 28, 2011, all taxpayers selling goods, providing processing, repair or replacement services,\nselling services, intangible properties or immovable properties within the China or importing goods to the China shall pay value-added\ntax.\n\n \n\n**REGULATIONS RELATING TO FOREIGN EXCHANGE AND\nDIVIDEND DISTRIBUTION**\n\n** **\n\n**Regulations on Foreign Exchange**\n\n \n\nThe fundamental regulation governing foreign exchange\nin China is the Foreign Exchange Administration Rules of the PRC (the “Foreign Exchange Administration Rules”), promulgated\nby the State Council on January 29, 1996 and most recently amended on August 5, 2008. Under these rules, Renminbi is generally freely\nconvertible for payments of current account items, such as trade and service-related foreign exchange transactions and dividend payments,\nbut not freely convertible for capital account items, such as direct investment, loan or investment in securities outside China, unless\na prior approval of the State Foreign Exchange Administration of the PRC (the “SAFE”) or its local counterparts is obtained.\n\n \n\nPursuant to the Circular of the State Administration\nof Foreign Exchange on Further Promoting the Reform of Foreign Exchange Administration and Improving the Examination of Authenticity and\nCompliance, which was promulgated by SAFE on January 26, 2017, a foreign-invested enterprise may pay dividends to its foreign direct investors\nthrough the financial institutions without the approval of SAFE; the bank shall check the relevant documents under the principle of authenticity.\n\n \n\nAccording to the Circular on the Management of\nForeign Exchange Control on Offshore Investment and Financing and Round Trip Investment by Domestic Residents through Special Purpose\nVehicles (the “SAFE Circular 37”) which was promulgated by SAFE on July 4, 2014 with effect from the same day, domestic residents\nshall register with the local branch of SAFE for foreign exchange registration of overseas investment before contributing the domestic\nand overseas lawful assets or interests into a special purpose vehicle (the “SPV”), and to update such registration in the\nevent of any change of basic information of the registered SPV or major changes in the SPV’s capital, including increases and decreases\nof capital, share transfers, share swaps, mergers or divisions. The SPV is defined as an “offshore enterprise directly established\nor indirectly controlled by the domestic resident (including domestic institution and resident individual) with their legally owned assets\nand equity of the domestic enterprise, or legally owned offshore assets or equity, for the purpose of investment and financing”;\n“Round Trip Investment refers to “the direct investment activities carried out by a domestic resident directly or indirectly\nvia a SPV, i.e., establishing a foreign-invested enterprise or project within the PRC through a new entity, merger or acquisition and\nother ways, while obtaining ownership, control, operation and management and other rights and interests”.\n\n \n\n68\n\n \n\n \n\nOn February 13, 2015, SAFE promulgated the Circular\nof the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration\nPolicies (the “**SAFE Circular 13**”), which came into effect on June 1, 2015. According to the SAFE Circular 13, the initial\nforeign exchange registration for establishing or taking control of a SPV by domestic residents can be conducted with a qualified bank,\ninstead of a local branch of SAFE. The SAFE Circular 13 simplifies some procedures relating to foreign exchange for direct investments.\nOn March 30, 2015, SAFE promulgated the Circular on Reforming of the Management Method of the Settlement of Foreign Currency Capital of\nForeign-Invested Enterprises (the “**SAFE Circular 19**”), which came into effect from June 1, 2015. According to the SAFE\nCircular 19, the foreign exchange capital of foreign-invested enterprises shall be subject to the Discretional Foreign Exchange Settlement\n(the “**Discretional Foreign Exchange Settlement**”). The Discretional Foreign Exchange Settlement refers to the foreign\nexchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has\nbeen confirmed by the local branch of SAFE (or the book-entry registration of monetary contribution by the banks) can be settled at the\nbanks based on the actual operational needs of the foreign-invested enterprise. Furthermore, the SAFE Circular 19 stipulates that the\nuse of capital by foreign-invested enterprises shall follow the principles of authenticity and self-use within the business scope of enterprises.\n\n \n\nOn June 9, 2016, SAFE promulgated the Circular\non Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (the “**SAFE Circular\n16**”), which came into effect on the same day. Pursuant to the SAFE Circular 16, enterprises registered in the PRC may also convert\ntheir foreign debts from foreign currency to Renminbi on self-discretionary basis. The SAFE Circular 16 provides an integrated standard\nfor conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts)\non self-discretionary basis which applies to all enterprises registered in the PRC. The SAFE Circular 16 reiterates the principle that\nRenminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its\nbusiness scope or prohibited by PRC laws.