{"url_path":"/sec/lxeh/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-12","source_url":"https://www.sec.gov/Archives/edgar/data/1814067/0001213900-26-055168-index.html","accession_number":"0001213900-26-055168","cik":"0001814067","ticker":"LXEH","issuer_name":"Lixiang Education Holding Co. Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1814067/0001213900-26-055168-index.html","primary_entity_key":"0001814067","primary_entity_name":"Lixiang Education Holding Co. Ltd."},"word_count":60741,"has_tables":true,"body_markdown":"** **\n\n**ITEM 3. KEY INFORMATION**\n\n** **\n\n**Our Corporate Structure and Contractual Arrangements\nwith the Consolidated VIEs**\n\n \n\nLixiang Education Holding\nCo., Ltd. is a Cayman Islands holding company and not a Chinese operating company, and does not conduct operations directly. The operations\nin China are conducted through Liandu WFOE and its subsidiaries in which Lixiang holds equity ownership interests, and their contractual\narrangements, commonly known as the VIE structure, with the VIEs incorporated in China, currently consisting of Lishui Mengxiang, Lishui\nInternational School, Beijing P.X., Langfang School, Hainan Jiangcai and Hebei Chuangxiang. Historically, the VIEs also included Qingtian\nInternational School from August 31, 2021 to December 31, 2023, Chuangmei Weiye from January 1, 2022 to November 9, 2023 and Beijing\nXinxiang from January 2022 to June 2024. The VIEs are consolidated for accounting purpose only and Lixiang does not own any equity interest\nin the VIEs. Our corporate structure involves unique risks to investors as they are purchasing equity securities in Lixiang, the Cayman\nIslands holding company, and are not purchasing, and may never directly hold, equity interests in the VIEs.\n\n \n\nPRC laws, regulations, and\nrules restrict and impose conditions on direct foreign investment in certain types of business, including education at the primary, middle\nschool and high school levels, and operation of vocational schools. As we are a company incorporated in the Cayman Islands, our wholly-owned\nsubsidiary in the PRC, Liandu WFOE, is viewed as a foreign-owned enterprise, and thus is ineligible to apply for or hold licenses to\noperate, or otherwise own equity interests in, primary and middle schools. Also, as neither we nor Liandu WFOE is a foreign education\ninstitution or a foreign vocational skills training institution with relevant qualifications on education services and operating high-quality\neducation, we and Liandu WFOE are ineligible to independently or jointly invest in or operate high schools or vocational schools pursuant\nto the relevant laws and regulations. In response to these restrictions, the Company operates these businesses in China through the VIE\nstructure which provides investors with exposure to foreign investment in the Chinese operating companies where Chinese law prohibits\nus from direct foreign investment in the operating companies.\n\n** **\n\n**Contractual Arrangements with respect to Qingtian\nInternational School**\n\n \n\nOn April 20, 2022,\nLiandu WFOE entered into a series of contractual arrangements, or the VIE structure, with Lishui Mengxiang, Qingtian International School,\nshareholders of Lishui Mengxiang and the Council Members of Qingtian International School. On January 31, 2023, due to the change of\nshareholders of Lishui Mengxiang, Liandu WFOE entered into an updated series of contractual arrangements with respect to the operation\nof Qingtian International School. The updated series of contractual arrangements replaced the previous ones in their entirety and took\neffect on December 16, 2022, the same date when the shareholders of Lishui Mengxiang signed an equity transfer agreement. On January\n15, 2024, Lishui Mengxiang entered into a definitive agreement to transfer 100% of the sponsorship interests of Qingtian International\nSchool to Zhejiang Lishui Qiaoxiang Education Consulting Services Co., Ltd (“Qiaoxiang Education”), an entity affiliated\nwith Mr. Biao Wei, a director and the Chief Executive Officer of the Company, for a consideration of RMB23,161,000. On April 2, 2024,\nLiandu WFOE, Lishui Mengxiang, Qingtian International School, the shareholders of Lishui Mengxiang and the Council Members of Qingtian\nInternational School entered into an Acknowledgment Agreement of Contractual Agreements of Qingtian Overseas Chinese Experimental High\nSchool (the “Acknowledgment Agreement of Contractual Agreements of Qingtian Overseas Chinese Experimental High School”),\npursuant to which rights and obligations under contractual arrangements with respect to Qingtian International School were actually terminated\non December 31, 2023. We deconsolidated the results of Qingtian International School in our consolidated financial statements since December\n31, 2023.\n\n \n\nBelow is a summary of the\nmaterial provisions of these contractual arrangements among Liandu WFOE and the shareholders of Lishui Mengxiang. For more complete information\nyou should read these agreements in their entirety. These agreements or their forms are filed as exhibits to this annual report on Form\n20-F.\n\n** **\n\n1\n\n \n\n \n\n**Exclusive Call Option\nAgreement.** Under the Exclusive Call Option Agreement dated January 31, 2023, Ms. Fen Ye and Ms. Hong Ye, or the\nshareholders of Lishui Mengxiang have irrevocably granted Liandu WFOE or its designated purchaser the exclusive right to purchase all\nor part of the direct and/or indirect equity interests of Lishui Mengxiang, or the Equity Call Option. The purchase price payable by\nLiandu WFOE or its designated purchaser in respect of the transfer of Lishui Mengxiang’s direct and/or indirect equity interest\nor equity interests shall be at the lowest price permitted under the PRC laws and regulations. Liandu WFOE or its designated purchaser\nshall have the right to purchase such proportion of Lishui Mengxiang’s interest in Qingtian International School and/or other equity\ninterest of Lishui Mengxiang as it decides at any time. Qingtian International School provides high school education services, in which\ncase the foreign investors are restricted to hold equity interests of Lishui Mengxiang, Qingtian International School’s sponsor,\nin accordance with the current PRC laws and regulations. If and when the PRC laws and regulations allow Liandu WFOE or us to directly\nhold all or part of the school sponsor interests in Qingtian International School and/or all or part of other equity interests of Lishui\nMengxiang and operate competent education business in the PRC, Liandu WFOE shall issue the notice of exercise of such equity call option\nas soon as practicable, and the percentage of interests to be purchased upon exercise of such Equity Call Option shall be no less than\nthe maximum percentage allowed to be held by Liandu WFOE or its designated purchaser under the PRC laws and regulations. Such equity\ntransfer price is not expressly provided for in the current PRC laws and regulations and it is uncertain whether it may be further regulated\nby future PRC laws and regulations. Pursuant to the Exclusive Call Option Agreement, all taxes and fees associated with the equity transfer\nshall be paid by Lishui Mengxiang’s shareholders and/or the direct equity holders of the VIEs upon the transfer. In the absence\nof written consent from Liandu WFOE, except as otherwise described in the Exclusive Call Option Agreement, Lishui Mengxiang and its shareholders\nshall not sell, transfer, assign or otherwise dispose of or create any encumbrance on any of Lishui Mengxiang’s assets, businesses\nor equity interests or procure separation or merge with any other entities. Furthermore, without written consent from Liandu WFOE, Lishui\nMengxiang may not terminate any material contracts or enter into any other contracts which may contradict such material contracts, incur\nany indebtedness or provide any loan or guarantee to a third party, except as disclosed to Liandu WFOE, or alter the nature or scope\nof its business. The Exclusive Call Option Agreement will remain in force during the operation term of VIEs and any periods that are\nrenewable pursuant to the PRC laws, and will terminate automatically when Liandu WFOE and/or its designated entities fully exercised\ntheir options to purchase all the equities of VIEs in accordance with this agreement. In addition, unless otherwise stipulated by laws,\nthis agreement may not be terminated by Lishui Mengxiang or its shareholders unilaterally, but may only be terminated by Liandu WFOE\nafter notice in advance.\n\n** **\n\n**Proxy Agreement for\nSchool’s Sponsors and Council Members.** Pursuant to the Proxy Agreement for School’s Sponsors and Council Members\ndated January 31, 2023, Lishui Mengxiang has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as school sponsor\nof Qingtian International School to the extent permitted by the PRC laws. These rights include, but are not limited to: (a) the\nright to appoint and/or elect of council members of Qingtian International School; (b) the right to appoint and/or elect the supervisors\nof Qingtian International School; the right to put forward the School’s mission and scope of operation;(c)the right to examine\nor approve the articles of association of Qingtian International School, development planning, major projects and budget for revenues\nand expenditures;(d) the right to supervise the performance of Qingtian International School and the achievement of the objectives set\nout in the bylaw;(e) the right to establish the executive school council in accordance with the authority and procedures prescribed in\nthe bylaw of Qingtian International School and to participate in the running and management of the School;(f) the right to access the\ninformation about the operation conditions and financial conditions of Qingtian International School;(g) the right to consult the resolutions,\nrecords, financial and accounting statements and reports of the school council meetings in accordance with the PRC laws;(h) the right\nto obtain reasonable returns from Qingtian International School’s Sponsor in accordance with the PRC laws;(i) the right to obtain\nthe remaining property of Qingtian International School after the liquidation in accordance with the PRC laws;(j) the right to transfer\nthe interests of Qingtian International School’s Sponsor in accordance with the PRC laws;(k) the right to select the profitability\nand non-profitability of the characteristic of Qingtian International School in accordance with the PRC laws, regulations or regulatory\ndocuments; and(l) any other rights of Qingtian International School’s Sponsor provided by other applicable laws and regulations\nof the PRC and the articles of association of Qingtian International School (as amended from time to time).\n\n \n\n2\n\n \n\n \n\nThe appointed Council Members\nof Qingtian International School from Lishui Mengxiang has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights\nas school sponsor of Qingtian International School to the extent permitted by the PRC laws. These rights include, but are not limited\nto: (a) acting as the agent of Qingtian International School’s Sponsor to attend the council meeting of Qingtian International;\nenjoying the right to speak, propose, vote, elect and stand for election, and the right to know, propose and supervise council meeting\nand business activities carried out by Qingtian International School; (b) exercising the voting rights on behalf of Qingtian International\nSchool’s Sponsor for all matters requiring discussion and resolution of the council; (c) proposing to convene a council meeting\nof Qingtian International School; (d) signing the council meeting minutes, council meeting resolutions or other legal documents\nthat the Appointed Council Members has the right to sign as the council member of Qingtian International School; (e) instructing\nthe legal representative, the financial, business and administrative chiefs, etc. of Qingtian International School to act in accordance\nwith the Trustee’s intention; (f) exercising other rights of the council member and council members’ voting rights under\nthe articles of association (including any other council members’ voting rights as stipulated in the amended articles of association)\nof Qingtian International School; (g) handling legal procedures containing registration, examination and approval and license of\nschools at the competent departments of government; and (h) any other rights of the Council Member as pursuant to the applicable\nPRC laws, regulations and the articles of association (as amended from time to time) of Qingtian International School. In addition, each\nof Lishui Mengxiang and the Council Members of Qingtian International School have irrevocably agreed that (i) Liandu WFOE may delegate\nits rights under the Proxy Agreement for School’s Sponsors and Council Members to the directors of Liandu WFOE or its designated\nperson, without prior notice to or approval by Lishui Mengxiang and the Council Members of Qingtian International School; and (ii) any\nperson as successor of civil rights of Liandu WFOE or liquidator by reason of subdivision, merger, liquidation of Liandu WFOE or other\ncircumstances shall have authority to replace Liandu WFOE to exercise all rights under the Proxy Agreement for School’s Sponsors\nand Council Members.\n\n** **\n\n**Proxy Agreement for\nShareholders.** Pursuant to the Proxy Agreement for Shareholders dated January 31, 2023, each shareholder of Lishui Mengxiang\nhas irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as the shareholder to the extent permitted by the PRC\nlaws. These rights include, but are not limited to: (a) the right to attend the shareholders’ meeting of our school acting\nas WFOE’s nominee; (b) the right to vote on behalf of the sponsors for all matters requiring discussion and resolution of\nthe shareholders’ meeting; (c) the right to sign the shareholders’ minutes, resolutions or other legal documents; (d) the\nright to indicate the directors, the legal representative, etc. to act in accordance with WFOE’s intention; (e) the right\nto handle legal procedures containing registration, examination and approval and license of schools at the competent departments of governments;\n(f) the right to decide to transfer or otherwise dispose of the equity of our school; (g) any other shareholder rights as pursuant\nto the applicable PRC laws, regulations and our school’s articles of association as amended from time to time.\n\n** **\n\n**Business Cooperation\nAgreement.** Pursuant to the Business Cooperation Agreement dated January 31, 2023, Liandu WFOE shall provide technical services,\nmanagement support and consulting services necessary for the private education business, and in return, the VIEs shall make payments\naccordingly. In particular, such services include but not limited to developing curriculum, conducting market research and offering management\nand marketing advice, providing technology services, providing public relations services, providing support for teacher hiring and training\nand providing other services that the VIEs may need from time to time. Without the prior consent of Liandu WFOE, none of the VIEs\nmay accept such services provided by any third party. As part of the business cooperative agreement, VIEs and the shareholders of Lishui\nMengxiang agree that they will not take any actions except as otherwise described in the Business Cooperation Agreement, such as incurring\nindebtedness, disposing of material assets, materially changing the scope or nature of the business of the VIEs, disposing of their equity\ninterests in the VIEs, or paying dividends or other similar payments to the sponsors or the shareholders VIEs in the absence of written\nconsent from Liandu WFOE. The aforementioned agreements will terminate automatically when Liandu WFOE and/or its designated entities\nfully exercised their options to purchase all the equities held by Nominee Shareholders in accordance with the Exclusive Call Option\nAgreement. In addition, unless otherwise stipulated by laws, this agreement may not be terminated by VIEs or the shareholders, but may\nonly be terminated by Liandu WFOE after notice in advance.\n\n** **\n\n3\n\n \n\n \n\n**Exclusive Technical\nService and Business Consulting Agreement.** Pursuant to the Exclusive Technical Service and Business Consulting Agreement\ndated January 31, 2023, Liandu WFOE agreed to provide exclusive technical services to Qingtian International School and Qingtian International\nSchool’s sponsor, Lishui Mengxiang. Furthermore, Liandu WFOE agreed to provide exclusive business consultancy services to Qingtian\nInternational School and Qingtian International School’s sponsor. In consideration of the technical and business consultancy services\nprovided by Liandu WFOE, Qingtian International School and Qingtian International School’s sponsor agreed to pay Liandu WFOE a\nservice fee withdrawn from their respective amount of surplus from operations after deducting all costs, expenses, taxes, losses (if\nrequired by the law) and the legally development fund of the respective school (if required by the law) and other costs and funds that\nshall be retained at Qingtian International School in accordance with applicable PRC laws. Liandu WFOE has the right (but not the obligation)\nto adjust the amount of such service fee by reference to the actual services provided and the actual business operations and needs of\nQingtian International School and Qingtian International School’s sponsor, provided that any adjusted amount shall not exceed the\namount mentioned above. Qingtian International School and Qingtian International School’s sponsor do not have any right to make\nany such adjustment. Unless otherwise prescribed under the PRC laws and regulations, Liandu WFOE shall have exclusive proprietary rights\nto any technology and intellectual property developed and materials prepared in the course of the provision of research and development,\ntechnical support and services by Liandu WFOE to Qingtian International School and Qingtian International School’s sponsor, and\nany intellectual property in the products developed, including any other rights derived thereunder, in the course of performance of obligations\nunder the Exclusive Technical Service and Business Consulting Agreement and/or any other agreements entered into between Liandu WFOE\nand the VIEs.\n\n** **\n\n**Equity Pledge Agreement**.\nPursuant to the Equity Pledge Agreement dated January 31, 2023, the shareholders unconditionally and irrevocably pledged all of their\nequity interests in Lishui Mengxiang to Liandu WFOE to guarantee performance of the obligations of the VIEs under the Exclusive Call\nOption Agreement, Business Cooperation Agreement, Exclusive Technical Service and Business Consulting Agreement, Proxy Agreement for\nShareholders, Proxy Agreement for School’s Sponsors and Council Members and Loan Agreement, each as described above the shareholders\nof Lishui Mengxiang agreed that without prior written consent of the PRC WFOE, they shall not transfer or dispose of the pledged equity\ninterests, or create or allow any encumbrance on the pledged equity interests. Unless otherwise stipulated by laws, this agreement may\nnot be terminated by Lishui Mengxiang or the shareholders of Lishui Mengxiang unilaterally, but may only be terminated by the Liandu\nWFOE after notice in advance. The equity pledge agreement remains in full force and effect until all of the obligations under the contractual\narrangements have been duly performed or the guaranteed debts are duly paid. The pledge of equity interests in Lishui Mengxiang\nhas been duly registered with the local branch of SAIC and is effective upon such registration.\n\n** **\n\n**Acknowledge Agreement.**Pursuant to the Acknowledgment Agreement of Contractual Agreements of Qingtian Overseas Chinese Experimental High School dated\nApril 2, 2024, the rights and obligations under the Business Cooperation Agreement, the Exclusive Technical Service and Business Consulting\nAgreement, the Exclusive Call Option Agreement, the Proxy Agreement for School’s Sponsor and Council Members and the Loan Agreement\nrelating to Qingtian International School and the Council Members thereunder were actually terminated on December 31, 2023.\n\n** **\n\n**Contractual Arrangements with respect to Langfang\nSchool**\n\n \n\nOn March 28, 2023, Liandu\nWFOE entered into a series of contractual arrangements, or the VIE structure, with Beijing P.X. and Langfang School, shareholders of\nBeijing P.X. and the Council Members of Langfang School. The series of contractual arrangements became effective on January 1, 2022.\nBelow is a summary of the material provisions of these contractual arrangements among Liandu WFOE and the shareholders of Beijing P.X.\nFor more complete information you should read these agreements in their entirety. These agreements or their forms are filed as exhibits\nto this annual report on Form 20-F.\n\n** **\n\n**Exclusive Call Option\nAgreement.** Under the Exclusive Call Option Agreement dated March 28, 2023, Ms. Fen Ye, Ms. Hong Ye, and Lishui\nMengxiang, or the shareholders of Beijing P.X. have irrevocably granted Liandu WFOE or its designated purchaser the exclusive right to\npurchase all or part of the direct and/or indirect equity interests of Beijing P.X. and Langfang School, or the Equity Call Option. The\npurchase price payable by Liandu WFOE or its designated purchaser in respect of the transfer of above equity interests shall be at the\nlowest price permitted under the PRC laws and regulations. Liandu WFOE or its designated purchaser shall have the right to purchase such\nproportion of Beijing P.X.’s interest in Langfang School and/or other equity interest of Beijing P.X. as it decides at any time.\nLangfang School provides vocational school education services, in which case the foreign investors shall be a foreign education institution\nor a foreign vocational skills training institution with relevant qualifications on education services and operating high-quality education\nin accordance with the current PRC laws and regulations. If and when the PRC laws and regulations allow Liandu WFOE or us to directly\nhold all or part of the school sponsor interests in Langfang School and/or all or part of other equity interests of Beijing P.X. and\noperate competent education business in the PRC, Liandu WFOE shall issue the notice of exercise of such equity call option as soon as\npracticable, and the percentage of interests to be purchased upon exercise of such Equity Call Option shall be no less than the maximum\npercentage allowed to be held by Liandu WFOE or its designated purchaser under the PRC laws and regulations. Such equity transfer price\nis not expressly provided for in the current PRC laws and regulations and it is uncertain whether it may be further regulated by future\nPRC laws and regulations. Pursuant to the Exclusive Call Option Agreement, all taxes and fees associated with the equity transfer shall\nbe paid by Beijing P.X.’s shareholders upon the transfer. In the absence of written consent from Liandu WFOE, except as otherwise\ndescribed in the Exclusive Call Option Agreement, Beijing P.X. and its shareholders shall not sell, transfer, assign or otherwise dispose\nof or create any encumbrance on any of Langfang School’s assets, businesses or equity interests or procure separation or merge\nwith any other entities. Furthermore, without written consent from Liandu WFOE, Langfang School may not terminate any material contracts\nor enter into any other contracts which may contradict such material contracts, incur any indebtedness or provide any loan or guarantee\nto a third party, except as disclosed to Liandu WFOE, or alter the nature or scope of its business. The Exclusive Call Option Agreement\nwill remain in force during the operation term of Beijing P.X. and Langfang School and any periods that are renewable pursuant to the\nPRC laws, and will terminate automatically when Liandu WFOE and/or its designated entities fully exercised their options to purchase\nall the equities of Beijing P.X. and Langfang School in accordance with this agreement. In addition, unless otherwise stipulated by laws,\nthis agreement may not be terminated by Langfang School, Beijing P.X. or its shareholders unilaterally, but may only be terminated by\nLiandu WFOE after notice in advance.\n\n \n\n4\n\n \n\n \n\n**Proxy Agreement for\nSchool’s Sponsors and Council Members.** Pursuant to the Proxy Agreement for School’s Sponsors and Council Members\ndated March 28, 2023, Beijing P.X. has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as school sponsor\nof Langfang School to the extent permitted by the PRC laws. These rights include, but are not limited to: (a) the right to appoint\nand/or elect of council members of Langfang School; (b) the right to appoint and/or elect the supervisors of Langfang School; the\nright to put forward the School’s mission and scope of operation;(c)the right to examine or approve the articles of association\nof Langfang School, development planning, major projects and budget for revenues and expenditures;(d) the right to supervise the performance\nof Langfang School and the achievement of the objectives set out in the bylaw;(e) the right to establish the executive school council\nin accordance with the authority and procedures prescribed in the bylaw of Langfang School and to participate in the running and management\nof the School;(f) the right to access the information about the operation conditions and financial conditions of Langfang School;(g)\nthe right to consult the resolutions, records, financial and accounting statements and reports of the school council meetings in accordance\nwith the PRC laws;(h) the right to obtain reasonable returns from Langfang School’s Sponsor in accordance with the PRC laws;(i)\nthe right to obtain the remaining property of Langfang School after the liquidation in accordance with the PRC laws;(j) the right to\ntransfer the interests of Langfang School’s Sponsor in accordance with the PRC laws;(k) the right to select the profitability and\nnon-profitability of the characteristic of Langfang School in accordance with the PRC laws, regulations or regulatory documents; and(l)\nany other rights of Langfang School’s Sponsor provided by other applicable laws and regulations of the PRC and the articles of\nassociation of Langfang School (as amended from time to time).\n\n \n\nThe appointed Council Members\nof Langfang School from Beijing P.X. has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as school sponsor\nof Langfang School to the extent permitted by the PRC laws. These rights include, but are not limited to: (a) acting as the agent\nof Langfang School’s Sponsor to attend the council meeting of Langfang School; enjoying the right to speak, propose, vote, elect\nand stand for election, and the right to know, propose and supervise council meeting and business activities carried out by Langfang\nSchool; (b) exercising the voting rights on behalf of Langfang School’s Sponsor for all matters requiring discussion and resolution\nof the council; (c) proposing to convene a council meeting of Langfang School; (d) signing the council meeting minutes, council\nmeeting resolutions or other legal documents that the Appointed Council Members has the right to sign as the council member of Langfang\nSchool; (e) exercising other rights of the council member and council members’ voting rights under the articles of association\n(including any other council members’ voting rights as stipulated in the amended articles of association) of Langfang School; (f) handling\nlegal procedures containing registration, examination and approval and license of school at the competent departments of government;\nand (g) any other rights of the Council Member as pursuant to the applicable PRC laws, regulations and the articles of association\n(as amended from time to time) of Langfang School. In addition, each of Beijing P.X. and the Council Members of Langfang School have\nirrevocably agreed that (i) Liandu WFOE may delegate its rights under the Proxy Agreement for School’s Sponsors and Council\nMembers to the directors of Liandu WFOE or its designated person, without prior notice to or approval by Beijing P.X. and the Council\nMembers of Langfang School; and (ii) any person as successor of civil rights of Liandu WFOE or liquidator by reason of subdivision,\nmerger, liquidation of Liandu WFOE or other circumstances shall have authority to replace Liandu WFOE to exercise all rights under the\nProxy Agreement for School’s Sponsors and Council Members.\n\n** **\n\n**Proxy Agreement for\nShareholders.** Pursuant to the Proxy Agreement for Shareholders dated March 28, 2023, Lishui Mengxiang, the shareholder of\nBeijing P.X. has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as the shareholder to the extent permitted\nby the PRC laws. These rights include, but are not limited to: (a) the right to attend the shareholders’ meeting of Beijing\nP.X. acting as WFOE’s nominee; (b) the right to vote on behalf of Lishui Mengxiang for all matters requiring discussion and\nresolution of the shareholders’ meeting; (c) the right to sign the shareholders’ minutes, resolutions or other legal\ndocuments; (d) the right to indicate the directors, the legal representative, etc. to act in accordance with WFOE’s intention;\n(e) the right to handle legal procedures containing registration, examination and approval and license of Beijing P.X. at the competent\ndepartments of governments; (f) the right to decide to transfer or otherwise dispose of the equity of Beijing P.X.; (g) any\nother shareholder’s rights as pursuant to the applicable PRC laws, regulations and articles of association of Beijing P.X. as amended\nfrom time to time.\n\n** **\n\n5\n\n \n\n \n\n**Business Cooperation\nAgreement.** Pursuant to the Business Cooperation Agreement dated March 28, 2023, Liandu WFOE shall provide technical services,\nmanagement support and consulting services necessary for the private education business, and in return, Beijing P.X. and Langfang School\nshall make payments accordingly. In particular, such services include but not limited to developing curriculum, conducting market research\nand offering management and marketing advice, providing technology services, providing public relations services, providing support for\nteacher hiring and training and providing other services that Beijing P.X. and Langfang School may need from time to time. Without\nthe prior consent of Liandu WFOE, none of Beijing P.X. and Langfang School may accept such services provided by any third party. As part\nof the business cooperative agreement, Beijing P.X., Langfang School and the shareholders of Beijing P.X. agree that they will not take\nany actions except as otherwise described in the Business Cooperation Agreement, such as incurring indebtedness, disposing of material\nassets, materially changing the scope or nature of the business of Langfang School, disposing of their equity interests in the Langfang\nSchool, or paying dividends or other similar payments to Beijing P.X. or the shareholders of Beijing P.X. in the absence of written consent\nfrom Liandu WFOE. The aforementioned agreements will terminate automatically when Liandu WFOE and/or its designated entities fully exercised\ntheir options to purchase all the equities held by Nominee Shareholders in accordance with the Exclusive Call Option Agreement. In addition,\nunless otherwise stipulated by laws, this agreement may not be terminated by Beijing P.X., Langfang School or the shareholders of Beijing\nP.X., but may only be terminated by Liandu WFOE after notice in advance.\n\n** **\n\n**Exclusive Technical\nService and Business Consulting Agreement.** Pursuant to the Exclusive Technical Service and Business Consulting Agreement\ndated March 28, 2023, Liandu WFOE agreed to provide exclusive technical services to Langfang School and Beijing P.X. Furthermore, Liandu\nWFOE agreed to provide exclusive business consultancy services to Langfang School and Beijing P.X. In consideration of the technical\nand business consultancy services provided by Liandu WFOE, Langfang School and Beijing P.X. agreed to pay Liandu WFOE a service fee withdrawn\nfrom their respective amount of surplus from operations after deducting all costs, expenses, taxes, losses (if required by the law) and\nthe legally development fund (if required by the law) and other costs and funds that shall be retained at Langfang School in accordance\nwith applicable PRC laws. Liandu WFOE has the right (but not the obligation) to adjust the amount of such service fee by reference to\nthe actual services provided and the actual business operations and needs of Langfang School and Beijing P.X., provided that any adjusted\namount shall not exceed the amount mentioned above. Langfang School and Beijing P.X. do not have any right to make any such adjustment.\nUnless otherwise prescribed under the PRC laws and regulations, Liandu WFOE shall have exclusive proprietary rights to any technology\nand intellectual property developed and materials prepared in the course of the provision of research and development, technical support\nand services by Liandu WFOE to Langfang School and Beijing P.X., and any intellectual property in the products developed, including any\nother rights derived thereunder, in the course of performance of obligations under the Exclusive Technical Service and Business Consulting\nAgreement and/or any other agreements entered into between Liandu WFOE, Langfang School and Beijing P.X..\n\n** **\n\n**Equity Pledge Agreement**.\nPursuant to the Equity Pledge Agreement dated March 28, 2023, the shareholders unconditionally and irrevocably pledged all of their equity\ninterests in Beijing P.X. to Liandu WFOE to guarantee performance of the obligations of Langfang School and Beijing P.X. under the Exclusive\nCall Option Agreement, Business Cooperation Agreement, Exclusive Technical Service and Business Consulting Agreement, Proxy Agreement\nfor Shareholders, Proxy Agreement for School’s Sponsors and Council Members and Loan Agreement, each as described above the shareholders\nof Beijing P.X. agreed that without prior written consent of the WFOE, they shall not transfer or dispose of the pledged equity interests,\nor create or allow any encumbrance on the pledged equity interests. Unless otherwise stipulated by laws, this agreement may not be terminated\nby Beijing P.X. or the shareholders of Beijing P.X. unilaterally, but may only be terminated by the Liandu WFOE after notice in advance.\nThe equity pledge agreement remains in full force and effect until all of the obligations under the contractual arrangements have\nbeen duly performed or the guaranteed debts are duly paid. The pledge of equity interests in Beijing P.X. has been duly registered with\nthe local branch of PRC State Administration of Market Regulation, or SAMR and is effective upon such registration.\n\n** **\n\n6\n\n \n\n \n\n**Contractual Arrangements with respect to Lishui\nInternational School**\n\n \n\nOn April 2, 2024, Liandu\nWFOE entered into a series of contractual arrangements, or the VIE structure, with Lishui Mengxiang, Lishui International School, shareholders\nof Lishui Mengxiang and the Council Members of Lishui International School. The series of contractual arrangements became effective on\nJune 25, 2023. Below is a summary of the material provisions of these contractual arrangements among Liandu WFOE and the shareholders\nof Lishui Mengxiang. For more complete information you should read these agreements in their entirety. These agreements or their forms\nare filed as exhibits to this annual report on Form 20-F.\n\n** **\n\n**Exclusive Call Option\nAgreement.** Under the Exclusive Call Option Agreement dated April 2, 2024, Ms. Fen Ye and Ms. Hong Ye, or the shareholders\nof Lishui Mengxiang have irrevocably granted Liandu WFOE or its designated purchaser the exclusive right to purchase all or part of the\ndirect and/or indirect equity interests of Lishui Mengxiang, or the Equity Call Option. The purchase price payable by Liandu WFOE or\nits designated purchaser in respect of the transfer of Lishui Mengxiang’s direct and/or indirect equity interest or equity interests\nshall be at the lowest price permitted under the PRC laws and regulations. Liandu WFOE or its designated purchaser shall have the right\nto purchase such proportion of Lishui Mengxiang’s interest in Lishui International School and/or other equity interest of Lishui\nMengxiang as it decides at any time. Lishui International School provides high school education services, in which case the foreign investors\nare restricted to hold equity interests of Lishui Mengxiang, Lishui International School’s sponsor, in accordance with the current\nPRC laws and regulations. If and when the PRC laws and regulations allow Liandu WFOE or us to directly hold all or part of the school\nsponsor interests in Lishui International School and/or all or part of other equity interests of Lishui Mengxiang and operate competent\neducation business in the PRC, Liandu WFOE shall issue the notice of exercise of such equity call option as soon as practicable, and\nthe percentage of interests to be purchased upon exercise of such Equity Call Option shall be no less than the maximum percentage allowed\nto be held by Liandu WFOE or its designated purchaser under the PRC laws and regulations. Such equity transfer price is not expressly\nprovided for in the current PRC laws and regulations and it is uncertain whether it may be further regulated by future PRC laws and regulations.\nPursuant to the Exclusive Call Option Agreement, all taxes and fees associated with the equity transfer shall be paid by Lishui Mengxiang’s\nshareholders and/or the direct equity holders of the VIEs upon the transfer. In the absence of written consent from Liandu WFOE, except\nas otherwise described in the Exclusive Call Option Agreement, Lishui Mengxiang and its shareholders shall not sell, transfer, assign\nor otherwise dispose of or create any encumbrance on any of Lishui Mengxiang’s assets, businesses or equity interests or procure\nseparation or merge with any other entities. Furthermore, without written consent from Liandu WFOE, Lishui Mengxiang may not terminate\nany material contracts or enter into any other contracts which may contradict such material contracts, incur any indebtedness or provide\nany loan or guarantee to a third party, except as disclosed to Liandu WFOE, or alter the nature or scope of its business. The Exclusive\nCall Option Agreement will remain in force during the operation term of VIEs and any periods that are renewable pursuant to the PRC laws,\nand will terminate automatically when Liandu WFOE and/or its designated entities fully exercised their options to purchase all the equities\nof VIEs in accordance with this agreement. In addition, unless otherwise stipulated by laws, this agreement may not be terminated by\nLishui Mengxiang or its shareholders unilaterally, but may only be terminated by Liandu WFOE after notice in advance.