\n\n \n\nOn October 23, 2019, SAFE issued the Circular\non Further Promoting the Facilitation of Cross- border Trade and Investment (the “**SAFE Circular 28**”), which came into\neffect on the same day. The SAFE Circular 28 allows all foreign-invested enterprises to make equity investment in the PRC using their\ncapital, with genuine investment projects and subject to compliance with the negative list. As of the date of this Annual Report, its\ninterpretation and implementation in practice are still subject to substantial uncertainties.\n\n \n\n**Regulations on Dividend Distribution**\n\n \n\nDistribution of dividends of foreign investment\nenterprises are mainly governed by the Foreign Investment Enterprise Law, issued in 1986 and amended in 2000 and 2016, respectively, and\nthe Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in 2001 and 2014, respectively. Under\nthese regulations, foreign investment enterprises in the PRC may distribute dividends only out of their accumulative profits, if any,\ndetermined in accordance with PRC accounting standards and regulations. In addition, no less than 10% of the accumulated profits of the\nforeign investment enterprises in the PRC are required to be allocated to fund certain reserve funds each year unless these reserves have\nreached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute any profits until any losses from\nprevious fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits\nfrom the current fiscal year. Under our current corporate structure, our Marshall Islands holding company may rely on dividend payments\nfrom Hongri PRC, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing requirements we may\nhave.\n\n \n\n69\n\n \n\n \n\n**Regulations on Loans by Foreign Companies to\ntheir PRC Subsidiaries**\n\n \n\nA loan made by foreign investors as shareholders\nin a foreign-invested enterprise is considered to be foreign debt in China and is regulated by various laws and regulations, including\nthe Regulation of the People’s Republic of China on Foreign Exchange Administration, the Interim Provisions on the Management of\nForeign Debts, the Statistical Monitoring of Foreign Debts Tentative Provisions (Revised in 2020), the Detailed Rules for the Implementation\nof Provisional Regulations on Statistics and Supervision of External Debt, and the Administrative Measures for Registration of Foreign\nDebts. Under these rules and regulations, a shareholder loan in the form of foreign debt made to a PRC entity does not require the prior\napproval of the SAFE. However, such foreign debt must be registered with and recorded by the SAFE or its local branches within fifteen\nbusiness days after entering into the foreign debt contract. Pursuant to these rules and regulations, the balance of the foreign debts\nof a foreign-invested enterprise shall not exceed the difference between the total investment and the registered capital of the foreign-invested\nenterprise (the “**Total Investment and Registered Capital Balance**”).\n\n \n\nOn January 12, 2017, the People’s Bank of\nChina, promulgated the Notice of the People’s Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered\nCross-Border Financing (the “**PBOC Notice No. 9**”). Pursuant to PBOC Notice No. 9, within a transition period of one\nyear from January 12, 2017, the foreign-invested enterprises may adopt the currently valid foreign debt management mechanism (the “**Current\nForeign Debt Mechanism**”), or the mechanism as provided in PBOC Notice No. 9 (the “**Notice No. 9 Foreign Debt Mechanism**”),\nat their own discretions. PBOC Notice No. 9 provides that enterprises may conduct independent cross-border financing in RMB or foreign\ncurrencies as required. Pursuant to PBOC Notice No. 9, the outstanding cross-border financing of an enterprise (the outstanding balance\ndrawn, here and below) shall be calculated using a risk-weighted approach, and shall not exceed certain specified upper limits. PBOC Notice\nNo. 9 further provides that the upper limit of risk-weighted outstanding cross-border financing for enterprises shall be equal to 200%\nof its net assets multiplied by macro-prudential regulation parameter. The macro-prudential regulation parameter shall be 1. Enterprises\nshall file with SAFE in its capital item information system after entering into the relevant cross-border financing contracts and prior\nto three business days before drawing any money from the foreign debts.\n\n \n\nIn March 2020, the PBOC and SAFE issued the Notice\non Adjustments to Comprehensive Macro-Prudential Regulation Parameters for Cross-border Financing, further increasing outstanding cross-border\nfinancing for enterprises to 250% of its net assets. FIEs can choose to calculate their maximum amount of foreign debts based on either\n(i) the Total Investment and Registered Capital Balance, or (ii) the Net Asset Limits. In addition, a foreign debt with a term longer\nthan one year must be filed with the NDRC before the debt issuance, and the issuer shall submit the foreign debt information to the NDRC\nwithin 10 business days from completion of each debt issuance according to the Circular on Promoting the Reform of Filing and Registration\nAdministrative Regime for the Foreign Debt Issuance by the NDRC. According to the Notice on Adjustments to the Macro-Prudential Adjustment\nParameter for Cross-border Financing of Companies promulgated by the PBOC and SAFE, which took effect on January 7, 2021, the PBOC and\nthe SAFE decide to lower the macro-prudential adjustment parameter for cross-border financing of companies to 1 from 1.25.\n\n \n\n**The HFCAA and AHFCAA**\n\n** **\n\nAs part of a continued regulatory focus in the\nUnited States on access to audit and other information currently protected by national law, in particular China’s, on May 20, 2020,\nthe U.S. Senate passed the HFCAA, which includes requirements for the SEC to identify issuers whose audit work is performed by auditors\nthat the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s\nlocal jurisdiction. The HFCAA was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we have filed\naudit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive\nyears beginning in 2021, the SEC shall prohibit its securities from being traded on a national securities exchange or in the over-the-counter\ntrading market in the United States.\n\n \n\n70\n\n \n\n \n\nOn September 22, 2021, the PCAOB adopted a final\nrule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether\nthe Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because\nof a position taken by one or more authorities in that jurisdiction.\n\n \n\nOn December 16, 2021, the PCAOB issued the Determination\nReport which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in:\n(1) China of the China or Hong Kong, because of a position taken by one or more authorities in China; and (2) Hong Kong, a Special Administrative\nRegion and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. Our auditor, Onestop, is a Singapore-based\nindependent accounting firm that is registered with the PCAOB and can be inspected by the PCAOB and is subject to laws pursuant to which\nthe PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. The PCAOB currently has access\nto inspect the working papers of our auditor. We have no intention of dismissing Onestop in the future or of engaging any auditor not\nsubject to regular inspection by the PCAOB.\n\n \n\nOn August 26, 2022, the\nPCAOB announced and signed a Statement of Protocol (the “Protocol”) with CSRC and the Ministry of Finance of the People’s\nRepublic of China. The Protocol provides the PCAOB with: (1) sole discretion to select the firms, audit engagements and potential violations\nit inspects and investigates, without any involvement of Chinese authorities; (2) procedures for PCAOB inspectors and investigators to\nview complete audit work papers with all information included and for the PCAOB to retain information as needed; (3) direct access to\ninterview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates. On December 15, 2022, the\nPCAOB issued a new Determination Report which: (1) vacated the December 16, 2021 Determination Report; and (2) concluded that the PCAOB\nhas been able to conduct inspections and investigations completely in the PRC in 2022. The December 15, 2022 Determination Report cautions,\nhowever, that authorities in the PRC might take positions at any time that would prevent the PCAOB from continuing to inspect or investigate\ncompletely. As required by the HFCAA, if in the future the PCAOB determines it no longer can inspect or investigate completely because\nof a position taken by an authority in the PRC, the PCAOB will act expeditiously to consider whether it should issue a new determination.\n\n \n\nPrior to enactment of the AHFCAA, the HFCAA provided\nthat our securities will be prohibited from trading on any national securities exchange and in the over-the-counter market in the United\nStates if our auditor cannot continue to be subject to full inspection by the PCAOB for three consecutive years. On December 29, 2022,\nthe omnibus spending bill was signed into law, which included the enactment of provisions under the AHFCAA to accelerate the timeline\nfor implementation of trading prohibitions under the HFCAA from three consecutive years to two consecutive years. The termination in or\nany restriction on the trading of our securities will significantly limit or completely hinder our ability to offer securities to investors,\nor cause such securities to significantly decline in value or become worthless. \n\n \n\n**Regulations Relating to Product Quality**\n\n \n\nThe principal legal provisions governing product\nliability are set forth in the PRC Product Quality Law, which was promulgated in February 1993 by the SCNPC and amended in July 2000 and\nAugust 2009.\n\n \n\nThe PRC Product Quality Law stipulates the responsibilities\nand obligations of product sellers and producers. Violations of the PRC Product Quality Law may result in the imposition of fines. In\naddition, the seller or producer may be ordered to suspend its operations, and its business license may be revoked. There may also be\ncriminal liability in serious cases.\n\n \n\nAccording to the PRC Product Quality Law, consumers\nor other victims who suffer injury or property losses due to product defects may demand compensation from the manufacturer as well as\nthe seller. After compensating the consumer, the seller may recover the corresponding amount from the manufacturer if the manufacturer\nis responsible for the product defects, and vice versa.