\n\n** **\n\n**Proxy Agreement for\nSchool’s Sponsors and Council Members.** Pursuant to the Proxy Agreement for School’s Sponsors and Council Members\ndated April 2, 2024, Lishui Mengxiang has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as school sponsor\nof Lishui International School to the extent permitted by the PRC laws. These rights include, but are not limited to: (a) the right\nto appoint and/or elect of council members of Lishui International School; (b) the right to appoint and/or elect the supervisors\nof Lishui International School; the right to put forward the School’s mission and scope of operation;(c)the right to examine or\napprove the articles of association of Lishui International School, development planning, major projects and budget for revenues and\nexpenditures;(d) the right to supervise the performance of Lishui International School and the achievement of the objectives set out\nin the bylaw;(e) the right to establish the executive school council in accordance with the authority and procedures prescribed in the\nbylaw of Lishui International School and to participate in the running and management of the School;(f) the right to access the information\nabout the operation conditions and financial conditions of Lishui International School;(g) the right to consult the resolutions, records,\nfinancial and accounting statements and reports of the school council meetings in accordance with the PRC laws;(h) the right to use the\nremaining property of the school after the liquidation for running other non-profit schools continuously in accordance with the PRC laws;(i)\nthe right to transfer the interests of Lishui International School’s sponsor in accordance with the PRC laws; and (j) any other\nrights of Lishui International School’s Sponsor provided by other applicable laws and regulations of the PRC and the articles of\nassociation of Lishui International School (as amended from time to time).\n\n \n\n7\n\n \n\n \n\nThe appointed Council Members\nof Lishui International School from Lishui Mengxiang has irrevocably authorized and entrusted Liandu WFOE to exercise all its rights\nas school sponsor of Lishui International School to the extent permitted by the PRC laws. These rights include, but are not limited to:\n(a) acting as the agent of Lishui International School’s Sponsor to attend the council meeting of Lishui International School;\nenjoying the right to speak, propose, vote, elect and stand for election, and the right to know, propose and supervise council meeting\nand business activities carried out by Lishui International School; (b) exercising the voting rights on behalf of Lishui International\nSchool’s Sponsor for all matters requiring discussion and resolution of the council; (c) proposing to convene a council meeting\nof Lishui International School; (d) signing the council meeting minutes, council meeting resolutions or other legal documents that\nthe Appointed Council Members has the right to sign as the council member of Lishui International School; (e) instructing the legal\nrepresentative, the financial, business and administrative chiefs, etc. of Lishui International School to act in accordance with the\nTrustee’s intention; (f) exercising other rights of the council member and council members’ voting rights under the\narticles of association (including any other council members’ voting rights as stipulated in the amended articles of association)\nof Lishui International School; (g) handling legal procedures containing registration, examination and approval and license of schools\nat the competent departments of government; and (h) any other rights of the Council Member as pursuant to the applicable PRC laws,\nregulations and the articles of association (as amended from time to time) of Lishui International School. In addition, each of Lishui\nMengxiang and the Council Members of Lishui International School have irrevocably agreed that (i) Liandu WFOE may delegate its rights\nunder the Proxy Agreement for School’s Sponsors and Council Members to the directors of Liandu WFOE or its designated person, without\nprior notice to or approval by Lishui Mengxiang and the Council Members of Lishui International School; and (ii) any person as successor\nof civil rights of Liandu WFOE or liquidator by reason of subdivision, merger, liquidation of Liandu WFOE or other circumstances shall\nhave authority to replace Liandu WFOE to exercise all rights under the Proxy Agreement for School’s Sponsors and Council Members.\n\n** **\n\n**Proxy Agreement for\nShareholders.** Pursuant to the Proxy Agreement for Shareholders dated April 2, 2024, each shareholder of Lishui Mengxiang\nhas irrevocably authorized and entrusted Liandu WFOE to exercise all its rights as the shareholder to the extent permitted by the PRC\nlaws. These rights include, but are not limited to: (a) the right to attend the shareholders’ meeting of our school acting\nas WFOE’s nominee; (b) the right to vote on behalf of the sponsors for all matters requiring discussion and resolution of\nthe shareholders’ meeting; (c) the right to sign the shareholders’ minutes, resolutions or other legal documents; (d) the\nright to indicate the directors, the legal representative, etc. to act in accordance with WFOE’s intention; (e) the right\nto handle legal procedures containing registration, examination and approval and license of schools at the competent departments of governments;\n(f) the right to decide to transfer or otherwise dispose of the equity of our school; (g) any other shareholder rights as pursuant\nto the applicable PRC laws, regulations and our school’s articles of association as amended from time to time.\n\n** **\n\n**Business Cooperation\nAgreement.** Pursuant to the Business Cooperation Agreement dated April 2, 2024, Liandu WFOE shall provide technical services,\nmanagement support and consulting services necessary for the private education business, and in return, the VIEs shall make payments\naccordingly. In particular, such services include but not limited to developing curriculum, conducting market research and offering management\nand marketing advice, providing technology services, providing public relations services, providing support for teacher hiring and training\nand providing other services that the VIEs may need from time to time. Without the prior consent of Liandu WFOE, none of the VIEs\nmay accept such services provided by any third party. As part of the business cooperative agreement, VIEs and the shareholders of Lishui\nMengxiang agree that they will not take any actions except as otherwise described in the Business Cooperation Agreement, such as incurring\nindebtedness, disposing of material assets, materially changing the scope or nature of the business of the VIEs, disposing of their equity\ninterests in the VIEs, or paying dividends or other similar payments to the sponsors or the shareholders VIEs in the absence of written\nconsent from Liandu WFOE. The aforementioned agreements will terminate automatically when Liandu WFOE and/or its designated entities\nfully exercised their options to purchase all the equities held by Nominee Shareholders in accordance with the Exclusive Call Option\nAgreement. In addition, unless otherwise stipulated by laws, this agreement may not be terminated by VIEs or the shareholders, but may\nonly be terminated by Liandu WFOE after notice in advance.\n\n** **\n\n8\n\n \n\n \n\n**Exclusive Technical\nService and Business Consulting Agreement.** Pursuant to the Exclusive Technical Service and Business Consulting Agreement\ndated April 2, 2024, Liandu WFOE agreed to provide exclusive technical services to Lishui International School and Lishui International\nSchool’s sponsor, Lishui Mengxiang. Furthermore, Liandu WFOE agreed to provide exclusive business consultancy services to Lishui\nInternational School and Lishui International School’s sponsor. In consideration of the technical and business consultancy services\nprovided by Liandu WFOE, Lishui International School and Lishui International School’s sponsor agreed to pay Liandu WFOE a service\nfee withdrawn from their respective amount of surplus from operations after deducting all costs, expenses, taxes, losses (if required\nby the law) and the legally development fund of the respective school (if required by the law) and other costs and funds that shall be\nretained at Lishui International School in accordance with applicable PRC laws. Liandu WFOE has the right (but not the obligation) to\nadjust the amount of such service fee by reference to the actual services provided and the actual business operations and needs of Lishui\nInternational School and Lishui International School’s sponsor, provided that any adjusted amount shall not exceed the amount mentioned\nabove. Lishui International School and Lishui International School’s sponsor do not have any right to make any such adjustment.\nUnless otherwise prescribed under the PRC laws and regulations, Liandu WFOE shall have exclusive proprietary rights to any technology\nand intellectual property developed and materials prepared in the course of the provision of research and development, technical support\nand services by Liandu WFOE to Lishui International School and Lishui International School’s sponsor, and any intellectual property\nin the products developed, including any other rights derived thereunder, in the course of performance of obligations under the Exclusive\nTechnical Service and Business Consulting Agreement and/or any other agreements entered into between Liandu WFOE and the VIEs.\n\n** **\n\n**Equity Pledge Agreement**.\nPursuant to the Equity Pledge Agreement dated April 2, 2024, the shareholders unconditionally and irrevocably pledged all of their equity\ninterests in Lishui Mengxiang to Liandu WFOE to guarantee performance of the obligations of the VIEs under the Exclusive Call Option\nAgreement, Business Cooperation Agreement, Exclusive Technical Service and Business Consulting Agreement, Proxy Agreement for Shareholders,\nProxy Agreement for School’s Sponsors and Council Members and Loan Agreement, each as described above the shareholders of Lishui\nMengxiang agreed that without prior written consent of the PRC WFOE, they shall not transfer or dispose of the pledged equity interests,\nor create or allow any encumbrance on the pledged equity interests. Unless otherwise stipulated by laws, this agreement may not be terminated\nby Lishui Mengxiang or the shareholders of Lishui Mengxiang unilaterally, but may only be terminated by the Liandu WFOE after notice\nin advance. The equity pledge agreement remains in full force and effect until all of the obligations under the contractual arrangements have\nbeen duly performed or the guaranteed debts are duly paid. The pledge of equity interests in Lishui Mengxiang has been duly registered\nwith the local branch of SAIC and is effective upon such registration.\n\n \n\nThe contractual agreements\nare not equivalent to equity ownership in the business of the VIEs. Our control over Lishui Mengxiang and its subsidiaries, Qingtian\nInternational School (deconsolidated on December 31, 2023), Lishui International School and Langfang School, and our position of being\nthe primary beneficiary of Lishui Mengxiang and its subsidiaries, Qingtian International School (deconsolidated on December 31, 2023),\nLishui International School and Langfang School for the accounting purposes are limited to the conditions that we have met for consolidation\nof Lishui Mengxiang and its subsidiaries, Qingtian International School (deconsolidated on December 31, 2023), Lishui International School\nand Langfang School under U.S. GAAP. Such conditions include that (i) we have the power to govern the activities which most significantly\nimpact the VIEs’ economic performance, (ii) we are contractually obligated to absorb losses of the VIEs that could potentially\nbe significant to the VIEs, and (iii) we are entitled to receive benefits from the VIEs that could potentially be significant to the\nVIEs. We have met such conditions for consolidation of the VIEs under U.S. GAAP through the aforementioned contractual arrangements,\nand as a result, we are deemed as the primary beneficiary of the VIEs, and the VIEs will be treated as our consolidated affiliated entities\nfor accounting purposes. We have consolidated the results of the VIEs in our consolidated financial statements included elsewhere\nin this annual report on Form 20-F in accordance with U.S. GAAP. For a more detailed discussion of the basis of presentation of our consolidated\nfinancial statements, see “*Item 5. Operating and financial Review and Prospects—A. Operating Results—Critical Accounting\nPolicies.*”\n\n** **\n\nWe\ncould face heightened risks and substantial costs in enforcing these contractual arrangements,\nbecause, although the aforementioned contractual arrangements have been widely adopted by\nPRC companies listed overseas, such arrangements have not been tested in any of the PRC courts.\nIn addition,  there are substantial uncertainties regarding the interpretation and application\nof current and future PRC laws, regulations, and rules relating to the contractual arrangements\nand the VIE structure. If the PRC government finds these contractual arrangements or the\nVIE structure non-compliant with the restrictions on direct foreign investment in the relevant\nindustries, or if the relevant PRC laws, regulations, and rules or the interpretation thereof\nchange in the future, we could be subject to severe penalties or be forced to relinquish\nour interests in the VIEs or forfeit our rights under the contractual arrangements. Lixiang\nand investors in the ADSs face uncertainty about potential future actions by the PRC government,\nwhich could affect the enforceability of our contractual arrangements, consequently, significantly\naffect the financial condition and results of operations. If we are unable to claim our right\nto control the assets of the VIEs, the ADSs may decline in value or become worthless. The\nPRC government could even disallow the VIE structure completely, which would likely result\nin a material adverse change in our operations and the ADSs may significantly decline in\nvalue or become worthless. See “*Risk Factors—Risks Relating to Our Corporate\nStructure.*”\n\n \n\n9\n\n \n\n \n\nFor the year ended\nDecember 31, 2025, we and the VIEs have established an education services network consisting of a high school (Lishui International\nSchool), two vocational education services providers (Langfang School and Hainan Jiangcai) and a human resources and healthcare support services\nprovider (Hebei Chuangxiang).\n\n \n\nLishui Mengxiang holds 100%\nof the sponsorship interests of Lishui International School starting from June 25, 2023. Beijing P.X., a wholly-owned subsidiary of Lishui\nMengxiang, holds 100% of the sponsorship interests of Langfang School from January 1, 2022, and has two wholly-owned subsidiaries, namely\nHainan Jiangcai and Hebei Chuangxiang. Historically, Lishui Mengxiang held 100% of the sponsorship interests in Qingtian International\nSchool from August 24, 2021 to December 31, 2023. Lishui Mengxiang, through its shareholding of Beijing P.X., also held 100% of the equity\ninterests in Chuangmei Weiye from January 1, 2022 to November 9, 2023. Beijing Xinxiang was formed by Lishui Mengxiang with Beijing R.R.Z.\nin January 2022 and was deregistered in June 2024. For details regarding the changes of our subsidiaries and the VIEs, see “*Item\n4. Information on the Company—A. History and Development of the Company.*”\n\n \n\nPrior to August 31,\n2021, the VIEs primarily operated primary and secondary school in Baiyun campus and Yijing campus—Featured Division of Lianwai\nSchool. Under the Implementation Rules for the Law for Promoting Private Education of the PRC (《中华人民共和国民办教育促进法实施条例》)\nfor Private Education Laws, or the 2021 Implementation Rules, which took effect on September 1, 2021, social organizations and individuals\nare prohibited from controlling a private school that provides compulsory education by means of, among others, merger, acquisition, and\ncontractual arrangements, and a private school providing compulsory education is prohibited from conducting transactions with its related\nparty. In particular, the prohibition over related party transactions has significantly affected the enforceability of the exclusive\nmanagement services and business cooperation agreements among Liandu WFOE and Lianwai School providing compulsory education. Therefore,\nwe re-assessed our control over Lianwai School. Based on the relevant accounting standard in accordance with U.S. GAAP, we have concluded\nthat we have lost control of Lianwai School since August 31, 2021, in view of the significant uncertainties and restrictions the 2021\nImplementation Rules impose on our ability to direct the range of ongoing activities that would most significantly impact the returns\nof Lianwai School. In light of such regulatory developments, on April 20, 2022, we entered into an acknowledgment agreement of contractual\nagreements with Lianwai School and respective directors, to confirm all the terms of rights and obligations relating to Lianwai School\nand the directors appointed by the sponsor under the contractual arrangements among them, and agree among the parties that such arrangements\nshall have been terminated on August 31, 2021. To minimize disruptions to existing students enrolled in Lianwai School, we and the\nVIEs continued to offer essential services to the students. We deconsolidated Lianwai School commencing from September 1, 2021 and\npresented it as a discontinued operation in current and comparative period financial statements.\n\n \n\nWe and the VIEs have explored\nand considered business opportunities beyond high school education and taken steps to expand into online education and vocational education.\nIn February 2021, Liandu WFOE completed the acquisition of 100% of the equity interests of Hangzhou Youxi to expand into the business\nof online education. In January 2022, Lishui Mengxiang formed Beijing Xinxiang with Beijing R.R.Z. to provide vocational education\nin the healthcare industry. To expand our and the VIEs’ business into vocational education, Lishui Mengxiang entered into definitive\nagreements to acquire 100% of the equity interests of Beijing P.X. on January 1, 2022, which was a wholly-owned subsidiary of Beijing\nS.K. at the time, so that after the transaction, Lishui Mengxiang through its shareholding of Beijing P.X. would in turn hold 100% of\nthe equity interests of Chuangmei Weiye and Hainan Jiangcai, and 100% of the sponsorship interests of Langfang School. The acquisition\nwas completed in May 2022. As of the date of the annual report on Form 20-F, the administrative procedures with the PRC governmental\nauthorities to amend the registration reflecting the result of the acquisition of Langfang School have not been completed due to the\ninternal procedures of the competent authorities and we are still in the process of active communication with such local authorities.\nOn November 5, 2023, Lishui Mengxiang elected to exercise the right to sell 100% of the equity interests of Chuangmei Weiye back to Beijing\nS.K. and its affiliates pursuant to that certain supplementary agreement by and among Lishui Mengxiang, Beijing S.K., certain affiliates\nof Beijing S.K. and Beijing P.X. dated August 20, 2023, primarily due to the substantial amount of Chuangmei Weiye’s historical\ndebts. The equity interests of Chuangmei Weiye were transferred back to Beijing S.K.’s affiliates at a price of RMB6.36 million\nand the transfer was completed on November 9, 2023. After the transaction, the amount of RMB6.36 million has been added to the total\ndebts owed by Beijing S.K. to Lishui Mengxiang. On January 6, 2023, Beijing P.X established Hebei Chuangxiang, a human resources services\nprovider for internship and employment recommendations, as its wholly-owned subsidiary to expand our human resources services\nbusiness. Hebei Chuangxiang also cooperates with healthcare and elderly care enterprises to deliver daily care, specialized\nnursing and companion services. On March 5, 2026, Mudanjiang Chuangxiang Health Management Co., Ltd. (“Mudanjiang Chuangxiang”) was\nincorporated in the PRC with 100% ownership by Hebei Chuangxiang.\n\n \n\n10\n\n \n\n \n\nThe following diagram illustrates\nthe corporate structure of us, our subsidiaries and the VIEs, as of the date of the annual report:\n\n \n\n*Notes:*\n\n \n\n(1)Lishui\nMengxiang holds 100% of the sponsorship interests of Lishui International School. On April\n2, 2024, Liandu WFOE entered into a series of contractual arrangements with respect to the\noperation of Lishui International School, pursuant to which Lishui Mengxiang’s sponsorship\ninterests of Lishui International School became effective on June 25, 2023. As of September\n1, 2025, Lishui International School had four classes and five teachers in total.\n\n \n\n11\n\n \n\n \n\n(2)Beijing\nP.X. holds 100% of the sponsorship interests of Langfang School. Liandu WFOE entered into\na series of contractual arrangements with respect to the operation of Langfang School on\nMarch 28, 2023. The contractual arrangements took effect on January 1, 2022. As of the date\nof the annual report, Langfang City has not released any detailed rules on classification\nregistration of private schools and we have not received any relevant notice from the competent\nauthorities of Langfang City since January 1, 2022 when Beijing P.X. began to hold the whole\nsponsorship interests of Langfang School. On January 6, 2023, Beijing P.X. established a\nwholly-owned subsidiary, Hebei Chuangxiang, a human resources services provider for internship\nand employment recommendations. It also cooperates with healthcare and elderly care enterprises to\ndeliver daily care, specialized nursing and companion services. On March 5, 2026, Mudanjiang Chuangxiang Health Management Co., Ltd. (“Mudanjiang Chuangxiang”) was\nincorporated in the PRC with 100% ownership by Hebei Chuangxiang.\n\n \n\n(3)According\nto PRC laws and regulations, entities and individuals who establish private schools are commonly\nreferred to as “sponsors” instead of “owners” or “shareholders.”\nThe economic substance of “sponsorship” with respect to private schools is substantially\nsimilar to that of ownership with regard to legal, regulatory and tax matters. However, the\ndifferences between sponsorship and equity ownership can be found in the specific provisions\nof the laws and regulations applicable to sponsors and owners, such as provisions regarding\nthe right to receive returns on investment and the right to the distribution of residual\nproperties upon termination and liquidation.\n\n \n\nInvestors are purchasing\nequity interests in Lixiang, the Cayman Islands holding company, and are not purchasing, and may never directly hold, equity interests\nin the VIEs. We do not have any equity interests in the VIEs. However, because of the contractual arrangements, we control the VIEs through\nour PRC subsidiary, Liandu WFOE, and are regarded as the primary beneficiary of the VIEs for accounting purposes under U.S. GAAP. We\nhave consolidated the results of the VIEs in our consolidated financial statements included elsewhere in this annual report on Form 20-F\nin accordance with U.S. GAAP. For a more detailed discussion of the basis of presentation of our consolidated financial statements, see\n“*Item 5. Operating and financial Review and Prospects—A. Operating Results—Critical Accounting Policies.*”\n\n \n\nThese contractual arrangements\nmay not be as effective in providing us with control over the VIEs as equity ownership. If we had equity ownership of the VIEs, we would\nbe able to exercise our rights as a direct or indirect shareholder to effect changes in the board of directors of the VIEs, which in\nturn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, as these contractual arrangements\nstand now, if the VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, we cannot\nexercise shareholders’ rights to direct corporate actions as direct ownership would otherwise entail. If the parties under such\ncontractual arrangements refuse to carry out our directions in relation to everyday business operations, we will be unable to maintain\neffective control over the operations of the VIEs in China under U.S. GAAP. Losing effective control over the VIEs may impair our access\nto their cash flow from operations, which may reduce our liquidity. If the VIEs or their respective ultimate shareholders fail to perform\ntheir obligations under our contractual arrangements, we may have to incur additional costs and expend substantial resources to enforce\nour contractual arrangements, temporarily or permanently lose control over our primary operations or lose access to our primary sources\nof revenue.\n\n \n\nThere are substantial uncertainties\nregarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the contractual arrangements\nand the VIE structure. If the PRC government finds these contractual arrangements or the VIE structure non-compliant with the restrictions\non direct foreign investment in the relevant industries, or if the relevant PRC laws, regulations, and rules or the interpretation thereof\nchange in the future, we could be subject to severe penalties or be forced to relinquish our interests in the VIEs or forfeit our rights\nunder the contractual arrangements. Lixiang and investors in the ADSs face uncertainty about potential future actions by the PRC government,\nwhich could affect the enforceability of our contractual arrangements, consequently, significantly affect the financial condition and\nresults of operations. If we are unable to claim our right to control the assets of the VIEs, the ADSs may decline in value or become\nworthless. The PRC government could even disallow the VIE structure completely, which would likely result in a material adverse change\nin our operations and the ADSs may significantly decline in value or become worthless.\n\n** **\n\n12\n\n \n\n \n\nOn June 30, 2020, the\nStanding Committee of the National People’s Congress of the PRC (the “Standing Committee of the NPC”), promulgated\nthe Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region, or\nthe Law of PRC on Safeguarding National Security in Hong Kong, the interpretation of which involves a degree of uncertainty. The PRC\ngovernment has also announced recently that it would step up supervision of overseas listed PRC businesses, and check sources of funding\nfor securities investment and control leverage ratios. The PRC government has also opened a probe into several U.S.-listed technology\ncompanies focusing on anti-monopoly, financial technology regulation and more recently, with the passage of the PRC Data Security Law,\nhow companies collect, store, process and transfer personal data. Currently these laws (other than the Law of the PRC on Safeguarding\nNational Security in Hong Kong) are expected to apply to China domestic businesses, rather than businesses in Hong Kong which operate\nunder a different set of laws from China. However, there can be no assurance that the government of Hong Kong will not enact similar\nlaws and regulations applicable to companies operating in Hong Kong. For example, the PRC government may pressure the government of Hong\nKong to enact similar laws and regulations to those in the PRC, which may seek to exert control over offerings conducted overseas by\nHong Kong companies. If any or all of the foregoing were to occur, and if our Hong Kong subsidiary elects to carry out substantive business\nactivities in the future, it could lead to a material adverse change in our operations and limit or hinder our ability to offer securities\nto overseas investors or remain listed in the United States, which could cause the value of our ADSs to significantly decline or become\nworthless. See “*Risk Factors—Risks Relating to Doing Business in China—Implementation of the Law of the PRC on Safeguarding\nNational Security in Hong Kong involves uncertainty, and the recent policy pronouncements by the PRC government regarding business activities\nof U.S.-listed PRC businesses may negatively impact Lixiang’s existing and future operations in Hong Kong.*”\n\n \n\n**2023 Private Placement**\n\n \n\nOn August 25, 2023, we entered\ninto a share subscription agreement with each of Xiaoxiong Li, Haibin Gong, Yiqiang Dong, Huafeng Hong, Kin Mang Kung, Shulin Gong, Kim\nTuk Yeung, Qunzhu Dong, Jinglong Hong and Canghai Hong (collectively, the “2023 Purchase Agreements”), pursuant to which\nwe agreed to issue and sell to such individual investors a total of 50,000,000 ordinary shares (now redesignated as Class A ordinary\nshares) with a par value of US$0.0001 each of the Company, in the aggregate consideration of US$6,000,000. Additionally, we filed a registration\nstatement with the SEC covering the resale of the ADSs representing the ordinary shares that would be issued to such investors under\nthe 2023 Purchase Agreements. After such registration statement was declared effective by the SEC and a final prospectus in connection\ntherewith was filed and the other conditions set forth in the Purchase Agreements were satisfied, we issued and sold the 50,000,000 ordinary\nshares (now redesignated as Class A ordinary shares) to be represented by ADSs to the investors and the transaction was closed on October\n6, 2023.\n\n** **\n\n**2023 Reverse Stock Split**\n\n \n\nOn May 3, 2023, the Company\nwas first notified by the Nasdaq Stock Market LLC (“Nasdaq”) of its failure to maintain a minimum bid price of US$1.00 per\nshare for 30 consecutive trading days under Nasdaq Listing Rules 5450(a)(1) (the “Bid Price Rule”), and was given its first\n180-day extension, or until October 30, 2023 to regain compliance. On November 30, 2023, the Company was granted an exception until January\n31, 2024, to effect a reverse stock split and thereafter regain compliance with the Bid Price Rule. Effective January 3, 2024, the Company\neffected a 1-for-2 reverse stock split.\n\n \n\nOn January 24, 2024, the\nCompany received a letter from the Nasdaq Hearing Panel (the “Panel”), notifying the Company that it has regained compliance\nwith the Bid Price Rule, as required by the Panel’s decision dated November 30, 2023. Accordingly, the Panel determined to continue\nthe listing of the Company’s securities on Nasdaq and this matter was closed.\n\n** **\n\n**2024 Reverse Stock Split**\n\n \n\nOn May 7, 2024, the Company\nwas notified by Nasdaq of its failure to maintain a minimum bid price of US$1.00 per share for 30 consecutive trading days under the\nBid Price Rule, and was given a compliance period of 180-day extension, or until November 4, 2024 to regain compliance. Effective September\n30, 2024, the Company effected a 1-for-10 reverse stock split. On October 14, 2024, the Company received a letter from the Nasdaq, notifying\nthe Company that it had regained compliance with the Bid Price Rule and this matter was closed.\n\n \n\n**2026 Reverse Stock Split**\n\n \n\nOn November 18, 2025, the\nCompany was notified by Nasdaq of its failure to maintain a minimum bid price of US$1.00 per share for 30 consecutive trading days under\nthe Bid Price Rule, and was given a compliance period of 180 calendar days, or until May 18, 2026, to regain compliance. On April 1,\n2026, the Company announced its plan to change the ratio of its ADS to Class A ordinary shares from the previous ratio of one (1) ADS\nto one hundred (100) Class A ordinary shares to a new ratio of one (1) ADS to one thousand (1,000) Class A ordinary shares. Effective\nApril 20, 2026, the Company effected a 1-for-10 reverse stock split.\n\n \n\n13\n\n \n\n \n\n**Variation of Share Capital**\n\n \n\nOn November 18, 2024, we\nheld our annual general meeting and approved that the authorized share capital of the Company be increased, re-classified and re-designated\nas follows (together, the “Variation of Share Capital”):\n\n \n\n \n(a)\nby the creation of an additional\n19,500,000,000 shares with a par value of US$0.0001 each to rank pari passu in all respects with the existing shares, such that following\nsuch increase of capital, the authorized share capital of the Company shall be US$2,000,000 divided into 20,000,000,000 shares of\na par value of US$0.0001 each,\n\n \n\n \n(b)\nby re-designating 19,700,000,000\nshares, including all of the then issued and outstanding shares immediately prior to the October 4, 2024 (except for those held by\nMengxiang Holdings Limited) and certain authorized but unissued shares, as Class A ordinary shares of a par value of US$0.0001 each,\n\n \n\n \n(c)\nby re-designating 100,000,000\nshares, including those held by Mengxiang Holdings Limited immediately prior to October 4, 2024 and certain authorized but unissued\nshares, as Class B ordinary shares of a par value of US$0.0001 each, and\n\n \n\n \n(d)\nby re-designating 200,000,000\nauthorized but unissued shares as shares of such class or classes (however designated) as the board of directors may determine in\naccordance with the third amended and restated memorandum and articles of association of the Company,\n\n \n\nsuch that following Variation\nof Share Capital, the authorized share capital of the Company shall be US$2,000,000 divided into (i) 19,700,000,000 Class A ordinary\nshares of a par value of US$0.0001 each, (ii) 100,000,000 Class B ordinary shares of a par value of US$0.0001 each, and (iii) 200,000,000\nshares of a par value of US$0.0001 each of such class or classes (however designated) as the board of directors may determine in accordance\nwith the third amended and restated memorandum and articles of association of the Company.\n\n \n\n**2024 Private Placement**\n\n \n\nOn November 28, 2024, we\nentered into a share subscription agreement with each of Jong Tchun Jin, Chong Juinn Hui, Kon Chee Thong, Ong Sin Leong, Man Ken Toh,\nVun Siong Wee, Law Kok Leong, Raymond Wee Hian Sen, Chai Kueh Sin, Wong Siong Yee and Siaw Ting Liang (collectively, the “2024\nPurchase Agreements”), pursuant to which we agreed to issue and sell to such individual investors a total of 1,800,000,000 Class\nA ordinary shares with a par value of US$0.0001 each of the Company, in the aggregate consideration of US$34,200,000. Additionally, we\nfiled a registration statement with the SEC covering the resale of the ADSs representing the Class A ordinary shares that would be issued\nto such investors under the 2024 Purchase Agreements. After such registration statement was declared effective by the SEC and a final\nprospectus in connection therewith was filed and the other conditions set forth in the Purchase Agreements were satisfied, we issued\nand sold the 1,800,000,000 Class A ordinary shares to be represented by ADSs to the investors and the transaction was closed in early\n2025.\n\n** **\n\n**Permissions Required for Our Operations in\nChina**\n\n \n\nIn order to conduct our\nand the VIEs’ business and operate schools in China, we and the VIEs are required to obtain and maintain various approvals, licenses\nand permits and fulfill registration and filing requirements. For example, to establish and operate a high school in the PRC, we are\nrequired to obtain a private school operation permit from the local education bureau and register with competent administration authorities\nto obtain a business license or registration certificate. Such local regulatory authorities may also conduct annual inspection of the\nschools.\n\n \n\nAfter consulting with our\nPRC legal counsel, Beijing DeHeng Law offices, we are of the view that, as of the date of the annual report, except for the circumstances\nwhich would not in the aggregate have a material adverse effect on our financial conditions, Lixiang, our PRC subsidiaries and the VIEs\nhave received from PRC authorities requisite licenses, permissions or approvals needed to engage in the businesses currently conducted\nin China. Such licenses and permissions mainly include Business License, Public Institution Legal Person Certificate, Permit for Establishment\nof Privately-run Schools, Registration Certificate for Private Non-enterprise Entities, Labor Dispatch Operation License, Human Resources\nService License and Food Operation License. The following table provides details on the aforementioned licenses and permissions held\nby our PRC subsidiaries and VIEs.\n\n \n\n14\n\n \n\n \n\n**Company/School**\n \n**License/Permission**\n \n**Issuing\nAuthority**\n \n**Validity**\n\nLiandu WFOE\n \nBusiness License\n \nMarket Supervision Administration of Lishui City\n \nUntil October 9, 2068\n\n \n \n \n \n \n \n \n\nXianke\n \nBusiness License\n \nMarket Supervision Administration of Jingning Shezu\nAutonomous County\n \nLong-term\n\n \n \n \n \n \n \n \n\n \n \nFood Operation License\n \nMarket Supervision Administration of Jingning Shezu\nAutonomous County\n \nUntil August 24, 2025*\n\n \n \n \n \n \n \n \n\nHangzhou Youxi\n \nBusiness License\n \nMarket Supervision Administration of Hangzhou City\n \nLong-term\n\n \n \n \n \n \n \n \n\nLishui Mengxiang\n \nBusiness License\n \nMarket Supervision Administration of Lishui City\n \nUntil August 16, 2051\n\n \n \n \n \n \n \n \n\nBeijing\nP.X.\n \nBusiness License\n \nMarket Supervision Administration of Chaoyang District,\nBeijing\n \nUntil December 22, 2051\n\n \n \n \n \n \n \n \n\nHainan\nJiangcai\n \nBusiness License\n \nMarket Supervision Administration of Hainan Province\n \nLong-term\n\n \n \n \n \n \n \n \n\nLangfang\nSchool\n \nRegistration Certificate for Private Non-enterprise\nEntities\n \nAdministrative Examination and Approval Bureau of Langfang\nCity\n \nUntil July 7, 2027\n\n \n \n \n \n \n \n \n\n \n \nPermit for Establishment of Privately-run Schools\n \nDepartment of Human Resources and Social Security of\nHebei Province\n \nUntil July, 2028\n\n \n \n \n \n \n \n \n\n \n \nFood Operation License\n \nAdministrative Examination and Approval Bureau of Anci\nDistrict, Langfang City\n \nUntil October 15, 2027\n\n \n \n \n \n \n \n \n\nHebei\nChuangxiang\n \nBusiness License\n \nChina (Hebei) Pilot Free Trade Zone Zhengding Area\nManagement Committee\n \n Long-term\n\n \n \n \n \n \n \n \n\n \n \nLabor Dispatch Operation License\n \nChina (Hebei) Pilot Free Trade Zone Zhengding Area\nManagement Committee\n \n Until February 27, 2029  \n\n \n \n \n \n \n \n \n\n \n \nHuman Resources Service License\n \nChina (Hebei) Pilot Free Trade Zone Zhengding Area\nManagement Committee\n \n Until January 9, 2028\n\n \n \n \n \n \n \n \n\nLishui\nInternational School\n \nSocial Service Institution Registration Certificate\n \nCivil Affairs Bureau of Lishui City\n \nUntil June 24, 2028\n\n \n \n \n \n \n \n \n\n \n \nPermit for Establishment of Privately-run Schools\n \nLishui Education Bureau\n \nUntil May 31, 2026\n\n \n\n*Note: According to the\ndirections of Market Supervision Administration of Jingning Shezu Autonomous County, since\nXianke does not engage in the catering business and only sells pre-packaged food, it does\nnot need to renew its food operation license.