\n\n \n\n71\n\n \n\n \n\n**Regulations Relating to Consumer Protection**\n\n \n\nThe principal legal provisions for the protection\nof consumer interests are set forth in the Law of the PRC on Protection of Consumer Rights and Interests, or the Consumer Protection Law,\nwhich was promulgated in October 1993 amended in October 2013. The Consumer Protection Law sets forth standards of behavior that businesses\nmust observe in their dealings with consumers.\n\n \n\nViolations of the Consumer Protection Law may\nresult in the imposition of fines. In addition, the violating entity may be ordered to suspend its operations, and its business license\nmay be revoked. There may also be criminal liability in serious cases.\n\n \n\nAccording to the Consumer Protection Law, if the\nlegal rights and interests of a consumer are violated during the purchase or use of goods, the consumer may seek compensation from the\nseller. If the manufacturer or an upstream distributor is responsible, after compensating the consumer, the seller may recover the corresponding\namount from the manufacturer or the upstream distributor. Consumers or other persons who suffer personal injury or property damages due\nto defects in products may seek compensation from the manufacturer as well as the seller. After compensating the consumer, the seller\nmay recover the corresponding amount from the manufacturer if the manufacturer is responsible for the product defects, and vice versa. \n\n \n\n**Regulations Relating to Environmental Matters**\n\n \n\nOur facilities are subject to various governmental\nregulations related to environmental protection. We use a myriad of chemicals in our operations and produce emissions that could pose\nenvironmental risks. Our manufacturing facilities are subject to various pollution control regulations with respect to noise, water and\nair pollution and the disposal of waste and hazardous materials, including, China’s Environmental Protection Law, Law of the People’s\nRepublic of China on Appraising of Environment Impacts, China’s Law on the Prevention and Control of Water Pollution and its implementing\nrules, China’s Law on the Prevention and Control of Air Pollution and its implementing rules, China’s Law on the Prevention\nand Control of Solid Waste Pollution, and China’s Law on the Prevention and Control of Noise Pollution. We are subject to periodic\ninspections by local environmental protection authorities.\n\n \n\nWe did not incur material costs in environmental\ncompliance in fiscal years 2022, 2021 and 2020. We believe we are in material compliance with the relevant PRC environmental laws and\nregulations. We are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws.\n\n \n\n**Regulations on Stock Incentive Plans**\n\n \n\nThe State Administration of Foreign Exchange promulgated\nthe Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of\nOverseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by the State\nAdministration of Foreign Exchange in March 2007. Pursuant to the Stock Incentive Plan Notice and other relevant rules and regulations,\nPRC residents participating in stock incentive plan in an overseas publicly-listed company are required to register with the State Administration\nof Foreign Exchange or its local branches and follow certain other procedures. Participants of a stock incentive plan who are PRC residents\nmust conduct the registration and other procedures with respect to the stock incentive plan through a qualified PRC agent, which could\nbe a PRC subsidiary of the overseas publicly listed company or another qualified institution appointed by the PRC subsidiary. In addition,\nthe PRC agent is required to update the relevant registration should there be any material change to the stock incentive plan, the PRC\nagent or other material changes. The PRC agent must, on behalf of the PRC residents who have the right to exercise the employee stock\noptions, apply to the State Administration of Foreign Exchange or its local branches for an annual quota for the payment of foreign currencies\nin connection with the PRC residents’ exercise of the employee stock options. The foreign exchange proceeds received by the PRC\nresidents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must\nbe remitted into the bank accounts in the PRC opened by the PRC agents prior to distribution to such PRC residents.\n\n \n\nWe initially adopted an equity incentive plan\nin 2018, to award incentives and rewards to eligible participants. On January 11, 2022, our Board terminated the initial equity incentive\nplan and adopted a new equity incentive plan (the “2022 Plan”). On October 26, 2022, our Board terminated the 2022 Plan and\nadopted the New 2022 EIP. On May 7, 2025, the Board and shareholders of 65% of the outstanding capital stock of the Company, approved\nand adopted Amendment #1, and on August 1, 2025, the Board and shareholders of 52% of the outstanding capital stock of the Company adopted\nAmendment #2. We have advised the recipients of awards under our equity incentive plan to handle relevant foreign exchange matters in\naccordance with the Stock Incentive Plan Notice. However, we cannot guarantee that all employee-awarded equity-based incentives can successfully\nregister with SAFE in full compliance with the Stock Incentive Plan Notice. See “Risk *Factors—Risks Related to Doing Business\nin China”.* \n\n \n\n72\n\n \n\n \n\n**C. Organizational Structure**\n\n \n\nSee “—A. **History and Development\nof the Company**” above for details of our current organizational structure.\n\n \n\n**D. Property, Plants and Equipment**"}