\n\n \n\n15\n\n \n\n \n\nWe cannot assure you that\nLixiang, our PRC subsidiaries and the VIEs are always able to successfully update or renew the licenses or permits required for the relevant\nbusiness in a timely manner or that these licenses or permits are sufficient to conduct all of our and the VIEs’ present or future\nbusiness. As advised by our PRC legal counsel, Beijing DeHeng Law Offices, if Lixiang, our PRC subsidiaries or the VIEs (i) do not\nreceive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required,\nor (iii) applicable laws, regulations, or interpretations change and Lixiang, our PRC subsidiaries or the VIEs are required to obtain\nsuch permissions or approvals in the future, we could be subject to fines or legal sanctions, which may materially and adversely affect\nthe business, financial condition and results of operations of us and the VIEs.\n\n \n\nAs of the date of the annual\nreport on Form 20-F, the administrative procedures for changing the sponsor of Langfang School with the PRC governmental authorities,\nespecially for renewing the Permit for Establishment of Privately-run Schools, have not been completed due to the internal procedures\nof the competent authorities and we and the VIEs are still in the process of active communication with such local authorities. The adjustment\nof the cooperation arrangement between Beijing P.X. and Hainan Communication Senior Technical School (海南省交通高级技工学校)\n(“Hainan Technical School”) for compliance purposes has not been completed.\n\n \n\nFor risks relating to permissions\nand approvals required for the operations of us and the VIEs in China, see *“Risk Factors—Risks Relating to Our Business\nand Industry—We and the VIEs may not be able to obtain all necessary approvals, licenses and permits and to make all necessary\nregistrations and filings for our and the VIEs’ educational and other services in China.”*\n\n** **\n\n**Regulatory Approval from the China Securities\nRegulatory Commission**\n\n \n\nAs advised by our PRC legal\ncounsel, Beijing DeHeng Law Offices, as of the date of this annual report, approvals from the China Securities Regulatory Commission,\nor CSRC, since we are existing listed enterprises, we are not required to fulfill the filing procedures with the CSRC for our initial\npublic offering in 2020. However, we have completed the filing procedures with the CSRC on August 20, 2024 for our 2023 Private Placement.\nBesides, we have submitted the filing documents to the CSRC in respect of the 2024 Private Placement. As of the date of the annual report,\nwe have not received any notice or determination from the CSRC confirming that we have completed our filing procedures for our 2024 Private\nPlacement. It is uncertain whether such filing can be completed or how long it will take to complete such filing. Any delay in completing\nsuch filing procedures might affect the other filing procedures with respect to other applicable circumstances, under the Trial Measures\nin the future, such as the secondary listing, primary listing, spin-off listing and making overseas offering and listing anew after being\ndelisted from an overseas exchange, which might affect our future public market financings and capital market transactions.\n\n \n\nBeijing DeHeng Law Offices,\nhas further advised us that there remains some uncertainty as to how the Provisions on the Merger and Acquisition of Domestic Enterprises\nby Foreign Investors (Revised in 2009), or the M&A Rules, will be interpreted or implemented in the context of an overseas offering\nand its opinions summarized above are subject to any new laws, regulations and rules or detailed implementations and interpretations\nin any form relating to the M&A Rules.\n\n \n\nIn addition, on February\n17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, or the\nTrial Measures, which became effective on March 31, 2023. Subsequently, the CSRC circulated a series of supporting guidance rules, the\nNotes on the Trial Measures, the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and\nthe relevant CSRC Answers to Reporter Questions on the official website of CSRC, or collectively, the Guidance Rules and Notice. These\nnew regulations propose to establish a new filing-based regime to regulate overseas offerings and listings by Chinese domestic companies.\n\n \n\n16\n\n \n\n \n\nUnder the Trial Measures\nand the Guidance Rules and Notice, Chinese domestic companies conducting overseas securities offering and listing activities, either\nin direct or indirect form, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within\nthree working days following its submission of initial public offering or listing application. Since the date of effectiveness of the\nTrial Measures, the domestic enterprises falling within the scope of filing that have been listed overseas or met the following circumstances\nare existing enterprises: before the effectiveness of the Trial Measures, the application for indirect overseas issuance and listing\nhas been agreed by the overseas regulators or overseas stock exchanges (such as having passed the hearing on the Hong Kong market or\nregistration become effective as agreed on the U.S. market, etc.), and it is not required to perform issuance and listing supervision\nprocedures of the overseas regulators or overseas stock exchanges (such as rehearing on the Hong Kong market, etc.), and the overseas\nissuance and listing will be completed by September 30, 2023. Existing enterprises are not required to file immediately, and filing should\nbe made as required if they involve refinancing and other filing matters.\n\n \n\nIf the CSRC or other regulatory\nagencies later promulgate new rules or explanations requiring that we obtain their approvals to maintain the listing status of our ADSs\non the Nasdaq or to conduct offerings of securities in the future, we may be unable to obtain such approvals in a timely manner, or at\nall, and such approvals may be rescinded even if obtained. Any such circumstance could significantly limit or completely hinder our ability\nto maintain the listing status of our ADSs on the Nasdaq or continue to offer securities to investors and cause the value of our ADSs\nto significantly decline or be worthless.\n\n** **\n\n**Regulatory Approval from the Cyberspace\nAdministration of China**\n\n \n\nOn December 28, 2021, thirteen\nPRC governmental and regulatory agencies, including the Cyberspace Administration of China, or CAC, promulgated the Measures for Cyber\nSecurity Review, which further restates and expands the applicable scope of the cybersecurity review. Pursuant to the Measures for Cyber\nSecurity Review, network platform operators grasping the personal information of more than 1 million users must apply with the Cybersecurity\nReview Office of CAC for a cybersecurity review in order to pursue a foreign listing, and operators of critical information infrastructure\npurchasing network products and services and online platform operators engaging in data processing activities which affect or may affect\nnational security of the PRC are also obligated to apply for a cybersecurity review. However, the Measures for Cyber Security Review\nprovide no further explanation on the extent of “network platform operator”, “affect or may affect national security”\nor “foreign” listing.\n\n \n\nWe currently have less than\n200 subscribers on our digital platform such as WeChat public account. We have no registered users on our website. We only require and\nobtain user information after users register with us. As advised by our PRC legal counsel, Beijing DeHeng Law Offices, as of the date\nof this annual report, we do not need to apply for a cybersecurity review pursuant to the above regulation to maintain the listing status\nof our ADSs on the Nasdaq, given that (i) we are not in possession of personal information of over one million users and it is also very\nunlikely that it will reach such threshold in the near future; and (ii) as of the date of the annual report, we have not received any\nnotice or determination from applicable PRC governmental authorities identifying us as a critical information infrastructure operator\nor an online platform operator engaging in relevant data processing activities which affect or may affect national security of the PRC.\n\n \n\nConsidering that the Measures\nfor Cyber Security Review empower the cybersecurity review office to initiate cybersecurity review when they believe any particular data\nprocessing activities “affect or may affect national security”, it is uncertain whether the competent government authorities\nwill deem that our data processing activities may affect national security and thus initiate the cybersecurity review against our business.\nAlthough we believe we currently are not required to obtain clearance from the CAC in order to maintain the listing status of our ADSs\non the Nasdaq under the Measures for Cyber Security Review or the Opinions on Strictly Cracking Down on Illegal Securities Activities,\nwe face uncertainties as to the interpretation or implementation of such regulations or rules, and if required, whether such clearance\ncan be timely obtained, or at all. If we were to subject to such review in order to maintain the listing status of our ADSs on the Nasdaq,\nduring such review, we may be required to suspend our operation and experience other disruptions to our operations. Cybersecurity review\ncould also result in negative publicity with respect to our company and diversion of our managerial and financial resources. Further,\nfailure of cybersecurity, data privacy and data security compliance could subject us to penalties, damage our reputation and brand, and\nadversely harm our business and results of operations.\n\n** **\n\n17\n\n \n\n \n\n**The Holding Foreign Companies Accountable\nAct**\n\n \n\nPursuant to the HFCAA, if\nthe SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections\nby the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange\nor in the over-the-counter trading market in the United States.\n\n \n\nOur financial statements\ncontained in this annual report on Form 20-F for the fiscal years ended December 31, 2023, 2024 and 2025 have been audited by Audit\nAlliance LLP, an independent registered public accounting firm headquartered in Singapore and is among the public accounting firms that\nare registered with the Public Company Accounting Oversight Board of the United States, or the PCAOB. Such PCAOB-registered accounting\nfirms are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with\nthe applicable professional standards. On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect\nor investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions\ntaken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms\nthat are headquartered in the PRC or Hong Kong. This list does not include Audit Alliance LLP. As of the date of the annual report, our\nlisting is not affected by the Holding Foreign Companies Accountable Act, or the HFCAA, and related regulations. However, the recent\ndevelopments would add uncertainties to our listing and we cannot assure you whether Nasdaq or regulatory authorities would apply additional\nand more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures,\nadequacy of personnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial\nstatements. In the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of\na position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause our securities to be delisted from\nthe stock exchange. If, in the future, we are identified by the SEC for two consecutive years as a commission-identified issuer\nwhose registered public accounting firm is determined by the PCAOB that it is unable to inspect or investigate completely because of\na position taken by one or more authorities in China, the SEC may prohibit our shares or ADSs from being traded on a national securities\nexchange or in the over the counter trading market in the United States, and this ultimately could result in our ADSs being delisted.\n\n \n\nOn August 26, 2022, the\nPCAOB signed a statement of protocol agreement with the CSRC and the PRC Ministry of Finance, or the “Cooperative Agreement.”\nAccording to the fact sheets published by the PCAOB, the PCAOB has the sole discretion in selecting the subject of its inspections and\ninvestigations without input from the Chinese authorities, and that procedures are in place to allow PCAOB inspectors and investigators\nto review complete audit working papers of accounting firms located in mainland China and Hong Kong.\n\n \n\nOn December 15, 2022, the\nPCAOB determined that it was able to secure complete access to inspect and investigate registered public accounting firms headquartered\nin mainland China and Hong Kong and vacated its previous determinations to the contrary. However, should PRC authorities obstruct or\notherwise fail to facilitate the PCAOB’s access in the future, the PCAOB may consider the need to issue a new determination.\n\n** **\n\n**Risk Factors Summary**\n\n \n\nAn investment in our ADSs\nis subject to a number of risks, including risks related to our business and industry, risks related to our corporate structure, risks\nrelated to doing business in China and risks related to our ADSs. The following list summarizes some, but not all, of these risks. Please\nread the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.\n\n** **\n\n**Risks Relating to Our Business and Industry**\n\n** **\n\n●Significant\nuncertainties exist in relation to the interpretation and implementation of, or proposed\nchanges to, the PRC laws, regulations and policies regarding the private education industry.\nSee *“Risk Factors—Risks Relating to Our Business and Industry—Significant\nuncertainties exist in relation to the interpretation and implementation of, or proposed\nchanges to, the PRC laws, regulations and policies regarding the private education industry.\nIn particular, our compliance with the 2021 Implementation Rules for Private Education Laws\nhas materially and adversely affected and may materially and adversely affect our and the\nVIEs’ business, financial condition, results of operations and prospect.”*\n\n \n\n18\n\n \n\n \n\n \n●\nWe are in the process of\nfiling the relevant application pursuant to the national and local regulations. See *“Risk Factors—Risks Relating to\nOur Business and Industry—We and the VIEs are in the process of filing the relevant application pursuant to the national and\nlocal regulations (including Zhejiang Province and Lishui City, as well as Hebei Province) of classification registration of private\nschools. Loss of taxes and fees may incur in the process, which may have an adverse impact on the VIEs’ operations.”*\n\n \n\n●We\nmay not be able to successfully integrate businesses operated by Lishui International School, Vocational Education Services Providers, Chuangmei Weiye and\nHebei Chuangxiang. See *“Risk Factors—Risks Relating to Our Business and Industry—We\nand the VIEs may not be able to successfully  integrate businesses operated by Lishui International School, Vocational Education Services Providers,\nChuangmei Weiye and Hebei Chuangxiang, which may cause us to lose the anticipated benefits\nfrom such business expansions and to incur significant additional expenses.”*\n\n \n\n●Our\nADSs may be prohibited from trading in the United States under the HFCAA in the future if\nthe PCAOB is unable to inspect or investigate completely our auditor for two consecutive\nyears. The delisting of the ADSs, or the threat of their being delisted, may materially and\nadversely affect the value of your investment. As of the date of the annual report, our auditor\nis not determined by the PCAOB that it is unable to inspect or investigate completely and\nour listing is not affected by the Holding Foreign Companies Accountable Act and related\nregulations. However, we cannot assure you whether Nasdaq or regulatory authorities would\napply additional and more stringent criteria to us after considering the effectiveness of\nour auditor’s audit of our financial statements. See *“Risk Factors—Risks\nRelating to Our Business and Industry—Our ADSs may be prohibited from trading in the\nUnited States under the HFCAA in the future if the PCAOB is unable to inspect or investigate\ncompletely our auditor for two consecutive years. The delisting of the ADSs, or the threat\nof their being delisted, may materially and adversely affect the value of your investment.”*\n\n** **\n\n●We\nand the VIEs are and may be in the future involved in legal and other disputes and claims\narising out of our and VIEs’ operations from time to time. See *“Risk Factors—Risks\nRelating to Our Business and Industry—We and the VIEs are and may be in the future\ninvolved in legal and other disputes and claims arising out of our operations from time to\ntime.”*\n\n \n\n**Risks Relating to Our Corporate Structure**\n\n \n\n●We\nmay be subject to severe penalties if the PRC government finds that the agreements that establish\nthe structure for operating our and the VIEs’ business in China do not comply with\napplicable PRC laws and regulations. See *“Risk Factors—Risks Relating to Our\nCorporate Structure—Our and the VIEs’ private education service business is subject\nto extensive regulation in China. We and the VIEs may be subject to severe penalties if the\nPRC government finds that the agreements that establish the structure for operating our and\nthe VIEs’ business in China do not comply with applicable PRC laws and regulations.”*\n\n \n\n●Our\ncontractual arrangements may not be as effective in providing control over the VIEs as equity\nownership. See *“Risk Factors—Risks Relating to Our Corporate Structure—Our\ncontractual arrangements may not be as effective in providing control over the VIEs as equity\nownership”* and *“Risk Factors—Risks Relating to Our Corporate Structure—If\nthe PRC government determines that the contractual arrangements constituting part of the\nVIE structure do not comply with PRC regulations, or if these regulations change or are interpreted\ndifferently in the future, we may be unable to assert our contractual rights over the assets\nof the VIEs, and our ADSs or Class A ordinary shares may decline in value or become worthless.”*\n\n \n\n●We\nmay have to incur additional costs and expend substantial resources to enforce our contractual\narrangements. Our contractual arrangements are governed by PRC law and provide for the resolution\nof disputes through arbitration in China. In the event that we are unable to enforce these\ncontractual arrangements, we may not be able to exert effective control over the VIEs for\nan extended period of time or we may be permanently unable to exert control over the VIEs.\nSee *“Risk Factors—Risks Relating to Our Corporate Structure—We may have\nto incur additional costs and expend substantial resources to enforce our contractual arrangements,\ntemporarily or permanently lose control over our primary operations or lose access to our\nprimary sources of revenue, if the VIEs or their respective ultimate shareholders fail to\nperform their obligations under our contractual arrangements.”*\n\n \n\n19\n\n \n\n \n\n●We\nrely on dividends and other payments from Liandu WFOE to pay dividends and other cash distributions\nto our shareholders. See *“Risk Factors—Risks Relating to Our Corporate Structure—We\nrely on dividends and other payments from Liandu WFOE to pay dividends and other cash distributions\nto our shareholders.”*\n\n \n\n●Lishui\nInternational School, and the Vocational Education Services Providers may be subject to limitations on their ability to operate private\neducation or make payments to related parties. See “*Risk Factors—Risks Relating to Our Corporate Structure—Lishui International School, and the Vocational Education Services Providers may be subject to limitations on their\nability to operate private education or make payments to related parties.*”\n\n \n\n**Risks Relating to Doing Business in China**\n\n \n\n●The\ninherent uncertainties in the PRC legal system could materially and adversely affect us.\nThe PRC legal system continues to evolve rapidly. The interpretations of such laws and regulations\nmay not always be consistent, and enforcement of these laws and regulations involves significant\nuncertainties and can change quickly with little advance notice, any of which could limit\nthe available legal protections. See “*Risk Factors—Risks Relating to Doing\nBusiness in China—The inherent uncertainties in the PRC legal system could materially\nand adversely affect us.*”\n\n \n\n●Investors\nin the ADSs and the business of us and the VIEs face potential uncertainty from the PRC government’s\npolicy. Adverse changes in the PRC economic, political and social conditions as well as laws\nand government policies, may materially and adversely affect our and the VIEs’ business,\nfinancial condition, results of operations and growth prospects. See “*Risk Factors—Risks\nRelating to Doing Business in China—Adverse changes in the PRC economic, political\nand social conditions as well as laws and government policies, may materially and adversely\naffect our and the VIEs’ business, financial condition, results of operations and growth\nprospects.*”\n\n \n\n●PRC\nregulation of loans and direct investment by offshore holding companies to PRC entities may\ndelay or prevent us from using the proceeds of our initial public offering to make loans\nor additional capital contributions to our PRC subsidiaries or VIEs. See *“Risk Factors—Risks\nRelating to Doing Business in China—PRC regulation of loans and direct investment by\noffshore holding companies to PRC entities may delay or prevent us from using the proceeds\nof our initial public offering to make loans or additional capital contributions to our PRC\nsubsidiaries or VIEs, which could materially and adversely affect our liquidity and our ability\nto fund and expand our and the VIEs’ business.”*\n\n \n\n●Any\nactions by the Chinese government to exert more oversight and control over offerings that\nare conducted overseas and/or foreign investment in China-based issuers could significantly\nlimit or completely hinder our ability to offer or continue to offer securities to investors\nand cause the value of such securities to significantly decline or be worthless. See *“Risk\nFactors—Risks Relating to Doing Business in China—Any actions by the Chinese\ngovernment, including any decision to intervene or influence the operations of our PRC subsidiaries\nor the VIE or to exert control over any offering of securities conducted overseas and/or\nforeign investment in China-based issuers, may cause us to make material changes to the operations\nof our PRC subsidiaries or the VIE, may limit or completely hinder our ability to offer or\ncontinue to offer securities to investors, and may cause the value of such securities to\nsignificantly decline or be worthless.*\n\n \n\n20\n\n \n\n \n\n●There\nis significant uncertainty about the application and interpretation of the Law on the Promotion\nof Private Education, the 2021 Implementation Rules and their detailed implementation rules\nand regulations. See *“Risk Factors—Risks Relating to Doing Business in China—Based\non the recent development of PRC law, there is significant uncertainty about the application\nand interpretation of the Law on the Promotion of Private Education, the 2021 Implementation\nRules and their detailed implementation rules and regulations. We and the VIEs may be subject\nto significant limitations on our ability to engage in the private education business, acquire\nprivate schools, or receive payments from the VIEs and may otherwise be materially and adversely\naffected by changes in PRC laws and regulations.”*\n\n \n\n●To\nthe extent cash is generated in our PRC Subsidiaries or the VIEs, and may need to be used\nto fund operations outside of mainland China, such funds may not be available due to limitations\nplaced by the PRC government. Furthermore, to the extent assets (other than cash) in our\nor the VIEs’ business are located in the PRC or held by a PRC entity, the assets may\nnot be available to fund operations or for other use outside of the PRC due to interventions\nin or the imposition of restrictions and limitations on the ability of us and our subsidiaries\nand the VIEs to transfer assets by the PRC government. If certain PRC laws and regulations,\nincluding existing laws and regulations and those enacted or promulgated in the future were\nto become applicable to our Hong Kong subsidiary in the future, and to the extent cash is\ngenerated in our Hong Kong subsidiary, and to the extent assets (other than cash) in our\nbusiness are located in Hong Kong or held by a Hong Kong entity and may need to be used to\nfund operations outside of Hong Kong, such funds or assets may not be available due to interventions\nin or the imposition of restrictions and limitations on the ability of us and our subsidiaries\nand the VIEs to transfer funds or assets by the PRC government. Furthermore, there can be\nno assurance that the PRC government will not intervene or impose restrictions or limitations\non our ability to transfer or distribute cash within its organization, which could result\nin an inability or prohibition on making transfers or distributions to entities outside of\nmainland China and Hong Kong and adversely affect its business. See “*Risk Factors—Risks\nRelated to Doing Business in China—Restrictions on currency exchange under PRC laws\nmay limit our ability to convert cash derived from our operating activities into foreign\ncurrencies and may materially and adversely affect the value of your investment*.”\n\n** **\n\n**Risks Relating to Our ADSs**\n\n \n\n●The\ntrading price of our ADSs may be volatile and the voting rights of holders of our ADSs are\nlimited by the terms of the deposit agreement. See *“Risk Factors—Risks Relating\nto Our ADSs—The trading price of our ADSs may be volatile, which could result in substantial\nlosses to you,” “Risk Factors—Risks Relating to Our ADSs—The voting\nrights of holders of our ADSs are limited by the terms of the deposit agreement, and you\nmay not be able to exercise your right to direct how the Class A ordinary shares represented\nby your ADSs are voted,”*and *“Risk Factors—Risks Relating to Our\nADSs—The depositary shall deem you to have instructed the depositary to give us a discretionary\nproxy to vote the Class A ordinary shares underlying your ADSs if you do not give timely\nvoting instructions to the depositary to direct how the Class A ordinary shares underlying\nyour ADSs are voted, except in limited circumstances, which could adversely affect your interests.”*\n\n \n\n●Our\ndual-class share structure with different voting rights will limit our ADSs holders’\nrights and affect the trading price and liquidity of our ADSs. See *“Risk Factors—Risks\nRelating to Our ADSs—Our dual-class share structure with different voting rights will\nlimit your ability to influence corporate matters and could discourage others from pursuing\nany change of control transactions that holders of our Class A ordinary shares and ADSs may\nview as beneficial,” “Risk Factors—Risks Relating to Our ADSs— Our\ndual-class voting structure may render the ADSs representing our Class A ordinary shares\nineligible for inclusion in certain stock market indices, and thus adversely affect the trading\nprice and liquidity of the ADSs.”*\n\n \n\n21\n\n \n\n \n\n**Financial Information Related to the VIEs**\n\n \n\nThe following table presents\nthe condensed consolidating schedule of financial position of our parent company, VIEs and their consolidated subsidiaries, Liandu WFOE\nthat is the primary beneficiary of the VIEs, and other subsidiaries as of December 31, 2024 and 2025.\n\ns\n\n  \nAs\nof December 31, 2024 \n\nCondensed\nConsolidating Schedule of Financial Position \nParent  \nVIEs\nand\ntheir\nconsolidated\nsubsidiaries  \nLiandu\n\nWFOE which\n\nis the primary\nbeneficiary of\nthe VIEs  \nOther\n\nsubsidiaries  \nElimination\n\nadjustment  \nTotal \n\n  \n   \n   \nRMB  \n   \n  \n\nAssets \n   \n   \n   \n   \n   \n  \n\nCash\nand cash equivalents \n 215,770,215  \n 3,897,892  \n 854,904  \n 201,227  \n -  \n 220,724,238 \n\nInter-group\nbalance due from VIEs and subsidiaries \n 43,130,675  \n 15,356,140  \n 3,105,881  \n 24,159,107  \n (85,751,803) \n - \n\nPrepayments\nand other current assets \n -  \n 4,426,665  \n 365,085  \n 1,054,980  \n -  \n 5,846,730 \n\nOther\ncurrent assets \n -  \n 156,770  \n -  \n -  \n -  \n 156,770 \n\nAmounts\ndue from a related party \n -  \n 9,542,000  \n -  \n -  \n -  \n 9,542,000 \n\nTotal\ncurrent assets \n 258,900,890  \n 33,379,467  \n 4,325,870  \n 25,415,314  \n (85,751,803) \n 236,269,738 \n\n  \n    \n    \n    \n    \n    \n   \n\nProperty\nand equipment, net \n -  \n 146,646,206  \n -  \n 603,848  \n -  \n 147,250,054 \n\nLand\nuse right \n -  \n 33,927,238  \n -  \n -  \n -  \n 33,927,238 \n\nOther\nnon-current assets \n -  \n 53,014,362  \n -  \n 155,938  \n -  \n 53,170,300 \n\nInvestments\nin subsidiaries \n -  \n -  \n 3,081,121  \n 1,388,736  \n (4,469,857) \n - \n\nTotal\nnon-current assets \n -  \n 233,587,806  \n 3,081,121  \n 2,148,522  \n (4,469,857) \n 234,347,592 \n\n  \n    \n    \n    \n    \n    \n   \n\nTotal\nassets \n 258,900,890  \n 266,967,273  \n 7,406,991  \n 27,563,836  \n (90,221,660) \n 470,617,330 \n\n  \n    \n    \n    \n    \n    \n   \n\nShort-term\nborrowings \n -  \n 84,000,000  \n -  \n -  \n -  \n 84,000,000 \n\nInter-group\nbalance due to VIEs and subsidiaries \n 46,586,500  \n 20,645,000  \n 19,805,002  \n -  \n (87,036,502) \n - \n\nAccrued\nliabilities and other current liabilities \n 31,932  \n 7,457,837  \n -  \n -  \n -  \n 7,489,769 \n\nOther\ncurrent liabilities \n -  \n 19,304,474  \n 38,078  \n 72,096  \n -  \n 19,414,648 \n\nInvestment\ndeficit in subsidiaries and VIEs \n 66,144,375  \n -  \n -  \n -  \n (66,144,375) \n - \n\nAmounts\ndue to a related party \n -  \n 1,817,485  \n -  \n -  \n -  \n 1,817,485 \n\nTotal\ncurrent liabilities \n 112,762,807  \n 133,224,796  \n 19,843,080  \n 72,096  \n (153,180,877) \n 112,721,902 \n\n  \n    \n    \n    \n    \n    \n   \n\nAmounts\ndue to Affected Entity, non-current \n -  \n 158,514,326  \n -  \n 14,531,837  \n -  \n 173,046,163 \n\nOther\nnon-current liabilities \n -  \n 39,352,135  \n -  \n -  \n -  \n 39,352,135 \n\nTotal\nnon-current liabilities \n -  \n 197,866,461  \n -  \n 14,531,837  \n -  \n 212,398,298 \n\n  \n    \n    \n    \n    \n    \n   \n\nTotal\nliabilities \n 112,762,807  \n 331,091,257  \n 19,843,080  \n 14,603,933  \n (153,180,877) \n 325,120,200 \n\n  \n    \n    \n    \n    \n    \n   \n\nNon-controlling\ninterests \n -  \n (640,953) \n -  \n -  \n -  \n (640,953)\n\nTotal\nshareholders’ equity/(deficit) \n 146,138,083  \n (64,123,984) \n (12,436,089) \n 12,959,903  \n 62,959,217  \n 145,497,130 \n\n \n\n22\n\n \n\n \n\n  \nAs of December 31, 2025 \n\nCondensed Consolidating Schedule of Financial Position \nParent  \nVIEs and\n\ntheir\n\nconsolidated\n\nsubsidiaries  \nLiandu\n\nWFOE which is the primary\n\nbeneficiary of\n\nthe VIEs  \nOther\n\nsubsidiaries  \nElimination\n\nadjustment  \nTotal \n\n  \nRMB \n\nAssets \n   \n   \n   \n   \n   \n  \n\nCash and cash equivalents \n 27,742  \n 11,699,127  \n 785,359  \n 270,623  \n -  \n 12,782,851 \n\nInter-group balance due from VIEs and subsidiaries \n 374,863,600  \n -  \n 3,105,881  \n 25,329,437  \n (403,298,918) \n - \n\nPrepayments and other current assets \n -  \n 11,054,550  \n 216,917  \n 1,032,412  \n -  \n 12,303,879 \n\nOther current assets \n -  \n 164,207  \n -  \n -  \n -  \n 164,207 \n\nAmounts due from related party \n -  \n 8,692,000  \n -  \n 240,000  \n -  \n 8,932,000 \n\nTotal current\nassets \n 374,891,342  \n 31,609,884  \n 4,108,157  \n 26,872,472  \n (403,298,918) \n 34,182,937 \n\n  \n    \n    \n    \n    \n    \n   \n\nProperty and equipment, net \n -  \n 142,306,682  \n -  \n 464,718  \n -  \n 142,771,400 \n\nLand use right \n -  \n 32,980,543  \n -  \n -  \n -  \n 32,980,543 \n\nOther non-current assets \n -  \n 61,885,822  \n -  \n 125,262  \n -  \n 62,011,084 \n\nInvestments in Equity Securities \n 44,974,376  \n    \n    \n    \n -  \n 44,974,376 \n\nInvestments in subsidiaries \n -  \n -  \n -  \n 4,538,519  \n (4,538,519) \n - \n\nTotal non-current\nassets \n 44,974,376  \n 237,173,047  \n -  \n 5,128,499  \n (4,538,519) \n 282,737,403 \n\n  \n    \n    \n    \n    \n    \n   \n\nTotal assets \n 419,865,718  \n 268,782,931  \n 4,108,157  \n 32,000,971  \n (407,837,437) \n 316,920,340 \n\n  \n    \n    \n    \n    \n    \n   \n\nShort-term borrowings \n -  \n 84,000,000  \n -  \n -  \n -  \n 84,000,000 \n\nInter-group balance due to VIEs and subsidiaries \n 48,001,814  \n 309,551,096  \n 20,055,002  \n -  \n (377,607,912) \n - \n\nAccrued liabilities and other current liabilities \n 31,223  \n 11,046,243  \n -  \n 3,543  \n -  \n 11,081,009 \n\nOther current liabilities \n -  \n 27,374,401  \n 46,923  \n 150,656  \n -  \n 27,571,980 \n\nInvestment deficit in subsidiaries and VIEs \n 218,625,928  \n -  \n -  \n -  \n (218,625,928) \n - \n\nAmounts due to related party \n -  \n 1,621,303  \n -  \n -  \n -  \n 1,621,303 \n\nAmounts due to Affected Entity,\ncurrent \n -  \n -  \n -  \n 26,430,695  \n (26,430,695) \n - \n\nTotal current\nliabilities \n 266,658,965  \n 433,593,043  \n 20,101,925  \n 26,584,894  \n (622,664,535) \n 124,274,292 \n\n  \n    \n    \n    \n    \n    \n   \n\nInvestment deficit in subsidiaries \n -  \n -  \n 1,286,695  \n -  \n (1,286,695) \n - \n\nOther non-current liabilities \n -  \n 39,439,295  \n -  \n -  \n -  \n 39,439,295 \n\nTotal non-current\nliabilities \n -  \n 39,439,295  \n 1,286,695  \n -  \n (1,286,695) \n 39,439,295 \n\n  \n    \n    \n    \n    \n    \n   \n\nTotal liabilities \n 266,658,965  \n 473,032,338  \n 21,388,620  \n 26,584,894  \n (623,951,230) \n 163,713,587 \n\n  \n    \n    \n    \n    \n    \n   \n\nTotal shareholders’\nequity/(deficit) \n 153,206,753  \n (204,249,407) \n (17,280,463) \n 5,416,077  \n 216,113,793  \n 153,206,753 \n\n \n\n23\n\n \n\n \n\nThe following table presents\nthe condensed consolidating schedule of results of operations and cash flows of our parent company, VIEs and their consolidated subsidiaries,\nLiandu WFOE that is the primary beneficiary of the VIEs, and other subsidiaries for the years ended December 31, 2023, 2024 and\n2025.\n\n \n\n  \nFor the year ended December 31,\n2023 \n\nCondensed Consolidating Schedule of Results of Operations \nParent  \nVIEs and\ntheir\nconsolidated\n\nsubsidiaries  \nLiandu\nWFOE which\n\nis the primary\nbeneficiary of\n\nthe VIEs  \nOther\nsubsidiaries  \nElimination\nadjustment  \nTotal \n\n  \nRMB \n\nContinuing operation \n   \n   \n   \n   \n   \n  \n\nRevenue \n -  \n 48,374,296  \n 2,441,120  \n -  \n -  \n 50,815,416 \n\nCost of revenue \n -  \n (46,182,644) \n (662,871) \n (4,799) \n -  \n (46,850,314)\n\nGeneral and administrative expenses \n (1,292,974) \n (110,694,880) \n (652,759) \n (621,002) \n -  \n (113,261,615)\n\nSales and marketing expenses \n -  \n (18,300) \n -  \n -  \n -  \n (18,300)\n\n(Loss)/income\nfrom operations \n (1,292,974) \n (108,521,528) \n 1,125,490  \n (625,801) \n -  \n (109,314,813)\n\nOther income, net \n 336  \n 8,263,054  \n 569,101  \n 6,693  \n -  \n 8,839,184 \n\nEquity in (loss)/income of subsidiaries\nand VIEs \n (125,338,010) \n -  \n (3,518,720) \n 1,824,129  \n 127,032,601  \n - \n\n(Loss)/income\nbefore income tax expenses \n (126,630,648) \n (100,258,474) \n (1,824,129) \n 1,205,021  \n 127,032,601  \n (100,475,629)\n\nIncome tax expense \n -  \n (216,120) \n -  \n (2,903,456) \n -  \n (3,119,576)\n\nLoss from continuing\noperations, net of tax \n (126,630,648) \n (100,474,594) \n (1,824,129) \n (1,698,435) \n 127,032,601  \n (103,595,205)\n\nLoss from discontinued\noperations, net of tax \n -  \n (23,394,661) \n -  \n -  \n -  \n (23,394,661)\n\nNet loss \n (126,630,648) \n (123,869,255) \n (1,824,129) \n (1,698,435) \n 127,032,601  \n (126,989,866)\n\n  \n    \n    \n    \n    \n    \n   \n\nCondensed Consolidating Schedule of\nCash Flows \n    \n    \n    \n    \n    \n   \n\nNet cash (used in)/provided by operating activities \n (42,725,890) \n (16,213,871) \n 283,574  \n (543,288) \n -  \n (59,199,475)\n\nNet cash used in investing activities \n -  \n (7,576,283) \n -  \n -  \n -  \n (7,576,283)\n\nNet cash provided by financing activities \n 41,856,435  \n 2,227,473  \n -  \n -  \n -  \n 44,083,908 \n\nEffect of exchange rate changes on cash and cash equivalents \n 2,947,203  \n -  \n -  \n 23,350  \n -  \n 2,970,553 \n\nNet increase/(decrease) in cash and cash equivalents \n 2,077,748  \n (21,562,681) \n 283,574  \n (519,938) \n -  \n (19,721,297)\n\nCash and cash equivalents at the beginning of year \n 210,769,439  \n 32,873,528  \n 1,026,430  \n 1,601,045  \n -  \n 246,270,442 \n\nCash and cash equivalents of discontinued operations–beginning\nof year \n -  \n 491,106  \n -  \n -  \n -  \n 491,106 \n\nCash and cash equivalents at the end of year \n 212,847,187  \n 11,801,953  \n 1,310,004  \n 1,081,107  \n -  \n 227,040,251 \n\nLess cash and cash equivalents of discontinued operations–end\nof year \n -  \n -  \n -  \n -  \n -  \n - \n\nCash and cash equivalents of continuing operations–end\nof year \n 212,847,187  \n 11,801,953  \n 1,310,003  \n 1,081,108  \n -  \n 227,040,251 \n\n** **\n\n24\n\n \n\n** **\n\n  \nFor the year ended December 31,\n2024 \n\nCondensed Consolidating Schedule of Results of Operations \nParent  \nVIEs and\ntheir\nconsolidated\n\nsubsidiaries  \nLiandu\nWFOE which\nis the primary\nbeneficiary of\nthe VIEs  \nOther\nsubsidiaries  \nElimination\nadjustment  \nTotal \n\n  \nRMB \n\nRevenue \n -  \n 32,139,658  \n 661,002  \n -  \n -  \n 32,800,660 \n\nCost of revenue \n -  \n (35,844,133) \n (2,810) \n (4,162) \n -  \n (35,851,105)\n\nGeneral and administrative expenses \n (2,647,144) \n (18,717,355) \n (577,702) \n (856,964) \n -  \n (22,799,165)\n\nSales and marketing expenses \n -  \n (111,780) \n -  \n -  \n -  \n (111,780)\n\n(Loss)/income\nfrom operations \n (2,647,144) \n (22,533,610) \n 80,490  \n (861,126) \n -  \n (25,961,390)\n\nOther income, net \n 18  \n 1,255,874  \n 1,570  \n 1,895  \n -  \n 1,259,357 \n\nEquity in (loss)/income of subsidiaries\nand VIEs, net \n (21,980,540) \n -  \n (822,165) \n 740,105  \n 22,062,600  \n - \n\nLoss before\nincome tax expenses \n (24,627,666) \n (21,277,736) \n (740,105) \n (119,126) \n 22,062,600  \n (24,702,033)\n\nIncome tax expense \n -  \n -  \n -  \n -  \n -  \n - \n\nNet loss \n (24,627,666) \n (21,277,736) \n (740,105) \n (119,126) \n 22,062,600  \n (24,702,033)\n\n  \n    \n    \n    \n    \n    \n   \n\nCondensed Consolidating Schedule of\nCash Flows \n    \n    \n    \n    \n    \n   \n\nNet cash used in operating activities \n (861,999) \n (16,099,979) \n (455,100) \n (904,713) \n -  \n (18,321,791)\n\nNet cash used in investing activities \n -  \n (554,082) \n -  \n -  \n -  \n (554,082)\n\nNet cash provided by financing activities \n -  \n 8,750,000  \n -  \n -  \n -  \n 8,750,000 \n\nEffect of exchange rate changes on cash and cash equivalents \n 3,785,027  \n -  \n -  \n 24,833  \n -  \n 3,809,860 \n\nNet increase/(decrease) in cash and cash equivalents \n 2,923,028  \n (7,904,061) \n (455,100) \n (879,880) \n -  \n (6,316,013)\n\nCash and cash equivalents at the beginning of year \n 212,847,187  \n 11,801,953  \n 1,310,004  \n 1,081,107  \n -  \n 227,040,251 \n\nCash and cash equivalents at the end of year \n 215,770,215  \n 3,897,892  \n 854,904  \n 201,227  \n -  \n 220,724,238 \n\n \n\n  \nFor the year ended December 31,\n2025 \n\nCondensed Consolidating Schedule of Results of Operations \nParent  \nVIEs and their consolidated subsidiaries  \nLiandu\n\nWFOE which\n\nis the primary\n\nbeneficiary of\n\nthe VIEs  \nOther\n\nsubsidiaries  \nElimination\n\nadjustment  \nTotal \n\n  \nRMB \n\nContinuing operation \n   \n   \n   \n   \n   \n  \n\nRevenue \n -  \n 30,606,575  \n -  \n 226,415  \n -  \n 30,832,990 \n\nCost of revenue \n -  \n (42,762,681) \n -  \n (399) \n -  \n (42,763,080)\n\nGeneral and administrative expenses \n (2,160,564) \n (19,737,374) \n (478,124) \n (1,092,308) \n -  \n (23,468,370)\n\nSelling and marketing expenses \n -  \n (985,278) \n -  \n -  \n -  \n (985,278)\n\nLoss from operations \n (2,160,564) \n (32,878,758) \n (478,124) \n (866,292) \n -  \n (36,383,738)\n\nOther income, net \n (151) \n (1,260,268) \n 1,566  \n 1,603  \n -  \n (1,257,250)\n\nImpairment loss on Investments \n (83,621,753) \n -  \n -  \n -  \n -  \n (83,621,753)\n\nEquity in (loss)/income of subsidiaries\nand VIEs, net \n (36,121,226) \n -  \n (849,096) \n 1,325,654  \n 35,644,668  \n - \n\n(Loss)/income\nbefore income tax expenses \n (121,903,694) \n (34,139,026) \n (1,325,654) \n 460,965  \n 35,644,668  \n (121,262,741)\n\nIncome tax expense \n -  \n -  \n -  \n -  \n -  \n - \n\nNet (loss)/income \n (121,903,694) \n (34,139,026) \n (1,325,654) \n 460,965  \n 35,644,668  \n (121,262,741)\n\n  \n    \n    \n    \n    \n    \n   \n\nCondensed Consolidating Schedule of\nCash Flows \n    \n    \n    \n    \n    \n   \n\nNet cash (used in)/provided by operating activities \n (331,856,004) \n 17,518,687  \n (69,545) \n 103,969  \n -  \n (314,302,893)\n\nNet cash used in investing activities \n (128,596,129) \n (13,617,452) \n -  \n -  \n -  \n (142,213,581)\n\nNet cash provided by financing activities \n 250,422,660  \n 3,900,000  \n -  \n -  \n -  \n 254,322,660 \n\nEffect of exchange rate changes on cash and cash equivalents \n (5,713,000) \n -  \n -  \n (34,573) \n -  \n (5,747,573)\n\nNet (decrease)/increase in cash and cash equivalents \n (215,742,473) \n 7,801,235  \n (69,545) \n 69,396  \n -  \n (207,941,387)\n\nCash and cash equivalents at the beginning of year \n 215,770,215  \n 3,897,892  \n 854,904  \n 201,227  \n -  \n 220,724,238 \n\nCash and cash equivalents at the end of year \n 27,742  \n 11,699,127  \n 785,359  \n 270,623  \n -  \n 12,782,851 \n\n \n\n25\n\n \n\n \n\n**Cash and Asset Flows through Our Organization**\n\n \n\nThe Company may (i) transfer\nthe net proceeds into Liandu WFOE to pay in their initially subscribed registered capital, and (ii) provide loans to Liandu WFOE\nand the VIEs. The Company and Liandu WFOE may also establish and/or acquire new foreign-invested enterprises in China in order to facilitate\nour business expansion and make additional investments by the way of paying in their registered capital and providing loans to them.\nHowever, we cannot assure you that our intended investments in these entities will always succeed as we planned, or at all. According\nto the dividend policy, our board of directors has discretion on whether to distribute dividends, subject to certain requirements of\nCayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount\nrecommended by our board of directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely\nthat our company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend\nbe paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if\nwe decide to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements\nand surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. See\n*“Item 8. Financial Information—Dividend Policy.”*\n\n \n\nTo the extent cash is generated\nin our PRC Subsidiaries, and may need to be used to fund operations outside of mainland China, such funds may not be available due to\nlimitations placed by the PRC government. Furthermore, to the extent assets (other than cash) in our business are located in the PRC\nor held by a PRC entity, the assets may not be available to fund operations or for other use outside of the PRC due to interventions\nin or the imposition of restrictions and limitations on the ability of us and our subsidiaries to transfer assets by the PRC government.\nSee *“Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Restrictions on currency\nexchange under PRC laws may limit our ability to convert cash derived from our operating activities into foreign currencies and may materially\nand adversely affect the value of your investment.”*\n\n \n\nThe cash management policies\nare a part of the Company’s internal control procedures. The cash management policies enable the Company to formalize the procedures\non the handling, depositing, receiving, safeguarding and recording of cash transfers. The cash management policies provide reasonable\nassurance for the consolidated financial statements, rather than imposing any restrictions or limitations on the cash transferred among\nthe Company, its subsidiaries, the consolidated VIEs and its shareholders, as the case may be. Each cash transfer requires approval of\nthe financial manager. Cash transfer in excess of RMB0.5 million (US$0.08 million) but less than RMB1 million (US$0.16 million) shall\nbe reviewed and approved by the Chief Financial Officer of the Company. Cash transfer in excess of RMB1 million (US$0.16 million) shall\nbe reviewed and approved by both Chief Financial Officer and Chief Executive Officer of the Company. For the condensed consolidating\nschedule and the consolidated financial statement, see “*Item 3. Key Information—Financial Information Related to the VIEs*.”\n\n \n\nThe Company may plan to\nutilize part of the proceeds from our initial public offering by way of paying in the initially subscribed registered capital of Liandu\nWFOE. The amount of funds in the form of capital contribution into Liandu WFOE and other PRC subsidiaries the Company or Liandu WFOE\nmay establish in the future is subject to the amount of their initially subscribed registered capital. Currently, the initially subscribed\nregistered capital of Liandu WFOE is US$1 million which will be fully paid before the deadline prescribed in its articles of association.\nIf the initially subscribed registered capital is not sufficient to allow our intended capital injection, under the current PRC laws\nand regulation, Liandu WFOE may increase the registered capital and complete the relevant procedures which include (i) altering\nour registration with local branch of the State Administration for Industry and Commerce of the PRC, or the SAIC, and (ii) filing\nthe alteration report to local counterparts of the Ministry of Commerce of the PRC, or the MOFCOM. In addition, capital contribution\nto the schools must be approved by the Ministry of Civil Affairs of the PRC or the MCA or their respective local counterparts.\n\n \n\n26\n\n \n\n \n\nThe Company may also plan\nto provide loans to Liandu WFOE and Lishui Mengxiang. According to the current PRC laws and regulations, the maximum amount of the loans\nprovided to a PRC enterprise is up to 3 times (or the prevailing statutory multiples) of the borrower’s net assets set out in its\nlatest audited financial statement. As a result, the loans that the Company may provide to Liandu WFOE and Lishui Mengxiang are in an\namount of up to 2 times (or the prevailing statutory multiples) of their respective net assets set out in their latest audited financial\nstatements. Liandu WFOE and Lishui Mengxiang are required to file the information of their cross-border financing arrangements with local\nbranch of the State Administration of Foreign Exchange of the PRC, or the SAFE, after the loan agreements are signed and before three\nworking days prior to the fund withdrawal. In addition, for loans carrying a term of more than one year, Liandu WFOE and Lishui Mengxiang\nmay be required to complete the relevant filing and registration formalities to the National Development and Reform Commission of the\nPRC, or the NDRC. Currently, the Company’s business operation is conducted through Liandu WFOE’s contractual arrangements\nwith the VIEs and Liandu WFOE does not engage in its own business. As such, Liandu WFOE’s current net assets are in close approximation\nto its paid-up registered capital. Pursuant to the relevant PRC laws and regulations, the estimated amount of loans the Company will\nprovide to Liandu WFOE will be approximately US$30 million which is 2 times of its current enlarged registered capital, assuming\nthat Liandu WFOE’s net assets set out in its latest audited financial statements equals to its paid-up registered capital at the\ntime when the loans are made.\n\n \n\nFor the years ended December 31,\n2023, 2024 and 2025, the cash flows that have occurred between the Company, the VIEs and their consolidated subsidiaries, Liandu WFOE\nwhich is the primary beneficiary of the VIEs, and other subsidiaries are summarized as the following:\n\n \n\n  \nFor the years ended\nDecember 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n　RMB  \nRMB  \n　RMB \n\nCash transfer from Liandu WFOE to VIEs and their consolidated subsidiaries \n 15,800,000  \n —  \n 20,000,000 \n\nCash transfer from VIEs and their consolidated subsidiaries to Liandu WFOE \n 15,550,000  \n —  \n 20,250,000 \n\nCash paid by Lianwai School to other subsidiaries for sofeware service \n —  \n —  \n 120,000 \n\nCash transfer from other subsidiaries to VIEs and their consolidated subsidiaries \n 650,000  \n 100,000  \n — \n\nCash transfer from VIEs and their consolidated subsidiaries to other subsidiaries \n 20,150,000  \n —  \n 3,890,000 \n\nCash transfer from other subsidiaries to parent company \n —  \n —  \n 290,000 \n\n \n\nFrom January 1, 2026\nto the date of this annual report, cash is transferred among the Company, Liandu WFOE, the VIEs and their consolidated subsidiaries,\nin the following manners: (i) VIEs and their consolidated subsidiaries provided a total of RMB100,000 in cash to other subsidiaries ;\n(ii) other subsidiaries provided a total of RMB300,000 in cash to the Company; (iii) VIEs and their consolidated subsidiaries provided\na total of RMB1,000,000 in cash to Liandu WFOE and (iv) other subsidiaries provided a total of RMB500,000 in cash to VIEs and their consolidated\nsubsidiaries. The aforementioned cash transfers were generally for working capital purpose among the Liandu WFOE, VIEs and their consolidated\nsubsidiaries, and other subsidiaries.\n\n \n\nAs of the date of the annual\nreport, other than the cash transfer described hereto, there were no transfer of other assets between the Company, Liandu WFOE, VIEs\nand their consolidated subsidiaries have never made any dividends or distributions to Lixiang. Similarly, the Company has not declared\nor made any dividend or other distribution to its shareholders, including U.S. investors to date. Furthermore, the Company, Liandu WFOE,\nthe VIEs and their consolidated subsidiaries have not any plan to pay any dividends in cash in the foreseeable future. The service fees\nand expenses owed under the VIEs agreements would be settled by VIEs to Liandu WFOE through negotiation.\n\n \n\nThe Company, Liandu WFOE,\nthe VIEs and their consolidated subsidiaries maintained cash management policies that dictate the purpose, amount, appropriate internal\ncontrol procedures on the handling, depositing, receiving, transferring, safeguarding, and documentation and recording of cash transfers.\nSubject to the amounts of cash transfer and the nature of the use of funds, requisite internal approval shall be obtained prior to each\ncash transfer. Specifically, all transactions require the approval of the financial manager. As for the large quantity transactions,\nthe Chief Financial Officer and Chief Executive Officer are required to conduct regular review and approve.\n\n \n\n27\n\n \n\n \n\nIn considering any distribution\nof the earnings of the subsidiaries to their respective holding companies, we must consider their respective financial conditions before\nmaking a decision. There are no other significant restrictions and limitations on our ability to distribute earnings from our businesses,\nincluding our subsidiaries and the VIEs, to the holding company and U.S. investors or our ability to settle amounts owed. Except the\naforementioned restrictions on our PRC Subsidiaries, there are no significant restrictions on foreign exchange or our ability to transfer\ncash between entities within our group, across borders, or to U.S. investors.\n\n** **\n\n**Restrictions and Limitations on Transfer of\nCash and dividend distribution**\n\n \n\nThe PRC government imposes\ncontrols on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. The\nmajority of our and the VIEs’ income is received in Renminbi and shortages in foreign currencies may restrict our ability to pay\ndividends or other payments, or otherwise satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange\nregulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions,\ncan be made in foreign currencies without prior approval from SAFE as long as certain procedural requirements are met. Approval from\nappropriate government authorities is required if Renminbi is converted into foreign currency and remitted out of China to pay capital\nexpenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions\non access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends\nin foreign currencies to our shareholders.\n\n \n\nOur cash dividends, if any,\nwill be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas\nshareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax.\n\n \n\nRelevant PRC laws and regulations\npermit the PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting\nstandards and regulations. Additionally, the Company’s PRC subsidiaries and the VIEs can only distribute dividends upon approval\nof the shareholders after they have met the PRC requirements for appropriation to the statutory reserves, subject to further restrictions\napplicable to non-profit private schools. Under PRC laws, rules and regulations, each of our subsidiaries incorporated in China is required\nto set aside at least 10% of its after-tax profits each year, after making up for previous years’ accumulated losses, if any, to\nfund certain statutory reserves, until the aggregate amount of such fund reaches 50% of its registered capital.\n\n \n\nAs a result of these and\nother restrictions under the PRC laws and regulations, the PRC subsidiaries and the VIEs are restricted to transfer a portion of their\nnet assets to the Company either in the form of dividends, loans or advances. Even though the Company currently does not require any\nsuch dividends, loans or advances from the PRC subsidiaries and the VIEs for working capital and other funding purposes, the Company\nmay in the future require additional cash resources from its PRC subsidiaries and the VIEs due to changes in business conditions, to\nfund future acquisitions and developments, or merely declare and pay dividends to or distributions to the Company’s shareholders.\nThere are currently no restrictions on foreign exchange and our ability to transfer cash among our Company and our principal subsidiaries\nand the consolidated VIEs, as applicable, or to investors.\n\n \n\nIn addition, in recent years,\nthe PRC government has adopted a number of policies to regulate the collection of education fees and related party transactions by private\neducation institutions. If, in the future, the relevant PRC government authorities tighten control on fee collection and related party\ntransactions or promulgate stricter laws and regulations governing private education, the VIEs’ ability to negotiate service prices\nand make payment of service fees to the Liandu WFOE may be affected.\n\n** **\n\n**A. Selected Financial Data**\n\n \n\nThe following summary consolidated\nstatements of operations and comprehensive loss for the fiscal years ended December 31, 2023, 2024 and 2025 and summary consolidated\nbalance sheets as of December 31, 2024 and 2025 have been derived from our audited consolidated financial statements included in\nthis annual report on Form 20-F beginning on page F-1. Our consolidated financial statements are prepared and presented in\naccordance with the generally accepted accounting principles in the United States of America, or US GAAP. Our historical results\nare not necessarily indicative of results expected for future periods. The selected consolidated financial data should be read in conjunction\nwith, and are qualified in their entirety by reference to, our audited consolidated financial statements and the related notes and “*Item\n5. Operating and Financial Review and Prospects*” below. \n\n \n\n28\n\n \n\n \n\nThe following table presents\nour summary consolidated statements of operations and comprehensive loss for the fiscal years ended December 31, 2023, 2024 and\n2025.\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \nRMB  \nRMB  \nUS$ \n\nNet revenues: \n   \n   \n   \n  \n\nRevenue from third parties \n 50,061,131  \n 32,046,375  \n 30,229,432  \n 4,322,751 \n\nRevenue from a related party \n 754,285  \n 754,285  \n 603,558  \n 86,308 \n\nTotal net revenues \n 50,815,416  \n 32,800,660  \n 30,832,990  \n 4,409,059 \n\nCost of revenues \n (46,850,314) \n (35,851,105) \n (42,763,080) \n (6,115,039)\n\nGross profit/(loss) \n 3,965,102  \n (3,050,445) \n (11,930,090) \n (1,705,980)\n\nOperating expenses: \n    \n    \n    \n   \n\nGeneral and administrative expenses \n (25,445,401) \n (22,799,165) \n (23,468,370) \n (3,355,932)\n\nSelling and marketing expenses \n (18,300) \n (111,780) \n (985,278) \n (140,893)\n\nImpairment loss on goodwill \n (22,677,921) \n -  \n -  \n - \n\nExpected credit loss for receivables and other assets \n (65,138,293) \n -  \n -  \n - \n\nTotal operating expenses \n (113,279,915) \n (22,910,945) \n (24,453,648) \n (3,496,825)\n\nOperating loss \n (109,314,813) \n (25,961,390) \n (36,383,738) \n (5,202,805)\n\nInterest expense \n (3,634,721) \n (2,860,956) \n (3,456,630) \n (494,292)\n\nImpairment loss on Investments \n -  \n -  \n (83,621,753) \n (11,957,752)\n\nInterest income \n 134,011  \n 289,865  \n 9,301  \n 1,330 \n\nOther income, net \n 12,339,894  \n 3,830,448  \n 2,190,079  \n 313,177 \n\nLoss before income tax expense \n (100,475,629) \n (24,702,033) \n (121,262,741) \n (17,340,342)\n\nIncome tax expenses \n (3,119,576) \n -  \n -  \n - \n\nLoss from continuing operations, net of tax \n (103,595,205) \n (24,702,033) \n (121,262,741) \n (17,340,342)\n\nLoss from discontinued operation, net of tax \n (23,394,661) \n -  \n -  \n - \n\nNet loss \n (126,989,866) \n (24,702,033) \n (121,262,741) \n (17,340,342)\n\nNet loss attributable to Lixiang Education Holding Co., Ltd. shareholders \n (126,630,648) \n (24,627,666) \n (121,903,694) \n (17,431,997)\n\nNet (loss)/income attributable to non-controlling interests \n (359,218) \n (74,367) \n 640,953  \n 91,655 \n\nOther comprehensive income/(loss): \n    \n    \n    \n   \n\nForeign currency translation adjustment, net of nil tax \n 2,970,553  \n 3,809,859  \n (5,747,573) \n (821,892)\n\nComprehensive loss \n (124,019,313) \n (20,892,174) \n (127,010,314) \n (18,162,234)\n\nTotal comprehensive (loss)/income attributable to non-controlling interests \n (359,218) \n (74,367) \n 640,953  \n 91,655 \n\nTotal comprehensive loss attributable to Lixiang Education Holding Co., Ltd. shareholders \n (123,660,095) \n (20,817,807) \n (127,651,267) \n (18,253,889)\n\n  \n    \n    \n    \n   \n\nLoss per ordinary share attributable to Lixiang Education Holding Co., Ltd. shareholders from continuing\noperations \n (1.32) \n (0.21) \n (0.06) \n (0.01)\n\n—Basic and diluted \n    \n    \n    \n   \n\nLoss per ordinary share attributable to Lixiang Education Holding Co., Ltd. shareholders from discontinued\noperation \n (0.30) \n -  \n -  \n - \n\n—Basic and diluted \n    \n    \n    \n   \n\nWeighted average number of ordinary shares outstanding \n 78,584,808  \n 116,667,000  \n 1,911,667,000  \n 1,911,667,000 \n\n \n\n29\n\n \n\n \n\nThe following table presents\nour summary consolidated balance sheet data as of December 31, 2024 and 2025. \n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \nRMB  \nRMB  \nUS$ \n\nSelected Consolidated Balance Sheet Data \n   \n   \n  \n\nCash and cash equivalents \n 220,724,238  \n 12,782,851  \n 1,827,923 \n\nTOTAL ASSETS \n 470,617,330  \n 316,920,340  \n 45,319,005 \n\nTOTAL LIABILITIES \n 325,120,200  \n 163,713,587  \n 23,410,731 \n\nClass A ordinary shares (USD$0.0001 par value; 19,700,000,000\nshares authorized, 71,667,000 and 1,871,667,000 shares issued and outstanding as of December 31, 2024 and 2025, respectively) \n 50,584  \n 1,368,598  \n 195,707 \n\nClass B ordinary shares (USD$0.0001 par value; 100,000,000\nshares authorized, 45,000,000 and 45,000,000 shares issued and outstanding as of December 31, 2024 and 2025, respectively) \n 30,508  \n 30,508  \n 4,363 \n\nTOTAL SHAREHOLDERS’ EQUITY \n 145,497,130  \n 153,206,753  \n 21,908,274 \n\n \n\n**B. Capitalization and Indebtedness**\n\n \n\nNot applicable.\n\n** **\n\n**C. Reasons for the Offer and Use of Proceeds**\n\n \n\nNot applicable.\n\n** **\n\n**D. Risk Factors**\n\n \n\nAn investment in our ADSs\ninvolves a number of risks, including risks relating to our business and industry, risks relating to our corporate structure, risks relating\nto doing business in China and risks relating to our ADSs. A description of factors that could materially affect our and the VIEs’\nbusiness, financial condition or operating results is provided below.\n\n** **\n\n**Risks Relating to Our Business and Industry**\n\n** **\n\n**Significant uncertainties exist in relation\nto the interpretation and implementation of, or proposed changes to, the PRC laws, regulations and policies regarding the private education\nindustry. In particular, our compliance with the 2021 Implementation Rules for Private Education Laws has materially and adversely affected\nand may materially and adversely affect our and the VIEs’ business, financial condition, results of operations and prospect.**\n\n \n\nThe private education industry\nin the PRC is subject to various laws and regulations including among others the amended Law for Promoting Private Education of the PRC,\nor the Promotion Law, promulgated in December 2002, which are subject to changes to accommodate the development of the education industry,\nin particular, the private education industry from time to time. On November 7, 2016, the Decision of the Standing Committee of\nthe National People’s Congress on Amending the Private Education Promotion Law of the PRC, or the Decision, amended the Promotion\nLaw. On December 29, 2018, the Promotion Law was further amended. Under the Decision and the current Promotion Law, private schools\nmay be established as non-profit or for-profit entities. The sponsor of a non-profit private school shall\nnot receive proceeds from the running of the school and the cash surplus of the school shall be retained for the running of the school,\nwhile the sponsor of a for-profit private school may gain proceeds from the running of the school, and the cash surplus of\nthe school may be distributed in accordance with applicable PRC laws.\n\n \n\nThe Opinions on Further\nStrengthening and Regulating the Administration of Education Fees, or the Education Fees Opinions, which were issued on August 17,\n2020 by the relevant authorities, reiterate the provision from the Decision that the sponsors of non-profit privately-run schools shall\nnot gain proceeds from the running of schools. The Education Fees Opinions further underline that the sponsors of non-profit privately-run\nschools and non-profit privately-run sino-foreign cooperative educators shall be prohibited from obtaining proceeds from the running\nof schools such as tuition income, distributing school balances (residual assets) or transferring proceeds from the running of schools\nthrough related-party transactions or affiliated parties or other means.\n\n \n\n30\n\n \n\n \n\nOn April 7, 2021, the\nState Council promulgated the 2021 Implementation Rules for Private Education Laws, which became effective on September 1, 2021.\nThe 2021 Implementation Rules impose restrictions on the operation and management of private schools and the capital operation of private\neducation. Pursuant to the 2021 Implementation Rules, (i) foreign-invested enterprises established in China and social organizations\nwhose actual controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory\neducation; (ii) social organizations or individuals shall not control any private school that provides compulsory education or any\nnon-profit private school that provides pre-school education by means of merger, acquisition, contractual arrangements, etc.; (iii) private\nschools providing compulsory education shall not conduct any transaction with any interested related party; and (iv) for any change\nof school sponsor of a private school, an alteration agreement shall be entered into but shall not involve the legal property of the\nschool, nor shall it affect the development of the school, or damage the rights and interests of teachers and students; the existing\nschool sponsor may, in accordance with its lawful rights and interests, enter into agreements with the successional school sponsor to\nstipulate the income from the alteration.\n\n \n\nThe 2021 Implementation\nRules have had significant impacts on our and the VIEs’ business operations and our results of operations. As a result of the effectiveness\nof the 2021 Implementation Rules, we have lost control over Lianwai School which primarily provides primary and middle education to the\nstudents. We had ceased to recognize revenues for all activities related to Lianwai School and had discontinued all business activities\nwith Lianwai School by August 31, 2021. We deconsolidated Lianwai School commencing from September 1, 2021 and presented it\nas a discontinued operation in current and comparative period financial statements. To minimize disruptions to existing students enrolled\nin Lianwai School, we and the VIEs continued to offer essential services to the students. As a result, our and the VIEs’ ability\nto engage in the private not-for-profit education in China has been materially and adversely affected, and we cannot assure you that\nwe will be able to restore such ability, which could materially and adversely affect our and the VIEs’ business, prospects, results\nof operations and financial condition. We and the VIEs have established an education services network through Liandu WFOE and its subsidiaries\nin which Lixiang holds equity ownership interests, and their contractual arrangements, commonly known as the VIE structure, with the\nVIEs incorporated in China. For details regarding the changes of our subsidiaries and the VIEs, see “*Item 4. Information on\nthe Company—A. History and Development of the Company.*”\n\n \n\nThere are substantial uncertainties\nregarding the interpretation and application of the Decision, the current Promotion Law, the Education Fees Opinions and the 2021 Implementation\nRules, which affect or may affect Lishui International School, the Vocational Education Services Providers, or our industry as a whole.\nSuch uncertainties include, among others:\n\n \n\n●**Uncertainties\nwith respect to liquidation**\n\n \n\nAccording to the Decision,\nupon liquidation of for-profit private schools, school sponsors can obtain the schools’ remaining assets after the settlement\nof the schools’ indebtedness. The Decision also states that, a private school established before the promulgation of this Decision\nregistered as non-profit, shall give appropriate compensation out of the remains to the sponsors after its property is liquidated,\nat its termination, based on their applications and by taking into full account of the circumstances. After that, the remaining assets\nshall be used for the operation of other non-profit private schools. The Decision is silent on how or by whom the aforesaid rest of the\nremaining assets of a liquidated non-profit private school shall be dominated or disposed of. Accordingly, we may not be able to transfer\nall or part of the remaining assets and residual interests of our school to Liandu WFOE upon their liquidation. As a result, our and\nthe VIEs’ business, our financial position and the market price of our shares may be materially and adversely affected.\n\n  \n\n●**Uncertainties\nwith respect to school fees**\n\n \n\nAccording to the Decision,\nthe fees charged by private schools shall be determined in accordance with costs and market demand. The level of fees charged by for-profit private\nschools is determined by the schools at their discretion, while the level of fees charged by non-profit private schools shall\nbe regulated by the relevant local government authorities. The 2021 Implementation Rules state that the people’s governments of\nprovinces, autonomous regions and municipalities directly under the Central Government may set a ceiling for the fees charged by non-profit\nprivate schools that the government-run schools participate in the establishment thereof, that use state-owned assets, or that receive\ngovernment subsidies per student. There is uncertainty as to whether there will be any material adverse impact on the fees charged by non-profit private\nschools generally or our school. We and the VIEs may not be able to maintain our current tuition and boarding fees, and may not be able\nto raise any of such fees at our desired rates, times and places or at all in the future. As a result, our and the VIEs’ business,\nour financial position and the market price of our shares may be materially and adversely affected.\n\n \n\n31\n\n \n\n \n\n●**Uncertainties\nwith respect to supporting measures**\n\n \n\nAccording to the Decision\nand the 2021 Implementation Rules, additional supportive measures will be provided for private schools. Non-profit private\nschools will enjoy more supportive measures than for-profit private schools, such as government subsidies, fund awards and\nincentive donations. Non-profit private schools will enjoy the same preferential tax policies as public schools, while for-profit private\nschools will not be expected to enjoy the same preferential tax policies as public schools or non-profit private schools. The Decision\ndoes not specify whether and how existing schools that choose to become for-profit private schools will be required to pay\nadditional taxes during the transition process. As the relevant PRC tax laws have not been amended to distinguish between non-profit and for-profit private\nschools, there is currently uncertainty as to whether the tax treatments will change after the 2021 Implementation Rules became effective.\nAccording to the Decision and the 2021 Implementation Rules, non-profit private schools will enjoy the same treatment as public\nschools with respect to the supply of land, which will be supplied by the government through allocation or other means, and for-profit\nprivate schools are not expected to enjoy the same treatment as public schools and non-profit private schools. There is uncertainty\nas to whether and how our schools will be able to benefit from any of such additional supporting measures as contemplated or at all.\nWe cannot assure you that the tax and other treatments will not change or that they apply or continue to apply to our school after the\n2021 Implementation Rules became effective.\n\n \n\n●**Uncertainties\nwith respect to transactions with related parties**\n\n \n\nAccording to the 2021 Implementation\nRules, private schools providing compulsory education shall not conduct any transaction with any interested related party. Where any\nother private school conducts any transaction with any interested related party, it shall follow the principles of openness, fairness\nand impartiality, fix the price reasonably and regulate the decision-making, and shall not damage the state interests, the interests\nof the school or the rights and interests of the teachers and students. Private schools shall establish an information disclosure system\nfor their transactions with interested related parties. The departments of education, human resources and social security, finance and\nother relevant departments shall strengthen the supervision over the agreements entered into by and between non-profit private schools\nand their interested related parties and review related-party transactions on an annual basis. The interested related parties as mentioned\nin the preceding paragraph refer to the founder, actual controller, principal, members of the council, director, supervisor, financial\nperson-in-charge and other persons of a private school, and any organization or individual that has the relationship of mutual control\nand influence with the above-mentioned organization or individual, which may lead to the transfer of the interests of the private school.\n\n \n\nFurther, the founder or\nactual controller, any member of the decision-making body or supervisory body of a private school conducting related-party transactions\nwith a private school providing compulsory education, or conducting related-party transactions with any other private school, thus damaging\nthe interests of the State, of the school or of the teachers and students, shall be ordered by the relevant authorities to make corrections\nwithin a time limit, and the illegal gains, if any, shall be confiscated after the fees collected are returned; if the circumstances\nare serious the offender shall not become the founder or actual controller, a member of the decision-making body or supervisory body\nof another private school within one to five years; if the circumstances are especially serious with adverse social impact, the offender\nshall not become the founder, actual controller or a member of the decision-making body or supervisory body of another private school\npermanently.\n\n \n\nAfter the 2021 Implementation\nRules took effect, we have terminated the contractual arrangements with Lianwai School. To minimize disruptions to existing students\nenrolled in Lianwai School, we and the VIEs continued to offer essential services to Lianwai School without recognizing any revenue.\nMeanwhile, we deconsolidated Lianwai School commencing from September 1, 2021 and presented it as a discontinued operation in current\nand comparative period financial statements. We have not received income from such transactions since September 1, 2021, which had\na material adverse impact on our income. In order to support the daily operation of Lianwai School, we and the VIEs continue to provide\nLianwai School with premises and other related facilities and services. The estimated annual expenses for providing these premises, facilities\nand services are approximately RMB 30 million. We have been unable to receive any revenue for providing these premises, facilities\nand services since the 2021 Implementation Rules came into effect. Lishui Mengxiang is no longer defined as an affiliated entity of Lianwai\nSchool.\n\n \n\n32\n\n \n\n \n\nFurthermore, our contractual\narrangements may be regarded as related party transactions of the VIEs, and we may incur substantial compliance costs for establishing\ndisclosure mechanisms and undergoing review by the relevant government authorities. Such process may not be in our control and may be\nhighly complicated and burdensome and may divert management attention. Government authorities may, during their review process, compel\nus to make modifications to our contractual arrangements for whatever reason, which may in turn adversely affect the operation of our\ncontractual arrangements. Government authorities may find that one or more agreements underlying our contractual arrangements do not\ncomply with applicable PRC laws and regulations and may subject us to severe penalties, resulting in material adverse impact on our operation\nand financial condition.\n\n \n\nTuition and boarding fees\nare a significant part of our schools’ revenue whilst we rely on contractual arrangements to obtain further related service revenue\nfrom the school. If any law and regulation that may be promulgated in the future further defines the contractual arrangements, including\nours, as related-party transactions transferring proceeds from the running of schools, we may not obtain the service revenue under our\ncontractual arrangements that is funded by proceeds from the running of schools. As of the date of the annual report, however, we are\nnot aware of any official administrative or judicial declaration on, or interpretation of, the Education Fees Opinions, especially as\napplied to contractual or other similar arrangements under which we operate. We are also not aware of when official administrative or\njudicial declaration or interpretation on that matter will be released, if at all, and we cannot assure you that the Education Fees Opinions\nwill not be interpreted, or further laws and regulations will not be promulgated, in a way that would affect or impair our ability to\nretain the tuition and boarding fees under the contractual arrangements in the future. Our and the VIEs’ business, financial condition\nand results of operations would be materially and adversely affected if we are unable to obtain any or all of the tuition and boarding\nfees to be paid by our schools under the contractual arrangements.\n\n \n\nThe local governments and\ntheir education authorities will generally issue detailed rules, guidelines or opinions on the interpretation, application and implementation\nof the upper-level laws after they come into effect, and the local government and education authorities in Zhejiang Province (in the\ncase of Lishui International School) and Hebei Province (in the case of Langfang School) have not yet\nissued such rules, guidelines or opinions on the interpretation, application and implementation of the 2021 Implementation Rules as of\nthe date of this annual report on Form 20-F. We have been closely monitoring the developments of the 2021 Implementation Rules and are\ncarefully evaluating the possible impact of the 2021 Implementation Rules on our and the VIEs’ business development and financial\nperformance. There is no expected timeline for the local government and education authorities to release such rules, guidelines or opinions.\nWe are also proactively seeking guidance from and cooperating with the local governments and their education authorities in connection\nwith our efforts to comply with the 2021 Implementation Rules and any related rules and regulations.\n\n \n\nWe cannot assure you that\nwe will always be deemed to be in compliance with the new laws and regulations, interpretation of which may remain uncertain and relevant\nPRC government authorities may take a different view or change their policy in the future, or that we will be able to efficiently change\nour and the VIEs’ business practice in line with the new regulatory environment. Any such failure could materially and adversely\naffect our and the VIEs’ business, financial condition and results of operations.\n\n** **\n\n**We and the VIEs are in the process of filing\nthe relevant application pursuant to the national and local regulations (including Zhejiang Province and Lishui City, as well as Hebei\nProvince) of classification registration of private schools. Loss of taxes and fees may incur in the process, which may have an adverse\nimpact on the VIEs’ operations.**\n\n \n\nAccording to the Implementation\nRules on Classification Registration of Private Schools (the “Classification Registration Rules”), which was issued jointly\nby the MOE, the Ministry of Human Resources and Social Security of the People’s Republic of China or the MOHRSS, the MCA, the State\nCommission Office of Public Sectors Reform and the SAMR, and became effective on December 30, 2016, if an existing private school\nchooses to register as a non-profit private school, it shall amend its articles of association in accordance with laws, continue its\nschool operation, and complete the new registration formalities. If an existing private school chooses to register as a for-profit private\nschool, it shall make financial settlement, clarify the ownership of the schools’ land, buildings and accumulations with the consent\nof the relevant departments of the people’s governments at or below the provincial level, pay relevant taxes and fees, obtain new\nschool permits, carry out their re-registration and continue their school operation. The provincial people’s government is responsible\nfor formulating the detailed measures on the alteration registration of the private schools in accordance with national laws and the\nlocal situation.\n\n \n\n33\n\n \n\n \n\nOn April 4, 2018, eight\ndepartments of Zhejiang Province including the Department of Education of Zhejiang Province promulgated the Implementation Measures for\nExisting Private Schools to Change Registration Status, or the Zhejiang Implementation Measures, which took effect on June 1, 2018\nand applies to all private schools established before November 7, 2016. According to the Zhejiang Implementation Measures, (i) any\nexisting private school which chooses to register as a non-profit private school shall amend and file its articles of association and\ncomplete the corresponding registration accordingly, and (ii) any existing private school that chooses to register as a for-profit\nprivate school, shall obtain a new Permit for Operating a Private School and be re-registered so as to continue its operation after completing\nits financial clearance and settlement, clarifying its ownership of assets, and paying relevant taxes and fees.\n\n \n\nOn June 16, 2021, Lishui\nMunicipal Education Bureau, Lishui Municipal Human Resources and Social Security Bureau, Office for Public Sector Reform Commission of\nLishui, Lishui Municipal Civil Affairs Bureau and Lishui Municipal Market Supervision Administration jointly promulgated the Administrative\nMeasures for Classification Registration of Private Schools in Lishui, which took effect on the same day. According to the Administrative\nMeasures, where an existing private school opts to be registered as a for-profit private school, it shall make financial settlement,\nand the ownership of the land, school buildings, school-running accumulation and other property shall be clarified by the relevant departments\nof the government of the jurisdiction and the relevant agencies according to law. The school shall pay the relevant taxes and fees, go\nthrough the formalities for a new permit for the establishment of the school and make a new registration. The school may continue running\nduring the process of the liquidation, re-handling of the permit for the establishment of the school and registration as a legal person.\n\n \n\nOn November 22, 2021,\nLishui Education Bureau promulgated the Work Plan for Classified Registration and Administration of Existing Private Schools (Kindergartens)\nof Lishui City, which stipulates that they shall adhere to the principles of voluntary selection, smooth classification, public welfare\norientation, and compliance with laws and regulations, and strive to complete the classified registration of existing private schools\nby December 30, 2022. The Plan also provides a schedule for arranging the classified registration tasks, from January to October\nin 2022, the classified registration of the existing private schools providing compulsory education, private kindergartens and private\nschools providing senior high school education shall be completed.\n\n \n\nThe main registration procedures\nfor non-profit private schools are selected as follows: (i) schools shall file an application for classified registration; (ii) the\napproval authority shall conduct verification and replacement of the certificate; (iii) the articles of association shall be ratified\n(filed for the record); and (iv) schools shall apply for registration as a legal person. In addition, the main registration procedures\nfor for-profit private schools are selected as follows: (i) sponsors make a pre-application for classified registration; (ii) schools\nmake financial settlement; (iii) sponsors apply for the pre-registration of corporate names; (iv) sponsors make a formal application\nfor classified registration; (v) certificates are replaced upon the approval authorities; (vi) schools apply for the registration\nof legal persons; (vii) schools complete the amendment registration of assets; (viii) private non-enterprise entities apply\nfor deregistration with the original registration authorities. See “*Item 4. Information on the Company—B. Business Overview—Regulation—Implementing\nRules on Classification Registration of Private Schools*” for details.\n\n \n\n34\n\n \n\n \n\nOn January 9, 2018, five\ndepartments of Hebei Province including the Department of Education of Hebei Province issued the Implementation Measures for the Classification\nRegistration of Private Schools in Hebei Province, which came into effect on the same day. The measures provide that (i) private schools\ncan choose to be registered as non-private schools or for-profit schools, and those engaging in compulsory education shall not be registered\nas for-profit schools; (ii) if a private school has chosen to be classified and registered as a non-profit private school, it shall no\nlonger be converted to a for-profit private school; while if it has chosen to be classified and registered as a for-profit private school,\nit may be converted to a non-profit private school by application by its sponsor(s) and changing the registration of its legal entity;\n(iii) existing private schools shall complete the classification and registration within a five-year transition period ending on September\n1, 2022, and before the classification and registration, they shall be managed as their originally-registered legal entity; (iv) if an\nexisting private school chooses to be classified and registered as a non-profit private school, it shall amend its constitution in accordance\nwith the laws, continue its operation, and re-register with the appropriate authorities or civil affairs department; and (v) if an existing\nprivate school chooses to be classified and registered as a for-profit private school, it shall conduct financial liquidation, clarify\nthe property rights for land(s), school building(s), school accumulation and pay relevant taxes and fees, renew the Permit for Establishment\nof Privately-run Schools, re-register with the appropriate authorities, and continue its operation.\n\n \n\nAs of the date of the annual\nreport, Langfang City has not released any detailed rules on classification registration of private schools and we have not received\nany relevant notice from the competent authorities of Langfang City since January 1, 2022 when Beijing P.X. began to hold the whole sponsorship\ninterests of Langfang School.\n\n** **\n\nLishui International School\nis not subject to the risk of loss of taxes and fees that may incur in the process of filing the relevant application pursuant to the\nnational and local regulations (including Zhejiang Province and Lishui City) on the classification registration of private schools. Lishui\nInternational School has already been registered as a non-profit private school at the time of its establishment and is in compliance\nwith the Classification Registration Rules, and therefore is not required to take extra steps of registration.\n\n** **\n\n**We and the VIEs may be unable to maintain\nor raise the tuition, meal and accommodation service fees as planned.**\n\n \n\nWe derive the majority of\nour revenue from tuition, meal and accommodation service fees. We determine the rates of the tuition or other fees for our schools primarily\nbased on limits, guidelines and requirements set by the authorities and commercial considerations such as the demand for our and the\nVIEs’ educational programs, cost of revenues, the tuition charged by our competitors, our pricing strategy, the economic conditions\nof Lishui City, Zhejiang Province (in the case of Lishui International School) and Langfang City, Hebei\nProvince (in the case of Langfang School), and the general economic conditions in China.\n\n \n\nAny increase in the tuition\nand accommodation service fees charged at our schools are subject to regulatory approval. Moreover, the Decision sets out certain specific\nrequirements with respect to the level of fees charged by non-profit private schools. Therefore, we may face the risks that\nwe can only maintain our current tuition and accommodation service fees, and may not be able to raise any of such fees for our schools\nat our desired rates, times and places or at all in the future.\n\n \n\nEven if our intended rates\nof tuition and other fees are approved by the authority, we may fail to attract sufficient prospective students to apply for our schools\nat those levels. As a result, our and the VIEs’ business, financial condition and results of operations may be materially and adversely\naffected.\n\n** **\n\n**Our and the VIEs’ business depends\non the market recognition of our brand and reputation that we and the VIEs may not be able to maintain.**\n\n \n\nThe success of our and the\nVIEs’ business has depended and will continue to depend on our and the VIEs’ brand and reputation. Our and the VIEs’\nbrand and reputation may be affected by a number of factors, including student and parent satisfaction rates, teaching quality, our students’\nacademic performances and test scores, campus accidents, scandals involving our schools, negative publicity and failure to pass governmental\ninspections. Some of these factors are beyond our control. In addition, as we and the VIEs continue to grow in size, expand our programs\nand extend our geographic reach, it may become difficult to maintain quality and consistency in the services we and the VIEs offer, which\nmay lead to diminishing confidence in our and the VIEs’ brand name and negatively affect our reputation. If our brand or reputation\nis damaged or negatively affected, students’ and parents’ interest in our schools may decrease and our and the VIEs’\nbusiness, financial condition and results of operations could be materially and adversely affected.\n\n \n\n35\n\n \n\n \n\nWe have developed our student\nbase primarily through word-of-mouth referrals. However, we cannot assure you that our marketing efforts will be successful\nor sufficient in further promoting our brand and reputation to help us maintain or increase student enrollment. Moreover, there can be\nno assurance that our brand and reputation will hold sufficient market recognition in the geographic areas where we plan to acquire or\nestablish schools. If we and the VIEs are unable to further enhance the market recognition of our brand and reputation, or if we are\nrequired to incur excessive marketing expenses to promote our brand and reputation, our and the VIEs’ business, financial condition\nand results of operations may be materially and adversely affected.\n\n** **\n\n**We may fail to continue to recruit and\nretain students in our school.**\n\n \n\nThe success of our and the\nVIEs’ business depends on the number of students enrolled in our school and in any school we and the VIEs may acquire or establish\nin the future. Our ability to attract and retain students depends on several factors, including the ability to:\n\n \n\n●enhance\nexisting programs to respond to market changes and the demands of students and parents;\n\n \n\n●develop\nnew programs or schools that appeal to students;\n\n \n\n●maintain\nand improve our reputation for providing high quality private education;\n\n \n\n●maintain\nand improve the academic and non-academic performance of our students;\n\n \n\n●recruit\nand retain qualified teachers;\n\n \n\n●manage\nour growth while maintaining the consistency of our teaching quality;\n\n \n\n●expand\nour student capacity;\n\n \n\n●effectively\nmarket our schools and programs to prospective students; and\n\n \n\n●respond\nto the increasing competition in the market.\n\n \n\nQingtian International School\nand Lishui International School are both educational institutions specialized in providing high school education to students as overseas\nChinese returnees. On August 18, 2021, Lishui Mengxiang entered into a sponsorship interests transfer agreement with Qingtian Zhongyi\nEducation Investment in respect of the acquisition of 100% of the sponsorship interests of Qingtian International School, for a total\nconsideration of RMB23 million. On August 24, 2021, the alteration registration of Qingtian International School was completed and\nLishui Mengxiang started to hold 100% of the sponsorship interests of Qingtian International School. The transaction was closed in November\n2021. Qingtian International School had 491 students enrolled and recorded a utilization rate of 60.6% as of September 1, 2023.\nWe deconsolidated the results of Qingtian International School in our consolidated financial statements since December 31, 2023.\n\n \n\nLishui International School\nwas established in June 2023 and started to enroll student in September 2023. Lishui International School had 97 students as of September\n1, 2025 and it recorded a utilization rate of approximately 71.8% as of September 1, 2025.\n\n \n\n36\n\n \n\n \n\nLangfang School is a provincial\nprivate vocational school approved by the Human Resources and Social Security Department of Hebei Province, integrating academic education\nand vocational education. Lishui Mengxiang acquired Langfang School in January 2022 and began to hold 100% of the sponsorship interests\nin Langfang School on January 1, 2022. Langfang School had 660 students enrolled as of September 1, 2025.\n\n \n\nWe and the VIEs cooperate\nwith Hainan Technical School, a reputable vocational education school in Haikou City, Hainan Province, through Hainan Jiangcai, a subsidiary\nof Beijing P.X., to jointly design and develop curriculum programs based on the prevalent market trends and employer preferences. Hainan\nJiangcai (through its cooperator Hainan Technical School) had 510 students enrolled as of September 1, 2025.\n\n \n\nIf Lishui International School, Langfang School and Hainan Technical School are unable to attract and retain students to fully utilize\nthe campuses, they may record lower operation efficiency and we may be unable to benefit from the acquisitions. As a result, our and\nthe VIEs’ business, financial condition and results of operations may be materially and adversely affected.\n\n** **\n\n**Our students’ academic performance\nmay fall and satisfaction with our and the VIEs’ educational services may otherwise decline.**\n\n \n\nOur students’ academic\nperformance may be affected by various factors, including teaching method and materials, personal efforts, learning environment, pressure\nand family influence, some of which may be beyond our control. If their academic performance fall or do not improve as expected, our\nstudents may be unable to achieve the test scores necessary for their desired progressions and satisfaction with our and the VIEs’\neducational services may decline. Satisfaction with our and the VIEs’ educational services may also decline due to negative publicity\non our schools, directors or management, lack of qualified teachers, unsatisfactory learning environment or other factors, which may\nresult in, among others, a decrease in word-of-mouth referrals and reputation, students’ withdrawal from our schools\nand decreased application for our schools. If our student retention rate decreases substantially or if we otherwise fail to continue\nto attract and admit students due to decreased students’ or parents’ satisfaction with our and the VIEs’ educational\nservices, our and the VIEs’ business, financial condition and results of operations may be materially and adversely affected.\n\n** **\n\n**We and the VIEs may fail to continue to\nattract and retain qualified and committed teachers and other school personnel.**\n\n \n\nWe and the VIEs rely substantially\non our teachers for the provision of educational services to our students. The teachers are critical to maintaining the quality of our\nprograms and upholding our brand and reputation. We must continue to attract qualified teachers who are committed to teaching. We and\nthe VIEs face competition from public schools, other private education providers and other institutions for high quality candidates and\nmay have to incur additional costs for our recruitment efforts. We and the VIEs may not be able to recruit enough teachers to keep pace\nwith the growth of our student enrollment while maintaining consistent teaching quality and the overall quality of our and the VIEs’\neducation programs. In addition, criteria such as dedication, capability and loyalty are difficult to ascertain during the recruitment\nprocess and we and the VIEs may fail to identify and select the desired candidates.\n\n \n\n37\n\n \n\n \n\nFurthermore, we and the\nVIEs may be unable to retain high quality teachers or have to incur significant expenditures for our retention efforts. Teachers may\nbe dissatisfied with their workload, compensation, benefits, career path or working environment, which may disrupt our school operations\nand teaching activities, adversely affect our reputation and damage our ability to attract and retain teachers and students. Similarly,\nother school personnel such as administrators, counselors and financial staff also play an important role in the efficient and smooth\nrunning of our schools. There is no guarantee that we and the VIEs can recruit and retain quality personnel to perform these functions\nin the future without incurring significant costs or at all. If we and the VIEs are unable to attract and retain qualified and committed\nteachers and other school personnel at reasonable costs or at all, or if there is a significant decrease in teaching quality or educational\nexperiences in our schools due to lack of qualified teachers or other school personnel, or if our teachers or other school personnel\ntake disruptive actions to express their dissatisfaction with our school or us, our and the VIEs’ business, financial condition\nand results of operations may be materially and adversely affected.\n\n** **\n\n**We and the VIEs face intense competition\nin the education industry and we and the VIEs may fail to compete effectively.**\n\n \n\nThe education sector in\nChina is rapidly evolving, highly fragmented and competitive and we expect competition in this sector to persist and intensify. In the\ngeographic market in which we and the VIEs operate the schools, we and the VIEs compete with public schools and other private schools\nthat offer high school education and vocational education. We and the VIEs compete with these schools across a range of factors, including\nprogram and curriculum offerings, tuition level, school location and premises, qualified teachers and other key personnel.\n\n \n\nOur competitors that are\nprivate schools may offer similar or superior educational programs, with different pricing and service packages that are more appealing\nthan those offered at our school. Some of our competitors that are private schools may have more resources than us and may be able to\ndevote greater resources than we and the VIEs can to the development and promotion of their schools and respond more quickly than we\nand the VIEs can to changes in student demands, testing materials, admissions standards, market needs or new technology. Our competitors\nthat are public schools may have access to resources that may not be available to private schools and may be able to offer quality educational\nprograms at lower prices than Lishui International School and Langfang School. According to the Frost &\nSullivan report, tuition charged by public schools is generally lower than tuition charged by private schools, especially premium private\nschools. In addition, the PRC public education system continues to improve in terms of resources, admission policies and teaching quality\nand approaches. If public schools relax their admission limitations, offer more diversified curriculum, upgrade their campus facilities\nor reforms the exam-oriented education approach, they may become more attractive to students, which may lead to increased competition\nin the education industry.\n\n \n\nAs a result, we and the\nVIEs may be required to reduce tuition or increase spending in order to retain or attract students or pursue new market opportunities.\nIf we and the VIEs are unable to successfully retain and attract students, maintain or increase our tuition level, recruit and retain\nqualified teachers or other key personnel, enhance the quality of our and the VIEs’ educational services or control competition\ncosts, our and the VIEs’ business, financial condition and results of operations may be materially and adversely affected.\n\n** **\n\n38\n\n \n\n \n\n**We and the VIEs may not be able to obtain\nall necessary approvals, licenses and permits and to make all necessary registrations and filings for our and the VIEs’ educational\nand other services in China.**\n\n \n\nIn order to conduct our\nand the VIEs’ business and operate schools in China, we and the VIEs are required to obtain and maintain various approvals, licenses\nand permits and fulfill registration and filing requirements. For example, to establish and operate a high school or a vocational school\nin the PRC, we are required to obtain a private school operation permit from the local departments of education, human resources and\nsocial security, and register with competent administration authorities to obtain a business license or registration certificate. Such\nlocal regulatory authorities may also conduct annual inspection of the schools. After consulting with our PRC legal counsel, Beijing\nDeHeng Law offices, we are of the view that, as of the date of the annual report, except for the circumstances which would not in the\naggregate have a material adverse effect on our financial conditions, Lixiang, our PRC subsidiaries and the VIEs have received from PRC\nauthorities requisite licenses, permissions or approvals needed to engage in the businesses currently conducted in China.\n\n \n\nWe cannot assure you that\nLixiang, our PRC subsidiaries and the VIEs are always able to successfully update or renew the licenses or permits required for the relevant\nbusiness in a timely manner or that these licenses or permits are sufficient to conduct all of our and the VIEs’ present or future\nbusiness. As advised by our PRC legal counsel, Beijing DeHeng Law Offices, if Lixiang, our PRC subsidiaries or the VIEs (i) do not\nreceive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required,\nor (iii) applicable laws, regulations, or interpretations change and Lixiang, our PRC subsidiaries or the VIEs are required to obtain\nsuch permissions or approvals in the future, we could be subject to fines or legal sanctions, which may materially and adversely affect\nthe business, financial condition and results of operations of us and the VIEs.\n\n \n\nAs of the date of the annual\nreport on Form 20-F, the administrative procedures for changing the sponsor of Langfang School with the PRC governmental authorities,\nespecially for renewing the Permit for Establishment of Privately-run Schools, have not been completed due to the internal procedures\nof the competent authorities and we and the VIEs are still in the process of active communication with such local authorities. If the\nabove administrative procedures cannot be completed, Langfang School might be determined as changing its sponsor without authorization\naccording to the Promotion Law and the 2021 Implementation Rules by the competent authorities, and thus Langfang School, the sponsor\nand actual controller and members of decision-making institution or supervisory institution of Langfang School shall be subject to administrative\npunishment. For Langfang School, any unlawful earning shall be confiscated, and if the circumstances are serious, it shall be ordered\nto stop enrolling students and its business license shall be revoked. In addition, since the former sponsor is still a Langfang School’s\nregistered sponsor with the relevant authorities, if it exercises the rights and interests of sponsor in accordance with relevant laws,\nregulations and the filed articles of association of Langfang School, the normal operation and management of Langfang School may be affected.\nThe aforesaid rights and interests of the registered sponsor include knowing the operation and financial status of Langfang School, recommending\ncouncil members and supervisors, and consulting the meeting minutes of the council and the financial/accounting statements of Langfang\nSchool. Although we believe that we can currently exert sufficient control over Langfang School, however, if the above situation occurs,\nwe will have to spend additional time and cost to eliminate the relevant adverse effects.\n\n \n\nAs of the date of this annual\nreport, the adjustment of the cooperation arrangement between Beijing P.X. and Hainan Technical School for compliance purposes has not\nbeen completed. We and the VIEs cooperate with Hainan Technical School, a reputable vocational education school in Haikou City, Hainan\nProvince, through Hainan Jiangcai, a subsidiary of Beijing P.X., to jointly design and develop curriculum programs based on the prevalent\nmarket trends and employer preferences. According to the cooperation arrangement made prior to the acquisition of Beijing P.X., Hainan\nJiangcai would designate their staffs to teach courses in Hainan Technical School, and the tuition, accommodation and miscellaneous fees\npaid by the students would be charged by Beijing P.X. on behalf of Hainan Technical School and then transferred back to Hainan Technical\nSchool after deducting the service fees payable to Beijing P.X. However, as stipulated in relevant regulations, teachers shall be directly\nrecruited by Hainan Technical School, and the tuition, accommodation and miscellaneous fees shall also be directly charged by Hainan\nTechnical School. To comply with the relevant regulations, Beijing P.X. has deliberated with Hainan Technical School for the adjustment\nof the cooperation, while the parties have not yet agreed on any specific and detailed adjustment plans as of the date of this annual\nreport. Beijing P.X. and Hainan Technical School may be ordered to return the tuition, accommodation and miscellaneous fees and be imposed\nfines, and the revenue from the cooperation may be adversely affected.\n\n** **\n\n39\n\n \n\n \n\n**We and the VIEs may not be able to successfully\nintegrate businesses operated by Lishui International School, Vocational Education Services Providers,\nChuangmei Weiye and Hebei Chuangxiang, which may cause us to lose the anticipated benefits from such business expansions and to incur\nsignificant additional expenses.**\n\n \n\nWe and the VIEs plan to\nexpand the business and school network by entering into cooperation with third-party school sponsors to establish new schools, in addition\nto establishing new schools ourselves or acquiring existing schools. We believe we will face challenges in running the newly established\nschool and integrating business operations and management philosophies of the schools we and the VIEs acquired. We and the VIEs may not\nbe able to successfully integrate businesses operated by Lishui International School, Vocational Education\nServices Providers, Chuangmei Weiye and Hebei Chuangxiang, and we may not realize the expected benefits or synergies of the business\nexpansion to the extent, or in the timeframe we anticipated, which may have a material adverse effect on our and the VIEs’ business,\nfinancial condition and results of operations.\n\n \n\nWe consider the benefits\nof our prospective acquisitions will mainly hinge on our ability to effectively and timely integrate the management, operations and personnel\nof these schools. The integration of the schools we and the VIEs acquire may be a complex, time-consuming and costly process that without\nproper arrangement and implementation, could seriously interfere with our and the VIEs’ business operations and damage our reputation.\nOur Directors consider the main challenges involved in integrating acquired entities to include the following:\n\n \n\n●retaining\nqualified teaching staff of any acquired school;\n\n \n\n●consolidating\nthe educational services offered by the acquired school;\n\n \n\n●complying\nwith the regulatory requirements;\n\n \n\n●the\nacquired schools having a culture that may be adverse to change and may not be receptive\nto our and the VIEs’ educational values and methods;\n\n \n\n●integrating\neducational and administrative systems;\n\n \n\n●minimizing\ndisruptions to existing students’ curricula and ensuring their ability to progress\nthrough the applicable education programs is not hindered as a result of the acquisition;\n\n \n\n●ensuring\nand illustrating to our students and their parents that the new acquisitions will not result\nin any adverse changes to our established brand image, reputation, service quality or standards;\nand\n\n \n\n●minimizing\nthe diversion of our management’s attention from its on-going business concerns\n\n \n\n**The operations of Lishui International School are subject to general conditions and the education industry of Lishui City and/or Zhejiang Province,\nwhile the operation of Langfang School is subject to general conditions and the education industry of Langfang City and/or Hebei Province.**\n\n \n\nLishui International School and its operations are currently located in Lishui City, Zhejiang Province. According to the\nlatest census report of Zhejiang Province, the population of Lishui City and Zhejiang Province in 2025 was 2.5 million and 66.7 million,\nrespectively. If Lishui City or Zhejiang Province experiences an event that materially and adversely affects its education industry,\nsuch as an economic downturn, a natural disaster or an outbreak of a contagious disease, or if any governmental authorities governing\nLishui City or Zhejiang Province adopt regulations that place additional restrictions or burdens on Lishui\nInternational School or on the education industry in general, our and the VIEs’ business, financial condition and results of operations\nmay be materially and adversely affected.\n\n \n\nLangfang School and its\noperations are currently located in Langfang City, Hebei Province. According to the latest census report of Hebei Province, the population\nof Langfang City and Hebei Province in 2025 was 5.5 million and 73.8 million, respectively. If Langfang City or Hebei Province\nexperiences an event that materially and adversely affects its education industry, such as an economic downturn, a natural disaster or\nan outbreak of a contagious disease, or if any governmental authorities governing Langfang City or Hebei Province adopt regulations that\nplace additional restrictions or burdens on Langfang School or on the education industry in general, our and the VIEs’ business,\nfinancial condition and results of operations may be materially and adversely affected.\n\n \n\n40\n\n \n\n \n\nIn addition, given that\nwe and the VIEs mainly offer the education services at Lishui International School and Langfang School,\nany material negative development with respect to Lishui International School or Langfang School could\nhave a material adverse effect on our and the VIEs’ business, financial condition and results of operations as a whole.\n\n** **\n\n**Misconduct of students and employees and\nimproper activities and any negative publicity concerning our schools, our Company, our Controlling Shareholder, our directors or our\nemployees may adversely affect us.**\n\n \n\nMisconduct of students and\nemployees and improper activities may adversely affect our brand image, business and results of operations. In addition, any negative\npublicity concerning our school, our Company, our controlling shareholder, our directors, our employees or any of them, even if untrue,\nmay damage our brand image and reputation, deter prospective students and teachers and take up excessive time of our management and other\nresources. As a result, our and the VIEs’ business, financial condition and results of operations may be materially and adversely\naffected.\n\n** **\n\n**The operations of Lishui International School depend on their abilities to promptly and adequately respond to changes in admission requirements\nfor higher-level education, testing materials and technologies.**\n\n \n\nOur high school students\nin Lishui International School are subject to the National Joint Entrance Examination for overseas\nChinese students. The admission scores for the various college schools in China usually change from year to year and so do the admission\nrequirements for overseas universities. Testing materials may also change in terms of focus areas, format and the manner in which such\ntests are administered. The new examination syllabus implemented in 2021 has greatly reduced the difficulty of the examination. These\nchanges require us to continually update and enhance the courses we and the VIEs offer and to continually train our students to take\nstandardized tests so as to maximize their performance on these tests. In order to enable our students to get admission to the prestigious\ncolleges in China, Lishui International School is required to offer not only the ordinary PRC high\nschool curriculum program but also the courses designed for the National Joint Entrance Examination for overseas Chinese students. If Lishui International School fail to adequately prepare its students for admission tests in the everyday\nclassroom teaching and any test preparation courses they offer, their students’ admissions rates to PRC colleges may decrease and\ntheir programs and services may become less attractive to students. Furthermore, if we and the VIEs fail to timely develop and introduce\nnew education services and programs in Lishui International School based on the changing education\nand test standards in China and abroad, our ability to attract and retain students may decrease. As a result, our reputation, business,\nfinancial condition and results of operations may be materially and adversely affected.\n\n** **\n\n**If we are not able to continually tailor\nour vocational education programs to market demand and enhance our courses to adequately and promptly respond to developments in the\nlabor market, our courses may become less attractive to students.**\n\n \n\nNew trends in the economy\nof China and rapid developments in the industries may change the type of skills required for vocational school graduates in the labor\nmarket. This requires us to continually develop, update and enhance our vocational education programs and course materials to adapt to\nthe needs of the labor market in China. We may be unable to update our courses in a timely and cost-effective manner, or at all, to keep\npace with changes in market requirements. Any inability to track and respond to these changes in a cost-effective and timely manner or\nto tailor our vocational education programs to the market demand in China would render our programs less attractive to students, which\nmay materially and adversely affect our reputation and ability to continue to attract students and cause us to lose market share.\n\n** **\n\n41\n\n \n\n \n\n**We and the VIEs may not be able to successfully\nimplement our business strategies.**\n\n \n\nOur business strategies\ninclude organic growth, strategic alliance with reputable education institutes, acquiring and establishing schools. We may not succeed\nin implementing our business strategies due to a number of factors, including the following:\n\n \n\n●we\nmay lose government support in Zhejiang Province, Hebei Province, Hainan Province or other\nplaces to which we plan to expand our operation;\n\n \n\n●we\nmay not be able to admit all qualified students who would like to enroll in our schools due\nto the capacity constraints of our school facilities;\n\n \n\n●we\nmay fail to identify cities with sufficient growth potential in which to acquire or establish\nschools;\n\n \n\n●we\nmay have limited access to capital resources or may have to rely on the shareholders’\nguarantee in obtaining bank facilities;\n\n \n\n●we\nmay fail to acquire or lease suitable land sites in the cities to which we plan to expand\nour operations;\n\n \n\n●we\nmay fail to effectively market our schools or brand in new markets or promote ourselves in\nexisting markets;\n\n \n\n●we\nmay not be able to replicate our successful growth model in new markets;\n\n \n\n●we\nmay not be able to effectively integrate any future acquisitions into our operations;\n\n \n\n●we\nmay fail to obtain the requisite licenses and permits from the authorities necessary to acquire\nor establish schools at our desired locations;\n\n \n\n●we\nmay not be able to continue to enhance our course materials or adapt our course materials\nto changing student needs and teaching methods;\n\n \n\n●we\nmay fail to follow the expected timetable with respect to the development of our schools;\nand\n\n \n\n●we\nmay fail to achieve the benefits we expect from our expansion.\n\n \n\nIf we fail to successfully\nexecute our growth strategies, we may not be able to maintain our growth rate and our and the VIEs’ business, financial condition\nand results of operations may be materially and adversely affected.\n\n** **\n\n**We historically recorded net current liabilities.**\n\n \n\nAs of December 31, 2024\nand 2025, we had net current assets of RMB124 million and net current liabilities of RMB90\nmillion, respectively. We cannot assure you that we will not experience periods of net current liabilities in the future. We\nmay record net current liabilities in future periods as we continue to expand. A net current liabilities position could expose us to\nliquidity risks, constrain our operational flexibility and adversely affect our ability to obtain financing and expand our and the\nVIEs’ business. There can be no assurance that we will always be able to generate sufficient cash flow from our operations or\nobtain necessary funding to meet our future financial needs, including repaying our loans upon maturity and finance our capital\ncommitments. If we fail to meet our financial obligations, our and the VIEs’ business, liquidity, financial position and\nprospects could be materially and adversely affected.\n\n** **\n\n**We face risks related to health epidemics,\nnatural disasters or terrorist attacks in China.**\n\n \n\nWe and the VIEs offer accommodation\nservice to students of Lishui International School, Langfang School and Hainan Technical School. Lishui\nInternational School also provides on-campus or nearby off-site accommodation to our teachers and staff. The boarding\nand accommodation arrangements make our students, teachers and staff vulnerable to outbreaks of health epidemics such as the COVID-19\nvirus, H1N1 flu virus, avian influenza and severe acute respiratory syndrome, or SARS, and Influenza A virus, such as H5N1 subtype and\nH5N2 subtype flu viruses, natural disasters, such as earthquakes, floods, landslides, as well as terrorist attacks, other acts of violence\nor war or social instability, especially when such health epidemics, natural disasters or terrorist attacks take place in our schools\nor in or near the regions where our schools are located. As a result, our and the VIEs’ business, financial condition and results\nof operations may be materially and adversely affected.\n\n \n\n42\n\n \n\n \n\nSince the worldwide outbreak\nof the COVID-19 pandemic in early 2020, all sectors have been severely affected with no exception to the education industry. In early\n2021, WHO announced the variants of the coronavirus causing COVID-19 were discovered in Denmark, the United Kingdom, South Africa and\nJapan subsequently, which is considered highly contagious and may pose a serious public health threat. To respond to the continuing impact\nand recurrence of COVID-19 pandemic, the PRC government has imposed various strict measures with the aim to contain the virus and restore\nthe business operation in an orderly manner including, but not limited to, mandatory vaccination requirements, travel restrictions, mandatory\nquarantine requirements, and postponed resumption of business operations. However, the relaxation of the restrictions on economic and\nsocial life may lead to development of new cases, which may result in the reimposition of further restrictions. The Baiyun Campus, Yijing\nCampus—Featured Division resumed normal operation from April 2020. No students withdrew from our schools due to the COVID-19 outbreak.\nWe and the VIEs have taken a series of measures in response to the outbreak to protect our employees, students and teachers in the reopened\ncampuses after the closedown in early 2020, including, among others, checking the temperature of our students, procurement and provision\nof hand sanitizers and other protective equipment for our employees. The campuses remained in normal operation during 2021, and the students\nand teachers continued with their on-campus courses in 2021. In 2022, the pandemic situation and the COVID-19 policies in China was changing.\nIn December 2022, the PRC government shifted its COVID-19 policies and eased the pandemic restrictions, which was companioned with a\nlarge number of people getting infected of COVID in a short time. To cope with the policy shift and to protect our students and teachers’\nhealth, Qingtian International School stopped on-campus teaching activities and provided off-campus online courses for two weeks in December\n2022. Besides, Langfang School provided online courses from March 7, 2022 to June 24, 2022 in the spring semester, and continued the\nonline courses from September 2, 2022 to December 23, 2022 in the fall semester. During the online courses periods, the campus of Langfang\nSchool was insulated from the outside and adopted daily disinfection measures. The above online courses are conducted through certain\nonline courses platforms, and are the substitute for on-campus courses in the pandemic situation. Thus, the online courses are distinguished\nfrom the online education service which shall be defined as a value-added telecom service, and therefore do not need extra permissions\nfor its operation. Nevertheless, as the students’ enrollment is conducted and the tuition is charged on a semester basis, the COVID-19\noutbreak did not have a material long-term impact on our and the VIEs’ financial condition and operation. Although most of the\nCOVID-19 related restrictions previously imposed by the PRC government were lifted in 2023, any future outbreak of public health epidemics\nmay restrict economic activities in affected regions, resulting in reduced business volume, disrupt our and the VIEs’ business\noperations and adversely affect our results of operations.\n\n** **\n\n**We and the VIEs are subject to extensive\ngovernmental approvals and compliance requirements for the construction and development of school and in relation to the land and buildings\nthat we and the VIEs own.**\n\n \n\nFor campuses and school\nfacilities constructed and developed for our school, we and the VIEs must obtain various permits, certificates and other approvals from\nthe relevant authorities at various stages of property development, including the land use right certificates, planning permits, construction\npermits, certificates for passing environmental assessments, certificates for passing fire control assessments, certificates for passing\nconstruction completion inspections and building ownership certificates.\n\n \n\nIn the event that if we\nand the VIEs lose the rights to any of our land or buildings, uses of such land or buildings may be limited, or we may be forced to relocate\nand incur additional costs, which may result in disruptions to the operations of our schools and materially and adversely affect our\nand the VIEs’ business, financial condition and results of operations. In addition, we and the VIEs may in the future encounter\nproblems in obtaining the relevant permits, certificates and approvals for the construction and development of our schools, which may\nnegatively affect our growth strategies. As a result, our and the VIEs’ business, financial condition and results of operations\nmay be materially and adversely affected.\n\n** **\n\n**Capacity constraints of our school facilities\ncould cause us to lose students to our competitors.**\n\n \n\nThe educational facilities\nof our school are limited in space and size which is also subject to regulatory approval from the competent departments in charge of\nurban and rural planning. We and the VIEs may not be able to admit all qualified students who would like to enroll in our school\ndue to the capacity constraints of our current school facilities. As of September 1, 2025, there were 97,660 and 510 students enrolled\nin Lishui International School, Langfang School, and Hainan Jiangcai (through its cooperator Hainan Technical School). None of Lishui\nInternational School, Langfang School, and Hainan Technical School had a lack of capacity for enrolling students as of September 1,\n2025. We and the VIEs may not be able to expand our capacity at our current campus unless we and the VIEs relocate to other facilities\nin the local area with more space. If we and the VIEs fail to expand our capacity as quickly as the demand for our services grows, or\nif we and the VIEs otherwise fail to grow by acquiring or establishing schools and campuses, we and the VIEs could lose potential students\nto competitors, and our and the VIEs’ business, financial condition and results of operations may be materially and adversely affected.\n\n** **\n\n43\n\n \n\n \n\n**Our historical financial and operating\nresults may not be indicative of our future performance and our financial and operating results may be difficult to forecast.**\n\n \n\nOur financial and operating\nresults may not meet the expectations of public market analysts or investors, which could cause the price of our ADSs to decline. Our\nrevenue, expenses and operating results may vary from year to year in response to a variety of factors beyond our control, including:\n\n \n\n●our\nability to increase student enrollment in our schools and raise tuitions fees;\n\n \n\n●general\neconomic conditions and regulations or government actions pertaining to the provision of\nprivate educational services in China;\n\n \n\n●shifts\nin consumer attitude toward private secondary education and vocational education in China;\n\n \n\n●our\nability to control cost of revenues, in particular salary and welfare relating to teachers\nand other costs; and\n\n \n\n●non-recurring charges\nincurred in connection with acquisitions or other extraordinary transactions or unexpected\ncircumstances.\n\n \n\nDue to these factors, we\nbelieve that year-to-year comparisons of our operating results may not be indicative of our future performance and you should\nnot rely on them to predict the future performance of our ADSs.\n\n** **\n\n**Accidents or injuries suffered by our students,\nemployees or other people at our schools may adversely affect our reputation and subject us to liability.**\n\n \n\nThere are inherent risks\nof accidents or injuries in schools. We and the VIEs could be held liable in the event of personal injuries, disease, fires or other\naccidents suffered by students, employees or other people that occur at our school. Although we and the VIEs designate certain staff\nmembers in each of our and the VIEs’ campuses to be in charge of student health and security, in the event of personal injuries,\ndisease, food poisoning, fires or other accidents suffered by our students, employees or other people on our campuses, we and the VIEs\nmay face claims for damages and our school may be perceived unsafe by prospective parents and students.\n\n \n\nClaims against us arising\nfrom injuries incurred or claimed to have incurred on our campuses may adversely affect our reputation, subject us to significant amounts\nof damages, divert management’s attention and other resources or increase our insurance costs. As a result, our and the VIEs’\nbusiness, financial condition and results of operations may be materially and adversely affected.\n\n** **\n\n**We and the VIEs are and may be in the future\ninvolved in legal and other disputes and claims arising out of our operations from time to time.**\n\n \n\nWe and the VIEs are and\nmay be in the future involved in disputes with and subject to claims by parents and students, teachers and other school personnel, our\nsuppliers, construction companies, third-party sub-contractors and other parties involved in our and the VIEs’ business.\n\n \n\nOn October 12, 2023, Langfang\nSchool received a court notice from the People’s Court of Anci District, Langfang City, Hebei Province that Hebei Technical College\nof Petroleum Profession (河北石油职业技术学院), as the plaintiff, had filed\na complaint in relation to its contractual dispute against Langfang School and Beijing S.K.’s affiliates, and the first-instance\njudgment of the court ruled that Langfang School should, within ten days after the effectiveness of the judgment, pay the plaintiff overdue\nrental expenses of RMB25,235,000 for the period from January 1, 2022 to August 31, 2023, and continue to pay rent for the period from\nSeptember 1, 2023 to the date when the lease is terminated. Langfang School filed for a second-instance lawsuit on December 19, 2023.\nOn April 19, 2024, Langfang School received the final judgment that it would not need to pay rental expenses for the period from January\n1, 2022 to August 31, 2023 or the period after September 1, 2023, but should vacate the premises in relation to the dispute by July 30,\n2024. To continue using the premises and facilities, Langfang School entered into a cooperation agreement with Hebei Petroleum College\non July 31, 2024, in which it was agreed that Langfang School could continue to use the facilities of the southern campus of Hebei Petroleum\nCollege for operating vocational education, for six years from July 31, 2024 to July 30, 2030, and Langfang School would pay Hebei Petroleum\nCollege RMB11,000,000 each year, subject to certain fees adjustment arrangements.\n\n \n\n44\n\n \n\n \n\nOn December 18, 2023, Lishui\nMengxiang, as applicant, filed an arbitration application against Beijing S.K. and its affiliates, as respondents in relation to the\nbreach of the investment cooperation agreement entered into between the two parties on July 27, 2021 and a series of investment supplemental\nagreement entered into between the two parties during 2022 and 2023. The main arbitration claim was to request the respondents to pay\nthe contracted amount of RMB72.41 million and liquidated damages of RMB20 million. On April 3, 2025, the Beijing Arbitration Commission\nrendered a final award granting the applicant’s main arbitration claim. As of the date of this annual report, Lishui Mengxiang\nhas applied for enforcement of the arbitration award but has not yet received the aforementioned amount. See “*Item 8. Financial\nInformation—A. Consolidated Statements and Other Financial Information—Legal Proceedings.*”\n\n \n\nThere can be no assurance\nthat favorable judgments will be obtained in the above or any future legal and other proceedings, and even if favorable judgments are\nobtained, legal or other proceedings involving us and the VIEs may, among others, incur significant costs, divert management’s\nattention and other resources, negatively affect our and the VIEs’ business operations, cause negative publicity against us or\ndamage our reputation. As a result, our and the VIEs’ business, financial condition and results of operations may be materially\nand adversely affected.\n\n** **\n\n**We and the VIEs may lose the services of\nour executive directors, officers and other key personnel.**\n\n \n\nOur future success depends\nheavily upon the continuing services of our executive directors and officers and in particular, Mr. Biao Wei and Ms. Fen Ye,\nwho have been our leaders since our inception. If one or more of our executive directors, officers or other key personnel are unable\nor unwilling to continue in their present positions, we and the VIEs may not be able to replace them easily or at all and our and the\nVIEs’ business may be disrupted and our financial condition and results of operations may be materially and adversely affected.\nCompetition for experienced executive directors or management personnel in the private education sector is intense, the pool of qualified\ncandidates is very limited and we and the VIEs may not be able to retain the services of our executive directors or officers or key personnel,\nor attract and retain high-quality executive directors or officers or key personnel in the future. In addition, if any member of our\nexecutive directors or officers or any other key personnel joins a competitor or forms a competing company, we and the VIEs may lose\nteachers, students and staff members. As a result, our and the VIEs’ business, financial condition and results of operations may\nbe materially and adversely affected.\n\n \n\nEach of our executive officers\nhas entered into an employment contract and certain executive officers and/or key employees have entered into confidentiality agreements\nwith us. The employment contracts and confidentiality agreements are governed by PRC laws and any disputes would be resolved in accordance\nwith PRC legal procedures. The legal uncertainties in the PRC legal system could limit our ability to enforce these agreements. For example,\nprior court decisions may be cited for reference but not necessary and have limited precedential value in the PRC and the PRC arbitration\ntribunals and courts have significant discretion in interpreting, implementing or enforcing relevant PRC laws. It is thus difficult to\npredict the outcome of any arbitration awards or court proceedings or gage the level of legal protection that such awards or proceedings\nmay provide. Accordingly, if any disputes arise between any of our senior executives or key personnel and us, it may be difficult to\nenforce these agreements against these individuals. As a result, our and the VIEs’ business, financial condition and results of\noperations may be materially and adversely affected.\n\n \n\n**We have identified material weaknesses\nin our internal control over financial reporting. If our remediation of the material weaknesses is not effective, or we fail to develop\nand maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial statements or\ncomply with applicable laws and regulations could be impaired.**\n\n \n\nWe are subject to\nreporting obligations under the U.S. securities laws. Section 404 of the Sarbanes-Oxley Act of 2002 (the\n“**Sarbanes-Oxley Act**”) requires that we include a management report on such company’s internal control over\nfinancial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ended December 31,\n2021. Our management has concluded that the material weaknesses identified for the year ended December 31, 2020 has been remediated,\nthe internal control over financial reporting was effective as of December 31, 2023 and 2024. However, in the course of auditing our\nconsolidated financial statements for the financial statements included elsewhere in this annual report for the fiscal year ended\nDecember 31, 2025, we identified two material weaknesses in our internal control over financial reporting. See “*Item 15.\nControls and Procedures*.”\n\n \n\nAs defined in the standards established by the PCAOB, a “material\nweakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable\npossibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.\nThe material weaknesses identified for the fiscal year ended December 31, 2025 relate to (i) the lack of sufficient and competent accounting\nstaff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements; and (ii) lack of robust and\nformal period-end financial reporting policies and procedures in place to address complex U.S. GAAP technical accounting and the SEC reporting\nrequirements.\n\n \n\n45\n\n \n\n \n\nIn response to the material\nweaknesses identified, we are in the process of implementing a number of measures to address the material weaknesses identified, including\nbut not limited to:\n\n \n\n \n●\ndevelop and implement a comprehensive set of processes and internal controls to timely and appropriately identify, analyze, and record transactions that may be subject to complex U.S. GAAP accounting treatment;\n\n \n\n \n●\nhire additional accounting staff members with U.S. GAAP and SEC reporting experiences to implement the abovementioned financial reporting procedures and internal controls to ensure the consolidated financial statements and related disclosures under U.S. GAAP and SEC reporting requirements are prepared appropriately on a timely basis; and\n\n \n\n \n●\nestablish an ongoing training program to provide sufficient and appropriate trainings for accounting and financial reporting personnel, including trainings related to U.S. GAAP and SEC reporting requirements.\n\n \n\nWe believe the measures described\nabove should remediate the material weaknesses identified and strengthen our internal control over financial reporting. The remediation\ninitiatives outlined above are estimated to take place over the next 12 to 18 months, and we can offer no assurance that these initiatives\nwill ultimately have the intended effects. We do not believe that the remediation of these material weaknesses will result in significant\nincremental cost. However, we cannot assure you that we will not identify additional material weaknesses or significant deficiencies in\nthe future. Another significant financial reporting failure or material weakness in internal control over financial reporting could result\nin substantial cost to remediate and could cause a loss of investor confidence and decline in the market price of our ADSs. In addition,\nif we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, our ADSs may not be able to remain listed on\nthe Nasdaq Global Market.\n\n \n\nOur management may conclude\nthat our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control\nover financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing,\nmay issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented,\ndesigned, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, as we are a public company,\nour reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable\nfuture. We may be unable to timely complete our evaluation testing and any required remediation.\n\n \n\nDuring the course of documenting\nand testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, we may\nidentify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy\nof our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not\nbe able to conclude on an ongoing basis that we have effective internal control over financial reporting. If we fail to achieve and maintain\nan effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting\nobligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our\naccess to capital markets, harm our results of operations and lead to a decline in the trading price of our shares. Additionally, ineffective\ninternal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential\ndelisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required\nto restate our financial statements from prior periods.\n\n \n\n46\n\n \n\n \n\nNeither we nor our independent\nregistered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting\nmaterial weaknesses and other control deficiencies in our internal control over financial reporting. Had we performed a formal assessment\nof our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal\ncontrol over financial reporting, additional deficiencies may have been identified.\n\n \n\nWe are a public company in the United States subject to the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. This\nannual report on Form 20-F does not include an attestation report of our independent registered public accounting firm regarding internal\ncontrol over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant\nto rules of the SEC where domestic and foreign registrants that are non-accelerated filers, which we are, are not required to provide\nthe auditor attestation report.\n\n \n\nDuring the course of documenting\nand testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses\nand deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control\nover financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude\non an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail\nto achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements\nand fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information.\nThis could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of\nour ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of\ncorporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil\nor criminal sanctions. We may also be required to restate our financial statements from prior periods.\n\n** **\n\n**Failure to develop appropriate internal\ncontrol and management structures in line with our rapid growth could result in a material adverse effect on our and the VIEs’\nbusiness, prospects, financial condition and results of operations.**\n\n \n\nOur and the VIEs’\nbusiness and operations have been expanding rapidly. Significant management resources must be expanded to develop and implement appropriate\nand effective internal control, risk monitoring and management systems which are in line with our growth. These systems are critical\nto ensure our compliance with the relevant laws and regulations on an on-going basis, effective business operations and our future development.\nHistorically, our and the VIEs’ business operations were subject to certain legal risks due to insufficient internal control measures.\nThese miscellaneous fees were mainly fees incurred from medical care and purchase of learning materials. The teachers then immediately\ntransferred all amounts collected to our schools’ accounts. Since June 2020, we have ceased such payment collection arrangement\nthrough teachers and no warnings or penalties were imposed upon us by the relevant authorities. However, if we fail to effectively implement\nour internal control measures and if we fail to allocate appropriate management resources, we may not be able to identify compliance\nissues, administrative oversight, unfavorable business trends or other risks that could materially and adversely affect our and the VIEs’\nbusiness, prospects, financial condition and results of operations.\n\n** **\n\n47\n\n \n\n \n\n**Our ADSs may be prohibited from trading\nin the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our auditor for two consecutive\nyears. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.**\n\n** **\n\nPursuant to the HFCAA, if\nthe SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections\nby the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange\nor in the over-the-counter trading market in the United States.\n\n \n\nOn December 16, 2021,\nthe PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered\npublic accounting firms headquartered in mainland China and Hong Kong (the “2021 Determination”).\n\n \n\nIn March 2022, the SEC issued\nits first “Conclusive list of issuers identified under the HFCAA”. The identified issuers in the list are subject to the\ndelisting provisions if they remain on the list for two consecutive years.\n\n \n\nOn December 15, 2022,\nthe PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely\nregistered public accounting firms.\n\n \n\nEven so, the SEC still included\nthe issuers to the “Conclusive list of issuers identified under the HFCAA” if the issuers filed an annual report with an\naudit report issued by a registered public accounting firm headquartered in mainland China and Hong Kong prior to the PCAOB’s decision\nto vacate its 2021 Determination. Additionally, each identified issuer that is on the conclusive list must comply with the HFCAA’s\nsubmission and disclosure requirements for the year that it is identified. As of the date of this prospectus, more than 170 public companies\nhave been listed in as issuers identified under the HFCAA. More recently, on February 21, 2025, the United States President Donald Trump\nissued the America First Investment Policy to provide guidance on investment oversight. The policy includes directives to, among other\nthings, determine if adequate financial auditing standards are upheld for companies covered by the HFCAA.\n\n \n\nEach year, the PCAOB will\ndetermine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. Any\nlack of access to the PCAOB inspection in mainland China and Hong Kong may prevent the PCAOB from fully evaluating audits and quality\ncontrol procedures of the auditors based there. As a result, the investors may be deprived of the benefits of such PCAOB inspection.\nIf the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland\nChina and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial\nstatements filed with the SEC, we may be identified as a commission-identified issuer following the filing of the annual report on Form\n20-F for the relevant fiscal year.\n\n \n\nOur current auditor Audit\nAlliance LLP is located in Singapore and is registered with the PCAOB. Audit Alliance LLP is subject to laws in the United States pursuant\nto which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. As of the date of\nthe annual report, Audit Alliance LLP is not subject to the 2021 Determinations announced by the PCAOB and our listing is not affected\nby the HFCAA and related regulations. If, in the future, we are identified by the SEC for two consecutive years as a commission-identified\nissuer whose registered public accounting firm is determined by the PCAOB that it is unable to inspect or investigate completely because\nof a position taken by one or more authorities in China, the SEC may prohibit our shares or ADSs from being traded on a national securities\nexchange or in the over the counter trading market in the United States, and this ultimately could result in our ADSs being delisted.\n\n** **\n\n48\n\n \n\n \n\n**There can be no assurance that our ADSs\nwill continue to be listed on Nasdaq or, if listed, that we will be able to comply with the continued listing standards of Nasdaq, which\ncould limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.**\n\n \n\nTo continue listing our\nClass A ordinary shares on Nasdaq, we are required to demonstrate compliance with Nasdaq’s continued listing requirements. On May\n3, 2023, the Company was notified by Nasdaq of its failure to maintain a minimum bid price of $1.00 per share for 30 consecutive trading\ndays under the Bid Price Rule and its failure to maintain a minimum market value of publicly held shares (“MVPHS”) of US$5\nmillion for continued listing on the Nasdaq Global Market under Listing Rule 5450(b)(1)(C), respectively. The Company was given its first\n180-day extension, or until October 30, 2023 to regain compliance. On November 2, 2023, we received a letter from the Staff of the Listing\nQualifications Department of Nasdaq notifying the Company that since our listed securities did not have a closing bid price of at least\nUS$1.00 for a minimum of 10 consecutive business days during the 180 calendar days ended October 30, 2023, the Company has not regained\ncompliance with Nasdaq Listing Rule 5450(a)(1), which requires listed securities to maintain a minimum bid price of US$1.00 per share.\nAs described in the letter, the Company’s listed securities are subject to delisting from the Nasdaq Global Market unless the Company\ntimely submit an application to transfer its securities to the Nasdaq Capital Market, or requests a hearing before the Panel. On November\n30, 2023, the Company received a letter from the Panel, indicating the Panel’s decision to grant an exception period until January\n31, 2024 (the “Exception Period”), for the Company to effect the reverse stock split and thereafter regain compliance with\nthe Bid Price Rule, subject to the terms that (1) on or before November 30, 2023, the Company shall obtain its board of directors’\napproval for a reverse stock split at a ratio that is sufficient to regain and maintain long term compliance with the Bid Price Rule,\nand the Company shall provide an update to the Panel on the reverse stock split approval on December 1, 2023; (2) on or before January\n5, 2024, the Company shall effect a reverse stock split and, thereafter, maintain a $1 closing bid price for a minimum of ten consecutive\nbusiness days; and (3) on or before January 31, 2024, the Company shall have demonstrated compliance with the Bid Price Rule, by evidencing\na closing bid price of US$1.00 or more per share for a minimum of ten consecutive trading sessions. On November 30, 2023, the Company\nobtained its board of directors’ approval to amend the ratio of ADS representing its ordinary shares (now redesignated as Class\nA ordinary shares) (“ADS Ratio”) from one (1) ADS representing five (5) ordinary share (now redesignated as Class A ordinary\nshares) to one (1) ADS representing fifty (50) ordinary shares (now redesignated as Class A ordinary shares), and provided an update\nto the Panel on the ADS Ratio change approval on December 1, 2023. On December 15, 2023, the Company announced that it planned to change\nits ADS Ratio, par value US$0.0001 per share, from the current ADS Ratio of one (1) ADS to five (5) ordinary shares (now redesignated\nas Class A ordinary shares) to a new ADS Ratio of one (1) ADS to ten (10) ordinary shares (now redesignated as Class A ordinary shares)\n(the “ADS Ratio Change”). Effective January 3, 2024, the Company effected a 1-for-2 reverse stock split. On January 24, 2024,\nthe Company received a letter from the Panel, notifying the Company that it had regained compliance with the Bid Price Rule, as required\nby the Panel’s decision dated November 30, 2023. Accordingly, the Panel had determined to continue the listing of the Company’s\nsecurities on the Nasdaq and the matter was closed.\n\n \n\nOn May 7, 2024, the Company\nwas again notified by Nasdaq of its failure to maintain a minimum bid price of US$1.00 per share for 30 consecutive trading days under\nthe Bid Price Rule, and was given a compliance period of 180-day extension, or until November 4, 2024 to regain compliance. Effective\nSeptember 30, 2024, the Company effected a 1-for-10 reverse stock split, to change to a new ADS Ratio of one (1) ADS to one hundred (100)\nClass A ordinary shares. On October 14, 2024, the Company received a letter from the Nasdaq, notifying the Company that it had regained\ncompliance with the Bid Price Rule and this matter was closed.\n\n \n\n49\n\n \n\n \n\nOn August 29, 2024, the\nCompany was again notified by Nasdaq of its failure to maintain the MVPHS of US$5 million for 30 consecutive trading days for continued\nlisting on the Nasdaq Global Market under Listing Rule 5450(b)(1)(C), and was given 180 calendar days, or until February 25, 2025 to\nregain compliance. On February 27, 2025, the Company received a letter from the staff of Nasdaq notifying the Company that it had regained\ncompliance with the MVPHS requirement under Listing Rule 5450(b)(1)(C).\n\n \n\nOn November 18, 2025, the\nCompany was again notified by Nasdaq of its failure to maintain a minimum bid price of US$1.00 per share for 30 consecutive trading days\nunder the Bid Price Rule, and was given a compliance period of 180-day extension, or until May 18, 2026 to regain compliance. Effective\nApril 20, 2026, the Company effected a 1-for-10 reverse stock split, to change the ratio of its ADS to Class A ordinary shares from the\nprevious ratio of one (1) ADS to one hundred (100) Class A ordinary shares to a new ratio of one (1) ADS to one thousand (1,000) Class\nA ordinary shares. The Company intended to actively monitor the closing bid price of its securities between November 18, 2025 and May\n18, 2026.\n\n \n\nOn February 9, 2026, the\nCompany was again notified by Nasdaq of its failure to maintain the MVPHS of US$5 million for 30 consecutive trading days for continued\nlisting on the Nasdaq Global Market under Listing Rule 5450(b)(1)(C), and was given 180 calendar days, or until August 10, 2026 to regain\ncompliance. The Company intends to actively monitor its market value of publicly held shares between February 9, 2026 and August 10,\n2026.\n\n \n\nWe cannot assure you that\nwe will be able to meet Nasdaq’s other continued listing standards. If our ADSs are delisted by Nasdaq, and we are not able to\nlist our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market.\nIf this were to occur, then we could face significant material adverse consequences, including:\n\n \n\n●less\nliquid trading market for our securities;\n\n \n\n●more\nlimited market quotations for our securities;\n\n \n\n●determination\nthat our ADSs are a “penny stock” that requires brokers to adhere to more stringent\nrules and possibly resulting in a reduced level of trading activity in the secondary trading\nmarket for our securities;\n\n \n\n●more\nlimited research coverage by stock analysts;\n\n \n\n●loss\nof reputation; and\n\n \n\n●more\ndifficult and more expensive equity financings in the future.\n\n \n\n**Our and the VIEs’ business, financial\nperformance and results of operations could be adversely affected by the deterioration of the relation between China and the United States\nand global geopolitical relations.**\n\n \n\nThe relation between China\nand the United States is constantly changing. There has been a “trade war” between the two countries during recent years,\nthe United States imposed additional import tariffs on specified products imported from China. As a result, China has responded by imposing\nretaliatory tariffs on goods exported from the United States. Tensions exist in other areas such as political, social and health\nissues, including the disagreements in relation to the COVID-19 pandemic. In light of the ongoing tensions between China and the United\nStates, including the recent increase of tariff between the two countries in 2025, there is a risk that our and the VIEs’ business\nand our listing status may be adversely affected by trade restrictions, sanctions and other policies that may be implemented. As we and\nthe VIEs operate in China, any deterioration in political or trade relations might cause a public perception in the United States or\nelsewhere that might cause our and the VIEs’ education services to become less attractive. The United States lawmakers have introduced\nseveral bills intended to protect American investments in Chinese companies. The PWG criticized China’s failure to uphold international\ncommitment to transparency and called for recommendations to protect U.S. investors from China’s failure to allow audits of U.S.-listed\nChinese companies. The PWG may impact U.S.-listed Chinese companies if strict compliance with audit requirements and U.S. law or new\nlisting rules or governance standards were imposed. Furthermore, there have been media reports on deliberations within the U.S. government\nregarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. If any such deliberations were\nto materialize, the resulting legislation may have a material and adverse impact on the performance of the stocks of the China-based\nissuers listed in the United States. From October 1, 2025 to November 12, 2025, the federal government of the United States was in a\nshutdown as Congress failed to pass appropriations legislation for the 2026 fiscal year. In addition, the United States government funding\nof the SEC and other government agencies on which we may rely, is subject to the political process, including executive and congressional\npriorities, which is inherently fluid and unpredictable. Future government shutdowns could impact our ability to access the public markets\nand obtain necessary capital in order to properly capitalize and continue our operations.\n\n \n\n50\n\n \n\n \n\nIn addition, political tensions\nbetween the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, tensions over\nTaiwan, legislation passed by the U.S. Senate banning all imports from Xinjiang, sanctions imposed by the U.S. Department of Treasury\non certain officials of Xinjiang’s regional government, the Hong Kong Special Administrative Region and the central government\nof the PRC and the executive orders issued by former U.S. President Joe Biden in June 2021 that barring American investment into Chinese\nfirms with purported ties to defense or surveillance technology sectors, which was expanded on an earlier investment blacklist issued\nby U.S. President Donald J. Trump in his first presidency. Under President Donald J. Trump’s administration, causes of US-China\nfriction remains. Starting from February 2025, the U.S. government imposed a series of tariff increases on imports from China. Following\nthe announcement by President Trump on April 9, 2025, the tariffs on imports from China have been raised to 145%. In response to\nthe multiple rounds of tariff increases by the U.S. government, China also announced several rounds of retaliatory tariffs on goods imported\nfrom the U.S., raising the rate to 125%. Rising political tensions between China and the U.S. could reduce levels of trades, investments,\ntechnological exchanges and other economic activities between the two major economies, which would have a material adverse effect on\nglobal economic conditions and the stability of global financial markets. Ongoing political tensions could reduce levels of trades, investments,\ntechnological exchanges and other economic activities between the two major economies, which would have a material adverse effect on\nglobal economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on\nour and the VIEs’ business, prospects, financial condition and results of operations.\n\n \n\nChanges in political conditions\nand changes in the state of China-U.S. relations are difficult to predict and could adversely affect our and the VIEs’ business,\noperating results and financial condition. We cannot predict what effect any changes in China-U.S. relations may have on our ability\nto access capital or effectively operate our and the VIEs’ business in China. Moreover, any political or trade controversies between\nthe United States and China, whether or not directly related to our and the VIEs’ business, could cause investors to be unwilling\nto hold or buy our ADSs and consequently cause the trading price of our ADSs to decline.\n\n \n\nRecently there have been\nheightened tensions in geopolitical relations, not only between the United States and China, but also globally, such as the conflicts\ninvolving Russia, Ukraine, Gaza, Iran and the Middle East more broadly, and the accompanying international response including economic\nsanctions, have been disruptive to the world economy, with increased volatility in global financial and commodity markets, including\nhigher oil and gasoline prices, disruption to international trade and financial markets, all of which have a trickle-down effect on supply\nchains. There is substantial uncertainty about the extent to which these conflicts will continue to impact economic and financial affairs,\nas the numerous issues arising from the conflicts are in flux and there is the potential for escalation of the conflicts globally. Although\nwe do not have operations in these areas, there is no guarantee that these global tensions, sanctions, or potential retaliatory trade\nmeasures will not further reduce levels of international trade and investment or cause disruptions in global economy. Such developments\ncould have a material adverse effect on our business and results of operations.\n\n \n\n**The enforcement of the PRC Labor Contract\nLaw and other labor-related regulations in the PRC may adversely affect our and the VIEs’ business and results of operations.**\n\n \n\nThe Standing Committee of\nthe NPC enacted the Labor Contract Law in 2008, and amended it on December 28, 2012. The Labor Contract Law introduced specific\nprovisions related to fixed-term employment contracts, part-time employment, probationary periods, consultation with labor unions and\nemployee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining to enhance previous\nPRC labor laws. Under the Labor Contract Law, except where an employee under a fixed-term labor contract, an employer is obligated to\nsign a permanent labor contract with any employee who has worked for the employer for more than ten consecutive years. Further, if an\nemployee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting\ncontract, with certain exceptions, must have an unlimited term, subject to certain exceptions. In addition, the PRC governmental authorities\nhave continued to introduce various new labor-related regulations since the effectiveness of the Labor Contract Law.\n\n \n\nUnder the PRC Social Insurance\nLaw and the Administrative Measures on Housing Fund, employees are required to participate in pension insurance, work-related injury\ninsurance, medical insurance, unemployment insurance, maternity insurance, and housing funds and employers are required, together with\ntheir employees or separately, to pay the social insurance premiums and housing funds for their employees. As of December 31, 2025,\nwe and the VIEs had made social insurance contribution for the PRC-based employees based on the relevant PRC laws and regulations and\npractical measures. If we and the VIEs fail to, or are deemed to have failed to, make adequate social insurance and housing fund contributions\nin the future, we and the VIEs may be required to make supplemental contributions and/or subject to overdue fees and/or fines and our\nand the VIEs’ business, financial condition and results of operations may be adversely affected. See “*Item 4. Information\non the Company—B. Business Overview—Regulation—PRC Laws and Regulations Relating to Labor Protection.*”\n\n \n\nThese laws designed to enhance\nlabor protection tend to increase our labor costs. In addition, as the interpretation and implementation of these regulations are still\nevolving, our and the VIEs’ employment practices may not be at all times be deemed in compliance with the regulations. As a result,\nwe and the VIEs could be subject to penalties or incur significant liabilities in connection with labor disputes or investigations.\n\n** **\n\n51\n\n \n\n \n\n**The increases in labor costs in the PRC\nmay adversely affect our and the VIEs’ business and results of operations and we may face labor and employment related disputes\nand regulatory penalties.**\n\n \n\nChina’s economy has\nexperienced increases in labor costs in recent years and the overall economy and the average wages in China are expected to continue\nto grow. The average wage level for our employees has also increased in recent years. We expect that our employee costs, including salaries\nand welfare, will continue to increase. Unless we are able to pass on these increased labor costs to our students and their parents\nby increasing tuition, meal and accommodation service fees, our profitability and results of operations may be materially and adversely\naffected.\n\n \n\nIn addition, we have been\nsubject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory\nemployee benefits to designated government agencies for the benefit of our employees. Compared with its predecessors, the current Labor\nContract Law of the PRC imposes stricter requirements on employers in terms of signing labor contracts, minimum wages, paying remuneration,\ndetermining the term of employees’ probation and unilaterally terminating labor contracts, further increasing our labor-related\ncosts such as limiting our ability to terminate employment of some of our employees or otherwise change our employment or labor practices\nin a cost-effective manner. In addition, as the interpretation and implementation of labor-related laws and regulations are still developing,\nwe cannot assure you that our employment practices have been or will at all times be deemed in compliance with the labor-related laws\nand regulations in China. If we are subject to severe penalties in connection with labor disputes or government investigations, our and\nthe VIEs’ business, financial condition and results of operations will be adversely affected.\n\n** **\n\n**Seasonal and other fluctuations in our\nresults of operations could adversely affect the trading price of the ADSs.**\n\n \n\nOur net revenue and results\nof operations normally fluctuate from quarter to quarter as a result of seasonal variations in our and the VIEs’ business. Our\nstudents and their parents typically pay the tuition and other fees prior to the commencement of a semester, and we recognize revenues\nfrom the delivery of education services on a straight-line basis over the semester. The fluctuations may result in volatility or have\nan adverse effect on the market price of the ADSs. In addition, comparisons of our operating results between different periods within\na single financial year, or between the same periods in different financial years, may not be meaningful and should not be relied upon\nas good indicators of our performance.\n\n** **\n\n**We have limited insurance coverage.**\n\n \n\nWe maintain various insurance\npolicies to safeguard against certain risks and unexpected events, such as school liability insurance, student personal accident insurance\nand property insurance for vehicles. However, our insurance may not be sufficient in terms of amounts and scope. If we were held liable\nfor amounts and claims exceeding the scope or amounts covered by our insurance policies, or suffered losses from incidents for which\nwe do not currently maintain any insurance, we may be required to pay significant damages or suffer significant loss without being able\nto recover all or part of the amounts from insurance companies, and our and the VIEs’ business, results of operations and financial\ncondition may be materially and adversely affected. In addition, we do not have any business disruption insurances to cover losses caused\nby natural disasters or catastrophic events, which may significantly disrupt our and the VIEs’ business operations and incur substantial\ncosts on us, and may materially and adversely affect our and the VIEs’ business, financial condition and results of operations.\n\n** **\n\n**We and the VIEs may not be able to adequately\nprotect our intellectual property rights.**\n\n \n\nAs of December 31,\n2025, we had 46 and two registered trademarks in the PRC and Hong Kong, respectively. As of December 31, 2025, we and the VIEs had\nno trademarks pending registration in the PRC or Hong Kong. We and the VIEs obtained five computer software copyrights through the acquisition\nof Hangzhou Youxi by Liandu WFOE in February 2021. We believe our and the VIEs’ trademarks and other intellectual properties are\ncompetitive advantages and are important to our success to date and our future prospects. We have been investing resources to develop\nour own intellectual properties and we take prudent steps to protect our intellectual properties and know-how. However, the steps we\nhave taken to protect our intellectual property rights may not prevent the misappropriation of our proprietary information or deter independent\ndevelopment of similar technologies by others and halt any copycat attempts.\n\n \n\nIn addition, the legal regime\ngoverning intellectual property in China is still evolving and the level of protection of intellectual property rights and know-how in\nChina may differ from those in other more developed jurisdictions. Accordingly, protection of intellectual property rights in China might\nnot be as effective as in the United States or other western countries. Furthermore, policing unauthorized use of proprietary technology\nis difficult and expensive, and we might need to resort to litigation to enforce or defend our intellectual property rights or to determine\nthe enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in\nany such litigation, if any, could result in substantial costs and the diversion of resources and management’s attention.\n\n** **\n\n52\n\n \n\n \n\n**We and the VIEs may be subject to intellectual\nproperty infringement claims and our brand and reputation may be negatively affected.**\n\n \n\nFrom time to time, we and\nthe VIEs could face allegations of trademark, copyright, patent and other intellectual property rights infringement of third parties.\nSuch allegations of intellectual property right infringements could come from our competitors and third parties which operate in other\nindustries. In the event that we or the VIEs are sued by the intellectual property owners or licensees, or we or the VIEs receive a cease\nand desist letter or a court order regarding alleged infringements, we and the VIEs may have to discontinue to use the brand name and\nmay be subject to claims or other financial losses. In the event that any lawsuit is filed against us and the VIEs and such claims were\nto prevail, it could have an adverse effect on our and the VIEs’ business, financial conditions and results of operations. In addition,\nwe and the VIEs will have to invest in additional resources in establishing new brand names, which may take time and cause us significant\ncosts and efforts, which in turn affects our ability to develop and grow.\n\n** **\n\n**Capacity constraints or system disruptions\nto our computers or network, any cybersecurity incidents, or any unauthorized disclosure or manipulation of sensitive information relating\nto our students and teachers may expose us to litigation and damages or may adversely affect the reputation of our schools.**\n\n \n\nWe and the VIEs possess\nsensitive and private information about our students and teachers, such as names, addresses, contact numbers, ID numbers and exam scores\nof our students. We and the VIEs store these sensitive data primarily in computers located in our school offices. If any sensitive and\nprivate data about our students and teachers was lost, damaged or leaked due to capacity constraints or system disruptions to our computers\nor network, was obtained, disclosed or manipulated by unauthorized third parties through cybersecurity breaches to the computers or network\nof our schools or our providers, or was negligently misappropriated or disclosed by our staff, we and the VIEs may be sued and held liable\nfor damages, which may incur significant costs, negatively affect our reputation and divert management attention and other resources.\nAs a result, our and the VIEs’ business, financial condition and results of operations may be materially and adversely affected.\n\n** **\n\n**Risks Relating to Our Corporate Structure**\n\n** **\n\n**Our and the VIEs’ private education\nservice business is subject to extensive regulation in China. We and the VIEs may be subject to severe penalties if the PRC government\nfinds that the agreements that establish the structure for operating our and the VIEs’ business in China do not comply with applicable\nPRC laws and regulations.**\n\n \n\nOur and the VIEs’\nprivate education service business is subject to extensive regulations in China. The PRC government regulates various aspects of our\nand the VIEs’ business and operations, such as curriculum content, education materials, standards of school operations, student\nrecruitment activities, tuition and other fees. The laws and regulations applicable to the private education sector are subject to frequent\nchanges, and new laws and regulations may be adopted, some of which may have a negative effect on our and the VIEs’ business, either\nretrospectively or prospectively.\n\n \n\nWe are a Cayman Islands\ncompany and thus, we are classified as a foreign enterprise under the PRC laws. Foreign investment in the education industry in China\nis extensively regulated and subject to various restrictions. Under the Special Administrative Measures for Foreign Investment Access\n(Negative List) (2021), or the 2021 Special Administrative Measures, high school is restricted industries for foreign investors, and\nforeign investors are only allowed to invest in such industries in cooperative ways with domestic investors, provided that domestic investors\nplay a dominant role in such cooperation. Furthermore, under the Implementation Opinions of the MOE on Encouraging and Guiding the Entry\nof Private Capital in the Field of Education and Promoting the Healthy Development of Private Education, which was issued by the MOE\non June 18, 2012, the foreign portion of the total investment in a Sino-foreign joint venture high school should be below 50%. According\nto Regulations of the People’s Republic of China on Establishment and Operation of Sino-Foreign Cooperative Educational Institutions\nissued by the State Council on March 2, 2019, the foreign investor that participates in the establishment of a Sino-foreign cooperative\neducational institution shall be a foreign educational institution that possesses the relevant credentials and teaching quality. In addition,\npursuant to the Sino-foreign Vocational Skills Training Measures, the foreign investor in a Sino-foreign technical school must be a foreign\neducation institution or a foreign vocational skills training institution with relevant qualifications on education services and operating\nhigh-quality education. See “*Item 4. Information on the Company—B. Business Overview—Regulation—Regulations\non Sino-Foreign Cooperation in operating school*” for details.\n\n \n\n53\n\n \n\n \n\nAlthough foreign investment\nin high schools and vocational schools is not prohibited, based on the operation experience, our subsidiary Liandu WFOE in China is still\nineligible to independently or jointly invest and operate high schools and vocational schools, including Langfang School. To comply with PRC laws and regulations, our wholly-owned subsidiary, Liandu WFOE, has entered into a series of\ncontractual arrangements with the VIEs, pursuant to which we are regarded as the primary beneficiary of the VIEs in accordance with U.S.\nGAAP. For a description of these contractual arrangements, see “*Item 4. Information on the Company—C. Organizational Structure—Contractual\nArrangements.*” If the contractual arrangements that establish the structure for operating our and the VIEs’ business\nin China are found to violate any PRC laws or regulations in the future or fail to obtain or maintain any of the required permits or\napprovals, the relevant PRC regulatory authorities, including the Ministry of Education of People’s Republic of China, or the MOE,\nwhich regulates the education industry, the Ministry of Commerce, or MOFCOM, which regulates the foreign investment in China, and the\nCivil Affairs Bureau, which regulates the registration of schools in China, would have broad discretion in dealing with such violations,\nincluding:\n\n \n\n●revoking\nthe business and operating licenses of our PRC subsidiaries or VIEs;\n\n \n\n●discontinuing\nor restricting the operations of any related-party transactions among Liandu WFOE or VIEs;\n\n \n\n●imposing\nfines or other requirements with which we or Liandu WFOE or VIEs may not be able to comply;\n\n \n\n●requiring\nus to restructure our operations in such a way as to compel us to establish new entities, re-apply for\nthe necessary licenses or relocate our and the VIEs’ businesses, staff and assets;\n\n \n\n●imposing\nadditional conditions or requirements with which we may not be able to comply; or\n\n \n\n●restricting\nthe use of proceeds from our additional public offering or financing to finance our and the\nVIEs’ business and operations in China.\n\n \n\nAs of the date of the annual\nreport, similar ownership structure and contractual arrangements have been used by many China-based companies listed overseas, including\na number of education companies listed in the United States. To our knowledge, none of the fines or punishments listed above has been\nimposed on any of these public companies, including companies in the education industry. However, we cannot assure you that such fines\nor punishments will not be imposed on us or any other companies in the future. If any of the above fines or punishments is imposed on\nus, our and the VIEs’ business, financial condition and results of operations could be materially and adversely affected. If any\nof these penalties results in our inability to direct the activities of the VIEs and their respective subsidiaries that most significantly\nimpact their economic performance, and/or our failure to receive the economic benefits from the VIEs and their respective subsidiaries,\nwe may not be able to consolidate the VIEs and their respective subsidiaries in our financial statements in accordance with U.S. GAAP.\nHowever, we do not believe that such actions would result in the liquidation or dissolution of our company, our wholly-owned subsidiaries\nin China or the VIEs or their respective subsidiaries.\n\n** **\n\n**Uncertainties exist with respect to the\ninterpretation and implementation of the newly enacted Foreign Investment Law of the People’s Republic of China and how it may\naffect the viability of our current corporate structure, corporate governance, business, financial condition and results of operations.**\n\n \n\nOn March 15, 2019,\nthe National People’s Congress promulgated the Foreign Investment Law of PRC or the Foreign Investment Law, which came into effect\non January 1, 2020 and replaced the Law of the PRC on Chinese-Foreign Equity Joint Ventures, the Law of the PRC on Chinese-Foreign\nContractual Joint Ventures, and the Wholly Foreign-invested Enterprise Law. The Foreign Investment Law embodies an expected PRC regulatory\ntrend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts\nto unify the corporate legal requirements for both foreign and domestic investments. For instance, the Foreign Investment Law does not\nexplicitly classify contractual arrangements as a form of foreign investment.\n\n \n\n54\n\n \n\n \n\nConducting operations through\ncontractual arrangements has been adopted by many PRC-based companies, and has been adopted by our Company to establish control\nof the VIEs. Since the Foreign Investment Law is relatively new, uncertainties still exist in relation to its interpretation and implementation,\nand failure to take timely and appropriate measures to cope with the regulatory-compliance challenges could result in material and adverse\neffect on us. For instance, although the Foreign Investment Law does not explicitly classify contractual arrangement as a form of foreign\ninvestment, it still leaves a leeway for future laws and if future laws, administrative regulations or provisions stipulates contractual\narrangements as a way of foreign investment, then whether our contractual arrangements will be recognized as foreign investment, whether\nour contractual arrangements will be deemed to be in violation of the foreign investment access requirements and how our contractual\narrangements will be handled are uncertain. In the extreme case-scenario, we may be required to unwind the contractual arrangements and/or\ndispose relevant business operations, which could have a material and adverse effect on our and the VIEs’ business, financial condition\nand result of operations.\n\n** **\n\n**Our contractual arrangements may not be\nas effective in providing control over the VIEs as equity ownership.**\n\n \n\nWe have relied and\nexpect to continue to rely on our contractual arrangements to operate private education businesses in China. These contractual\narrangements may not be as effective in providing us with control over the VIEs as equity ownership. If we had equity ownership of\nthe VIEs, we would be able to exercise our rights as a direct or indirect shareholder to effect changes in the board of directors of\nthe VIEs, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, as\nthese contractual arrangements stand now, if the VIEs or their shareholders fail to perform their respective obligations under these\ncontractual arrangements, we cannot exercise shareholders’ rights to direct corporate actions as direct ownership would\notherwise entail. If the parties under such contractual arrangements refuse to carry out our directions in relation to everyday\nbusiness operations, we will be unable to maintain effective control over the operations of our schools in China. If we were to lose\neffective control over the VIEs, certain negative consequences would result, including our being unable to consolidate the financial\nresults of the VIEs with our financial results. Given that we derived substantially all of our revenue from the VIEs for 2023, 2024\nand 2025 and substantially all of our assets are held by the VIEs (including our permits and licenses, real estate leases, buildings\nand other educational facilities related to our schools), our financial position would be materially and adversely affected if we\nwere to lose effective control over the VIEs or if our contractual arrangements are invalidated or nullified. In addition, losing\neffective control over the VIEs may negatively affect our operational efficiency and brand image. Further, losing effective control\nover the VIEs may impair our access to their cash flow from operations, which may reduce our liquidity.\n\n \n\nIn addition, if the legal\nstructure and the contractual arrangements were found to be in violation of any existing or future PRC laws and regulations, we may be\nsubject to fines or other legal or administrative sanctions. If government actions cause us to lose our right to direct the activities\nof our affiliated entities or our right to receive substantially all the economic benefits and residual returns from our affiliated entities\nand we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate\nthe financial results of our affiliated entities.\n\n \n\nFurthermore, we are a holding\ncompany incorporated in the Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority\nof our operations through our subsidiaries established in China, the VIEs, and its subsidiaries in China. We entered into certain contractual\narrangements with the VIEs through Liandu WFOE, pursuant to which we are regarded as the primary beneficiary of the VIEs in accordance\nwith U.S. GAAP. Our ADSs listed on Nasdaq Global Market represents shares of our offshore holding company instead of shares of the VIEs\nor its subsidiaries in China. We may not be able to continue to satisfy the applicable requirements and rules with respect to such structure.\nIf we are unable to satisfy the Nasdaq Global Market criteria for maintaining our listing, our securities could be subject to delisting.\n\n** **\n\n**If the PRC government determines that the\ncontractual arrangements constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or\nare interpreted differently in the future, we may be unable to assert our contractual rights over the assets of the VIEs, and our ADSs\nor ordinary shares may decline in value or become worthless.**\n\n \n\nInvestors in the ADSs are\nnot purchasing equity securities of our subsidiaries that have substantive business operations in China but instead are purchasing equity\nsecurities of a Cayman Islands holding company. We are a Cayman Islands holding company that conducts all of its operations and operates\nits business in China through its PRC subsidiaries and VIEs through contractual agreements. Such structure involves unique risks to investors\nin the ADSs.\n\n \n\n55\n\n \n\n \n\nRecently, the PRC government\nadopted a series of regulatory actions and issued statements to regulate business operations in China, including those related to VIEs\nand private schools, which may challenge the validity of our contractual arrangements. In the event that the PRC government determines\nthat the contractual arrangements constituting part of the VIE structure do not comply with PRC regulations, or if these regulations\nchange or are interpreted differently in the future, we may be unable to assert our contractual rights over the assets of the VIEs, and\nour ADSs or ordinary shares may decline in value or become worthless.\n\n \n\nPrior to August 31,\n2021, we and the VIEs primarily operated primary and secondary school in Baiyun campus and Yijing campus—Featured Division of Lianwai\nSchool through a series of contractual arrangements with the VIEs. Under the 2021 Implementation Rules which took effect on September 1,\n2021, social organizations and individuals are prohibited from controlling a private school that provides compulsory education by means\nof, among others, merger, acquisition, and contractual arrangements, and a private school providing compulsory education is prohibited\nfrom conducting transactions with its related party. In particular, the prohibition over related party transactions has significantly\naffected the enforceability of the exclusive management services and business cooperation agreements among Liandu WFOE and Lianwai School\nproviding compulsory education. Therefore, we re-assessed our control over Lianwai School. Based on the relevant accounting standard\nin accordance with U.S. GAAP, we have concluded that we have lost control of Lianwai School since August 31, 2021, in view of the\nsignificant uncertainties and restrictions the 2021 Implementation Rules impose on our ability to direct the range of ongoing activities\nthat would most significantly impact the returns of Lianwai School. In light of such regulatory developments, on April 20, 2022,\nwe entered into an acknowledgment agreement of contractual agreements with Lianwai School and respective directors, to confirm all the\nterms of rights and obligations relating to Lianwai School and the directors appointed by the sponsor under the contractual arrangements\namong them, and agree among the parties that such arrangements shall have been terminated on August 31, 2021. To minimize disruptions\nto existing students enrolled in Lianwai School, we and the VIEs continued to offer essential services to the students. We deconsolidated\nLianwai School commencing from September 1, 2021 and presented it as a discontinued operation in current and comparative period\nfinancial statements.\n\n \n\nMeanwhile, we and the VIEs\nhave entered into a series of contractual arrangements with Qingtian International School, Lishui International School and Langfang School.\nThe contractual arrangements enable us to: (i) exercise effective control over the VIEs; (ii) receive substantially all of\nthe economic benefits of the VIEs in consideration for the services provided by us; and (iii) have an exclusive option to purchase\nall of the equity interests in the VIEs when and to the extent permitted under PRC law. Therefore, we are able to consolidate the financial\nresults of the VIEs in our consolidated financial statements in accordance with U.S. GAAP. However, as there are substantial uncertainties\nregarding the interpretation and application of PRC laws and regulations, we cannot assure you that the PRC government would agree that\nour corporate structure or any of the above contractual arrangements comply with current or future PRC laws or regulations. PRC laws\nand regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities may have\nbroad discretion in interpreting these laws and regulations.\n\n \n\nIf such regulations change\nor are interpreted differently, it may result in our inability to assert contractual control over the assets of our PRC subsidiaries\nor the VIEs that conduct all or substantially all of our operations. In the event we are unable to enforce the Contractual Arrangements\nor we experience significant delays or other obstacles in the process of enforcing these Contractual Arrangements, we may not be able\nto exert control over the VIEs and may lose control over the assets owned by the VIEs.\n\n** **\n\n**The owners of the VIEs may have conflicts\nof interest with us, which may materially and adversely affect our and the VIEs’ business, financial condition and results of operations.**\n\n \n\nOur control over the VIEs\nis based upon the contractual arrangements with the VIEs. The beneficial owners of the VIEs and the registered shareholders are also\nour controlling shareholders. Any of them may potentially have conflicts of interest with us and breach any of their contracts or undertakings\nwith us if it would further any of their own interests or if any of them otherwise acts in bad faith. We cannot assure you that when\nconflicts of interest arise between our Company and the beneficial owners of the VIEs, any of them will act completely in our interest\nor that the conflicts of interest will be resolved in our favor. In the event that such conflict of interest cannot be resolved in our\nfavor, we may have to rely on legal proceedings which may disrupt our and the VIEs’ business operations and subject us to uncertainties\nas to the outcome of such legal proceedings. As a result, our and the VIEs’ business, financial condition and results of operations\nmay be materially and adversely affected.\n\n** **\n\n56\n\n \n\n \n\n**We may have to incur additional costs and\nexpend substantial resources to enforce our contractual arrangements, temporarily or permanently lose control over our primary operations\nor lose access to our primary sources of revenue, if the VIEs or their respective ultimate shareholders fail to perform their obligations\nunder our contractual arrangements.**\n\n \n\nUnder the current contractual\narrangements, if any of the VIEs or their ultimate shareholders fails to perform its or her respective obligations under these contractual\narrangements, we may incur substantial costs and resources to enforce such arrangements and relying on legal remedies under PRC laws,\nincluding seeking specific performance or injunctive relief and claiming damages.\n\n \n\nSince our contractual arrangements\nare governed by PRC law and provide for the resolution of disputes through arbitration in China, these contracts would be interpreted\nin accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. Under PRC laws, rulings by arbitration\ntribunals are final and the parties to a dispute cannot appeal the arbitration award in any court based on the substance of the case.\nThe prevailing party may enforce the arbitration award by instituting arbitration award recognition proceedings with the competent PRC\ncourt. In addition, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event\nthat we are unable to enforce these contractual arrangements, we may not be able to exert effective control over the VIEs for an extended\nperiod of time or we may be permanently unable to exert control over the VIEs.\n\n \n\nIn addition to the enforcement\ncosts outlined above, during the course of disputes regarding such enforcement action, we may temporarily lose effective control over\nour schools in China, which may lead to loss of revenue or potentially lead to our having to incur additional costs and expend substantial\nresources to operate our and the VIEs’ business in the absence of effective enforcement of these contractual arrangements. If this\nwere to occur, our and the VIEs’ business, financial condition and results of operations may be materially and adversely affected\nand the value of our Shareholders’ investments in our Company may therefore decrease.\n\n** **\n\n**Certain terms of our contractual arrangements\nmay not be enforceable under PRC laws.**\n\n \n\nOur contractual arrangements\nprovide for the resolution of disputes through arbitration in accordance with the arbitration rules of the China International Economic\nand Trade Arbitration Commission in Beijing. Our contractual arrangements contain provisions to the effect that the arbitral body may\naward remedies over the shares and/or assets of the VIEs, injunctive relief and/or winding up of the VIEs. In addition, our contractual\narrangements contain provisions to the effect that courts in the Cayman Islands are empowered to grant interim remedies in support of\nthe arbitration pending the formation of an arbitral tribunal. Under PRC laws, an arbitral body granting any injunctive relief or provisional\nor final liquidation order to preserve the assets of or any equity interest in Chinese legal entities in case of disputes must submit\nthe application to the court in China. Therefore, such remedies may not be available to us, notwithstanding the relevant contractual\nprovisions contained in our contractual arrangements. PRC laws allow an arbitral body to award the transfer of assets of or an equity\ninterest in China in favor of an aggrieved party. In the event of non-compliance with such award, enforcement measures may\nbe sought from the court. However, the court may or may not support the award of an arbitral body when deciding whether to take enforcement\nmeasures. Under PRC laws, courts of judicial authorities in the PRC generally would not grant injunctive relief or the winding-up order\nagainst an entity as interim remedies to preserve the assets or shares in favor of any aggrieved party. As a result, in the event that\nthe VIEs or any of the registered shareholders breaches any of the contractual arrangements, we may not be able to obtain sufficient\nremedies in a timely manner, and our ability to exert effective control over the VIEs and conduct the education business could be materially\nand adversely affected.\n\n** **\n\n**Our exercise of the option to acquire school\nsponsor’s interests in Lishui International School and Langfang School may be subject to certain limitations and we may incur substantial\ncosts and spend significant resources to enforce the option under the contractual arrangements.**\n\n \n\nWe may incur substantial\ncosts on our part to exercise the option to acquire the school sponsor’s interests in Lishui International School and Langfang\nSchool. Pursuant to the Exclusive Call Option Agreements, if and when the PRC laws and regulations permit foreign investors to directly\nhold part or all of the equity interests of the VIEs and to engage in the restricted and prohibited business, Liandu WFOE or its designated\npurchaser may, at its discretion, purchase all or part of the direct and/or indirect equity interests (including the interests in Lishui\nInternational School) held by Lishui Mengxiang’s shareholders, or purchase all or part of the direct and/or indirect equity interests\n(including the interests in Langfang School) held by Beijing P.X.’s shareholders at the minimum price permitted by PRC laws and\nregulations, and the percentage of equity interests to be purchased by Liandu WFOE or its designated purchaser shall be no less than\nthe maximum limit permitted by the PRC laws and regulations in relation to the equity held by foreign investors. Such equity transfer\nprice is not expressly provided for in the current PRC laws and regulations and it is uncertain whether it may be further regulated by\nfuture PRC laws and regulations. As a result, the estimated costs associated with the purchase of the equity interests in the VIEs cannot\nbe ascertained as of the date of the annual report.\n\n \n\n57\n\n \n\n \n\nPursuant to the Exclusive\nCall Option Agreement with respect to Lishui International School, Lishui Mengxiang’s shareholders have irrevocably undertaken\nthat if the purchase price is determined at an amount exceeding RMB0, the difference shall be compensated fully by Lishui Mengxiang’s\nshareholders to Liandu WFOE or its designated entity. In the event that Liandu WFOE or its designated party acquires the equity interests\nof Lishui Mengxiang or Lishui International School and the relevant PRC authorities determine that the purchase price for acquiring such\ninterests in Lishui International School is below market value, the respective equity holder(s), Lishui Mengxiang’s shareholders\nor Lishui Mengxiang, may be required to pay taxes with reference to the market value such that the amount of tax may be substantial.\nHowever, pursuant to the Exclusive Call Option Agreement, all taxes and fees associated with the equity transfer shall be paid by Lishui\nMengxiang’s shareholders and/or the direct equity holders of the VIEs upon the transfer. We will determine the purchase target\nafter due consideration of the said tax duties and fees before exercising the call option. In the event that Lishui Mengxiang is deemed\nas the direct interest holder, it may be subject to such tax. Furthermore, the PRC tax authorities may impose late payment penalties\non Lishui Mengxiang for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially\nand adversely affected if Lishui Mengxiang’s tax liabilities increase or if it is required to pay late payment fees and other penalties.\n\n \n\nPursuant to the Exclusive\nCall Option Agreement with respect to Langfang School, Beijing P.X.’s shareholders have irrevocably undertaken that if the purchase\nprice is determined at an amount exceeding RMB0, the difference shall be compensated fully by Beijing P.X.’s shareholders to Liandu\nWFOE or its designated entity. In the event that Liandu WFOE or its designated party acquires the equity interests of Beijing P.X. or\nLangfang School and the relevant PRC authorities determine that the purchase price for acquiring such interests in Langfang School is\nbelow market value, the respective equity holder(s), Beijing P.X.’s shareholders or Beijing P.X., may be required to pay taxes\nwith reference to the market value such that the amount of tax may be substantial. However, pursuant to the Exclusive Call Option Agreement,\nall taxes and fees associated with the equity transfer shall be paid by Beijing P.X.’s shareholders and/or the direct equity holders\nof Beijing P.X. and Langfang School upon the transfer. We will determine the purchase target after due consideration of the said tax\nduties and fees before exercising the call option. In the event that Beijing P.X. is deemed as the direct interest holder, it may be\nsubject to such tax. Furthermore, the PRC tax authorities may impose late payment penalties on Beijing P.X. for the adjusted but unpaid\ntaxes according to the applicable regulations. Our financial position could be materially and adversely affected if Beijing P.X.’s\ntax liabilities increase or if it is required to pay late payment fees and other penalties.\n\n \n\nThe rights and obligations\nunder the Exclusive Call Option Agreement with respect to Qingtian International School were actually terminated on December 31, 2023\npursuant the Acknowledgment Agreement of Contractual Agreements of Qingtian Overseas Chinese Experimental High School dated April 2,\n2024. See “*Item 3. Key Information—Contractual Agreements with respect to Qingtian International School.*”\n\n** **\n\n**Our contractual arrangements may be subject\nto scrutiny by the PRC tax authorities, which may impose late payment fees and other penalties on us.**\n\n \n\nUnder PRC laws and regulations,\narrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We and the VIEs\ncould face material and adverse tax consequences if the PRC tax authorities determine that the Business Cooperation Agreement and Exclusive\nTechnical Service and Business Consulting Agreement entered into, among others, the VIEs and Liandu WFOE does not represent an arm’s-length price\nand adjust any of those entities’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could increase\nour tax liabilities. In addition, PRC tax authorities may form the view that our subsidiaries or the VIEs have improperly minimized their\ntax obligations and we and the VIEs may not be able to rectify any such incident within the limited timeline required by PRC tax authorities.\nAs a result, PRC tax authorities may impose late payment fees and other penalties on us for under-paid taxes, which may materially and\nadversely affect our and the VIEs’ business, financial condition and results of operations.\n\n** **\n\n58\n\n \n\n \n\n**Certain lease agreements of our leased\nproperties have not been registered with the relevant PRC government authorities as required by PRC law, which may expose us to potential\nfines.**\n\n \n\nAccording to the applicable\nPRC laws, parties to a lease agreement are required to file the lease agreements for registration and obtain property leasing filing\ncertificates for their leases. As of the date of the annual report, we and the VIEs have entered into certain lease agreements with third-party\nlandlords for using the school buildings, facilities and dormitories and have not registered any lease agreements under which we and\nthe VIEs are tenant. The failure to register the lease agreements will not affect the validity of such agreements. However, we and the\nVIEs may be required by relevant government authorities to file the lease agreements to complete the registration formalities and may\nbe subject to a fine for non-registration within the prescribed time limit, which may range from RMB1,000 to RMB10,000 per lease agreement.\nThe imposition of the above fines could require us to make additional efforts and/or incur additional expenses, any of which could adversely\naffect our and the VIEs’ business, financial condition and results of operations. The registration of these lease agreements to\nwhich we and the VIEs are a party requires additional steps to be taken by the respective other parties to the lease agreement which\nare beyond our control. We and the VIEs cannot assure you that the other parties to our lease agreements will be cooperative or that\nwe and the VIEs can complete the registration of these lease agreements and any other lease agreements that we and the VIEs may enter\ninto in the future.\n\n** **\n\n**We rely on dividends and other payments\nfrom Liandu WFOE to pay dividends and other cash distributions to our shareholders**\n\n \n\nOur Company is a holding\ncompany and our ability to pay dividends and other cash distributions to our Shareholders, service any debt we may incur and meet our\nother cash requirements depends significantly on our ability to receive dividends and other distributions from Liandu WFOE. The amount\nof dividends paid to us by Liandu WFOE depends solely on the service fees paid to Liandu WFOE from the VIEs. However, there are restrictions\nunder PRC laws for the payment of dividends to us by Liandu WFOE. For example, relevant PRC laws and regulations permit payments of dividends\nby Liandu WFOE only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.\nUnder PRC laws and regulations, Liandu WFOE is required to set aside at least 10% of its after-tax profits based on the PRC\naccounting standards each year to fund a statutory reserve, until the accumulated amount of such reserve has exceeded 50% of its registered\ncapital. Consequently, Liandu WFOE is restricted in its ability to transfer a portion of its net assets to us or any of our other subsidiaries\nin the form of dividends, loans or advances. The foregoing restrictions on the ability of Liandu WFOE to pay dividends to us and the\nlimitations on the ability of VIEs to pay service fees to Liandu WFOE could materially and adversely limit our ability to borrow money\noutside of China or pay dividends to holders of our shares.\n\n** **\n\n**Lishui International School, and the Vocational\nEducation Services Providers may be subject to limitations on their ability to operate private education or make payments to related\nparties.**\n\n \n\nBefore the promulgation\nof the Decision in 2016, the principal regulations governing private education in China are the Promotion Law and the Regulations on\nthe Implementation of the Non-State Education Promotion Law of the PRC. Under these regulations, a private school may elect to be a school\nthat does not require reasonable returns or a school that requires reasonable returns. A private school that does not require reasonable\nreturns cannot distribute dividends to its school sponsors. A private school whose school sponsor requires reasonable returns must consider\nfactors such as items and criteria for the school’s fees, the ratio of the funds used for education-related activities to the total\nfees collected, the school’s operational level and educational quality when determining the percentage of the school’s net\nincome that would be distributed as reasonable returns. However, the Promotion Law in force at the time did not provide a formula or\nguidelines for determining what constitutes a “reasonable return”. PRC laws and regulations require a private school the\nschool sponsor of which requires reasonable returns to make an annual appropriation of 25% of its after-tax income to its development\nfund prior to payments of reasonable returns, while in the case of a private school that does not require reasonable returns, this amount\nis at least 25% of the annual increase in the net assets of the school, if any. Such appropriations are required to be used for the construction\nor maintenance of the school or for the procurement or upgrading of educational equipment. Furthermore, none of the current PRC laws\nand regulations set forth any requirements or restrictions on a private school’s ability to operate its education business that\ndiffer based on whether such school’s sponsor requires reasonable returns.\n\n \n\n59\n\n \n\n \n\nOn September 1, 2017,\nthe Decision became effective. According to the Decision, private schools can be established as non-profit or for-profit entities, with\nthe exception of schools providing compulsory education, which can only be established as non-profit entities. According to the Decision,\nthere is no longer a distinction between schools of which the school sponsors require reasonable returns and schools of which the school\nsponsors do not require reasonable returns. The sponsor of a non-profit private-run school shall not gain proceeds from school running,\nand the cash surplus of the school shall be used for school running. There are uncertainties involved in interpreting and implementing\nthe Decision with respect to various aspects of the operations of a private school. Therefore, we cannot assure that the detailed rules\nand regulations to be promulgated by local governmental authorities would not impose restrictions on the VIEs’ ability to operate\nprivate schools or to make payments to Liandu WFOE under the contractual arrangements, which may have a material adverse impact on our\nand the VIEs’ business operations and prospects.\n\n** **\n\n**We may lose the ability to use and enjoy\ncertain important assets, which could reduce the size of our operations, impair our ability to generate revenue and materially affect\nthe market price of our shares, if any of the VIEs becomes the subject of a bankruptcy or liquidation proceeding.**\n\n \n\nWe and the VIEs currently\noperate in China through the contractual arrangements. As part of these arrangements, the VIEs hold a majority of the assets that are\nimportant to the operation of our and the VIEs’ business, including operating permits and licenses and other educational facilities\nrelated to our schools. Under the contractual arrangements, Ms. Fen Ye and Ms. Hong Ye may not unilaterally, without our consent,\ndecide to voluntarily liquidate the VIEs.\n\n \n\nIf any of these entities\ngoes bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we and the VIEs may be unable\nto continue some or all of the business activities, which could materially and adversely affect our and the VIEs’ business, financial\ncondition, results of operations and price of our shares. If any of the VIEs undergoes a voluntary or involuntary liquidation proceeding,\nits shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to\noperate our and the VIEs’ business.\n\n** **\n\n**Risks Relating to Doing Business in China**\n\n** **\n\n**Adverse changes in the PRC economic, political\nand social conditions as well as laws and government policies, may materially and adversely affect our and the VIEs’ business,\nfinancial condition, results of operations and growth prospects.**\n\n \n\nCOVID-19 pandemic had a\nsevere and negative impact on the Chinese and the global economy since 2019. Whether this will lead to a prolonged downturn in the economy\nis still unknown. Even before the outbreak of the COVID-19, the global macroeconomic environment was facing numerous challenges.\n\n \n\nThe economic, political\nand social conditions in the PRC differ from those in more developed countries in many respects, including structure, government involvement,\nlevel of development, growth rate, control of foreign exchange, capital reinvestment, allocation of resources, rate of inflation and\ntrade balance position. Before the adoption of its reform and opening up policies in 1978, the PRC was primarily a planned economy. In\nrecent years, the PRC government has been reforming the PRC economic system and government structure. For example, the PRC government\nhas implemented economic reform and measures emphasizing the utilization of market forces in the development of the PRC economy in the\npast four decades. These reforms have resulted in significant economic growth and social prospects. Economic reform measures, however,\nmay be adjusted, modified or applied inconsistently from industry to industry or across different regions of the country.\n\n \n\nWe cannot predict whether\nthe resulting changes will have any adverse effect on our current or future business, financial condition or results of operations and\nthe VIEs. Despite these economic reforms and measures, the PRC government continues to play a significant role in regulating industrial\ndevelopment, allocation of natural and other resources, production, pricing and management of currency, and there can be no assurance\nthat the PRC government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market\nfriendly.\n\n \n\nOur ability to successfully\nexpand our and the VIEs’ business operations in the PRC depends on a number of factors, including macro-economic and other market\nconditions, and credit availability from lending institutions. Stricter credit or lending policies in the PRC may affect our customers’\nconsumer credit or consumer banking business, and may also affect our ability to obtain external financing, which may reduce our ability\nto implement our expansion strategies. We cannot assure you that the PRC government will not implement any additional measures to tighten\ncredit or lending standards, or that, if any such measure is implemented, it will not adversely affect our future results of operations\nor profitability.\n\n \n\n60\n\n \n\n \n\nDemand for our and the VIEs’\nservices and our business, financial condition and results of operations may be materially and adversely affected by the following factors:\n\n \n\n●political\ninstability or changes in social conditions of the PRC;\n\n \n\n●changes\nin laws, regulations, and administrative directives or the interpretation thereof;\n\n \n\n●measures\nwhich may be introduced to control inflation or deflation; and\n\n \n\n●changes\nin the rate or method of taxation.\n\n \n\nThese factors are affected\nby a number of variables which are beyond our control.\n\n \n\n**The inherent uncertainties in the PRC legal\nsystem could materially and adversely affect us.**\n\n \n\nSince 1979, newly introduced\nPRC laws and regulations have significantly enhanced the protections of interest relating to foreign investments in China. However, since\nthese laws and regulations are relatively new and the PRC legal system continues to evolve rapidly, the interpretations of such laws\nand regulations may not always be consistent, and enforcement of these laws and regulations involves significant uncertainties, any of\nwhich could limit the available legal protections.\n\n \n\nIn addition, the PRC administrative\nand judicial authorities have significant discretion in interpreting, implementing or enforcing statutory rules and contractual terms,\nand it may be difficult to predict the outcome of administrative and judicial proceedings and the level of legal protection we and the\nVIEs may enjoy in the PRC. These uncertainties may affect our decisions on the policies and actions to be taken to comply with PRC laws\nand regulations, and may affect our ability to enforce our contractual or tort rights. In addition, the regulatory uncertainties may\nbe exploited through unmerited legal actions or threats in an attempt to extract payments or benefits from us. Such uncertainties may\ntherefore increase our operating expenses and costs, and materially and adversely affect our and the VIEs’ business and results\nof operations.\n\n \n\nIn particular, PRC laws\nand regulations regarding the private fundamental education industry have been rapidly evolving in recent years. The relevant PRC government\nauthorities may promulgate new laws and regulations or materialize draft laws and regulations or consultation papers regulating the private\nfundamental education industry in the future which may impose limitations and restrictions on our and the VIEs’ business operation.\nMoreover, developments in the private fundamental education industry may lead to changes in PRC laws, regulations and policies or in\nthe interpretation and application of existing laws, regulations and policies that may impose limitations and restrictions on the private\nfundamental education market players, including us, which could materially and adversely affect our and the VIEs’ business and\noperations.\n\n** **\n\n**You may face difficulties in effecting\nservice of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in this annual\nreport on Form 20-F based on foreign laws.**\n\n \n\nWe are an exempted company\nwith limited liability incorporated under the laws of the Cayman Islands. We and the VIEs conduct business in China, and our assets are\nlocated in China. In addition, most of our senior executive officers are PRC nationals and they have lived in China for a significant\nportion of time. As a result, it may be difficult or impossible for you to bring an action against us or against our management named\nin this annual report on Form 20-F in the United States in the event that you believe that your rights have been infringed under the\nU.S. federal securities laws or otherwise as it may be difficult for our shareholders to effect service of process upon us or those persons\ninside China. Furthermore, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts\nwith the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court\nin any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult\nor impossible. Even if you are successful in bringing an action of this kind, the laws of China may render you unable to enforce\na judgment against our assets or the assets of our directors and officers.\n\n \n\nAlthough there is no statutory\nenforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are\nnot a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction\nwill be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits\nof the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such\njudgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a\nliquidated sum for which judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, (e) was\nnot obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman\nIslands. However, there is uncertainty with regard to Cayman Islands law on whether judgments of courts of the United States predicated\nupon the civil liability provisions of the securities laws of the United States or any State will be determined by the courts of the\nCayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or\nenforce the judgment against a Cayman Islands company, such as our company. Because such a determination in relation to judgments obtained\nfrom U.S. courts under civil liability provisions of U.S. securities laws has not yet been made by a court of the Cayman Islands, it\nis uncertain whether such judgments would be enforceable in the Cayman Islands. A Cayman Islands court may stay enforcement proceedings\nif concurrent proceedings are being brought elsewhere.\n\n \n\n61\n\n \n\n \n\nThe recognition and enforcement\nof foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance\nwith the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made\nor on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United\nStates or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according\nto the PRC Civil Procedures Law, courts in the PRC will not ratify and enforce a foreign judgment or ruling against us or our directors\nand officers if they deemed that the basic principle of the laws of the PRC or the sovereignty, security or public interest of the State\nis violated. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United\nStates or the Cayman Islands.\n\n \n\nFurthermore, as a matter\nof law or practicality, it is generally difficult to pursue shareholder claims including securities law class actions and fraud claims\nin China, which are contrarily common in the United States. For example, you may experience significant legal and practical obstacles\nto obtaining necessary information for shareholder investigations or litigations outside China or with respect to foreign entities. Although\nthe local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another\ncountry or region to implement cross-border supervision and administration, so far, no such cooperation has been established with the\nUnited States securities regulatory authorities. In addition, Article 177 of the PRC Securities Law which became effective in March 2020\npromulgated that no overseas securities regulator is allowed to conduct investigation or evidence collection activities directly in the\nPRC. Therefore, without approval from the competent PRC securities regulators and relevant authorities, no organization or individual\nmay provide documents and materials relating to the securities activities to overseas entities. While detailed interpretation of or implementation\nrules under Article 177 has yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation\nor evidence collection activities within China may further increase the difficulties you face in protecting your interests.\n\n** **\n\n**PRC regulation of loans and direct investment\nby offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our initial public offering to make\nloans or additional capital contributions to our PRC subsidiaries or VIEs, which could materially and adversely affect our liquidity\nand our ability to fund and expand our and the VIEs’ business.**\n\n \n\nWe may (i) transfer\nthe net proceeds into Liandu WFOE to pay in their initially subscribed registered capital, and (ii) provide loans to Liandu WFOE\nand the VIEs. We may also establish and/or acquire new foreign-invested enterprises in China, pay in their registered capital and provide\nloans to them.\n\n \n\nWe plan to utilize part\nof the proceeds from our initial public offering by way of paying in the initially subscribed registered capital of Liandu WFOE. The\namount of funds in the form of capital contribution into Liandu WFOE and other PRC subsidiaries we establish in the future is subject\nto the amount of their initially subscribed registered capital. Currently, the initially subscribed registered capital of Liandu WFOE\nis US$1 million which will be fully paid before the deadline prescribed in its articles of association. If the initially subscribed\nregistered capital is not sufficient to allow our intended capital injection, under the current PRC laws and regulation, we may increase\nthe registered capital and complete the relevant procedures which include (i) altering our registration with local SAIC, and (ii) filing\nthe alteration report to local counterparts of the Ministry of Commerce of the PRC, or the MOFCOM. In addition, capital contribution\nto our schools must be approved by the Ministry of Civil Affairs of the PRC or the MCA or their respective local counterparts. As of\nthe date of the annual report, we have not increased, and plan to increase, the registered capital of Liandu WFOE to approximately US$15 million.\n\n \n\n62\n\n \n\n \n\nWe also plan to provide\nloans to Liandu WFOE and Lishui Mengxiang. According to the current PRC laws and regulations, the maximum amount of the loans provided\nto a PRC enterprise is up to three times (or the prevailing statutory multiples) of the borrower’s net assets set out in its latest\naudited financial statement. As a result, the loans we may provide to Liandu WFOE and Lishui Mengxiang are in an amount of up to two\ntimes (or the prevailing statutory multiples) of their respective net assets set out in their latest audited financial statements. Liandu\nWFOE and Lishui Mengxiang are required to file the information of their cross-border financing arrangements with local SAFE after the\nloan agreements are signed and before three working days prior to the fund withdrawal. In addition, for loans carrying a term of more\nthan one year, Liandu WFOE and Lishui Mengxiang may be required to complete the relevant filing and registration formalities to the NDRC.\nCurrently, the Company’s business operation is conducted through Liandu WFOE’s contractual arrangements with the VIEs and\nLiandu WFOE does not engage in its own business. As such, Liandu WFOE’s current net assets are in close approximation to its paid-up\nregistered capital. Pursuant to the relevant PRC laws and regulations, the estimated amount of loans we will provide to Liandu WFOE will\nbe approximately US$30 million which is 2 times of its current enlarged registered capital, assuming that Liandu WFOE’s net\nassets set out in its latest audited financial statements equals to its paid-up registered capital at the time when the loans are made.\n\n \n\nMoreover, we intend to establish\nnew foreign-invested enterprises in order to facilitate our and the VIEs’ business expansion and make additional investments in\nthe manners described above. However, we cannot assure you that our intended investments to these entities will always succeed as we\nplanned, or at all.\n\n \n\nOn March 30, 2015,\nthe SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested\nEnterprises, or Circular 19. Circular 19 stipulates that the use of capital by foreign-invested enterprises shall follow the principles\nof authenticity and self-use within the business scope of enterprises. According to the Notice of the State Administration of Foreign\nExchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or Circular 28, promulgated on October 23,\n2019 by SAFE, restrictions on the domestic equity investment by non-investment foreign-funded enterprises with their capital funds have\nbeen canceled. Non-investment foreign-funded enterprises are allowed to make domestic equity investment with their capital funds in accordance\nwith the law on the premise that the existing Negative List for foreign investment access are not violated and the projects invested\nthereby in China are true and compliant. However, SAFE and competent banks may have different interpretations of SAFE Circular 28, resulting\nin uncertainties in practice.\n\n \n\nThe aforementioned existing\nrestrictions and future restrictions may significantly limit our ability to transfer the net proceeds from our initial public offering\nor any other offering of additional equity securities to Liandu WFOE or the VIEs or invest in or acquire any other companies in the PRC.\n\n** **\n\n**Restrictions on currency exchange under\nPRC laws may limit our ability to convert cash derived from our operating activities into foreign currencies and may materially and adversely\naffect the value of your investment.**\n\n \n\nThe PRC government imposes\ncontrols on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We\nand the VIEs receive our revenue in Renminbi. Under our current corporate structure, our income is primarily derived from dividend payments\nfrom Liandu WFOE. Shortages in the availability of foreign currency may restrict the ability of Liandu WFOE to remit sufficient foreign\ncurrency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations, if any. Under\nexisting PRC foreign exchange regulations, conversion of Renminbi is permitted, without prior approval from the SAFE, for current account\ntransactions, including profit distributions, interest payments and expenditures from trade-related transactions, as long as certain\nprocedural requirements are complied with. However, any existing and future restrictions on currency exchange in China may limit our\nability to convert cash derived from our operating activities into foreign currencies to fund expenditures denominated in foreign currencies.\nIf the foreign exchange restrictions in China prevent us from obtaining U.S. dollars or other foreign currencies as required, we may\nnot be able to pay dividends in U.S. dollars or other foreign currencies to our Shareholders.\n\n \n\nTo the extent cash is generated\nin our PRC Subsidiaries or the VIEs, and may need to be used to fund operations outside of mainland China, such funds may not be available\ndue to limitations placed by the PRC government. Furthermore, to the extent assets (other than cash) in our or the VIEs’ business\nare located in the PRC or held by a PRC entity, the assets may not be available to fund operations or for other use outside of the PRC\ndue to interventions in or the imposition of restrictions and limitations on the ability of us and our subsidiaries and the VIEs to transfer\nassets by the PRC government. If certain PRC laws and regulations, including existing laws and regulations and those enacted or promulgated\nin the future were to become applicable to our Hong Kong Subsidiary in the future, and to the extent cash is generated in our Hong Kong\nSubsidiary, and to the extent assets (other than cash) in our business are located in Hong Kong or held by a Hong Kong entity and may\nneed to be used to fund operations outside of Hong Kong, such funds or assets may not be available due to interventions in or the imposition\nof restrictions and limitations on the ability of us and our subsidiaries and the VIEs to transfer funds or assets by the PRC government.\nFurthermore, there can be no assurance that the PRC government will not intervene or impose restrictions or limitations on our ability\nto transfer or distribute cash within its organization, which could result in an inability or prohibition on making transfers or distributions\nto entities outside of mainland China and Hong Kong and adversely affect its business. Saved as the foregoing limitations imposed by\nthe PRC government as described hereto, there are currently no limitations on our or our subsidiaries’ ability to transfer cash\nto investors.\n\n** **\n\n63\n\n \n\n \n\n**If we are classified as a PRC resident\nenterprise for PRC income tax purpose, holders of our shares may be subject to a PRC withholding tax upon the dividends payable by us\nand upon gain from the sale of our shares.**\n\n \n\nUnder the PRC Enterprise\nIncome Tax Law and its implementing regulations, an enterprise established outside China with its “de facto management body”\nwithin China is considered a “resident enterprise” in China and will be subject to the PRC enterprise income tax at the rate\nof 25% on its worldwide income. The tax authority will normally review factors such as the routine operation of the organizational body\nthat effectively manages the enterprise’s production and business operations, locations of personnel holding decision-making power,\nlocation of finance and accounting functions and properties of the enterprise. The Enterprise Income Tax Law’s implementation regulations\ndefine the term “de facto management bodies” as “establishments that carry out substantial and overall management and\ncontrol over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise.” The State Administration\nof Taxation issued the Notice of the State Administration of Taxation on Issues about the Determination of Chinese-Controlled Enterprises\nRegistered Abroad as Resident Enterprises on the Basis of Their Body of Actual Management, or the SAT Circular 82, on April 22,\n2009. SAT Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled\noffshore incorporated enterprise is located inside China, stating that only a company meeting all the criteria would be deemed having\nits de factor management body inside China.\n\n \n\nOne of the criteria is that\na company’s major assets, accounting books and minutes and files of its board and shareholders’ meetings are located or kept\nin the PRC. In addition, the SAT issued a bulletin on July 27, 2011, effective on September 1, 2011, providing more guidance\non the implementation of SAT Circular 82. This bulletin clarifies matters including residence status determination, post determination\nadministration and competent tax authorities. Although both SAT Circular 82 and the bulletin only apply to offshore enterprises controlled\nby PRC enterprises and there are currently no further detailed rules or precedents applicable to us governing the procedures and specific\ncriteria for determining “de facto management body” for companies like ours, the determination criteria set forth in SAT\nCircular 82 and the bulletin may reflect the SAT’s general position on how the “de facto management body” test should\nbe applied in determining the tax residency status of offshore enterprises and how the administration measures should be implemented\nwith respect to such enterprises, regardless of whether they are controlled by PRC enterprises or PRC individuals.\n\n \n\nAs all of our management\nmembers are based in China, it remains unclear how the tax residency rule will apply to our case. We do not believe that our Company,\nor any of our offshore subsidiaries, should be qualified as a “resident enterprise” as each of our offshore holding entities\nis a company incorporated outside the PRC and we are not an offshore enterprise controlled by PRC domestic enterprises. As holding companies,\neach of these entities’ corporate documents, minutes and files of the board and shareholders’ meetings are located and kept\noutside of the PRC. Therefore, we believe that none of our offshore holding entities should be treated as a “resident enterprise”\nwith its “de facto management bodies” located within China as defined by the relevant regulations for PRC EIT purposes. However,\nas the tax resident status of an enterprise is subject to determination by the PRC tax authorities, there are uncertainties and risks\nassociated with this issue.\n\n \n\nUnder the Enterprise Income\nTax Law and the Regulation on the Implementation of the Enterprise Income Tax Law, the non-resident enterprise as the shareholder\nof the PRC resident enterprise will be subject to a 10% (or 20% for an individual shareholder pursuant to the Individual Income Tax Law)\nwithholding tax upon dividends received from the PRC resident enterprise and on gain recognized with respect to the sale of shares of\nthe resident enterprise. Accordingly, if we are treated as a PRC resident enterprise, our shareholders that are non-resident enterprises,\nincluding the holders of the ADSs, may be subject to a 10% withholding tax upon dividends received from us and on gain recognized with\nrespect to the sale of our shares, unless such withholding tax is reduced by an applicable income tax treaty between China and the jurisdiction\nof the shareholder. Any such tax may reduce the returns on your investment in our shares.\n\n** **\n\n64\n\n \n\n \n\n**We face uncertainty with respect to indirect\ntransfers of equity interests in PRC resident enterprises by their non-PRC holding companies.**\n\n \n\nOn February 3, 2015,\nthe SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident\nEnterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of PRC taxable assets\nthrough offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal\ngroup restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to\nboth foreign transferor and transferee, or other person who is obligated to pay for the transfer, of taxable assets. On October 17,\n2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding at Source of Income\nTax of Non-resident Enterprise, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies\nthe practice and procedure of the withholding of non-resident enterprise income tax. Where a non-resident enterprise transfers its taxable\nassets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident\nenterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer\nto the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence\nof the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding\nor deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee\nor other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes which is not related to a PRC\nestablishment or place of business of a non-resident enterprise, currently at a rate of 10% for the transfer of equity interests in a\nPRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails\nto withhold the taxes and the transferor fails to pay the taxes.\n\n \n\nWe and the VIEs face uncertainties\nas to the reporting and other implications of certain future transactions where PRC taxable assets are involved, such as offshore restructuring,\nsale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company\nis transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions,\nunder SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises,\nour PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we and the VIEs\nmay be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors\nfrom whom we and the VIEs purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed\nunder these circulars, which may have a material adverse effect on our financial condition and results of operations.\n\n** **\n\n**Fluctuations in exchange rates may result\nin foreign currency exchange losses and may have a material adverse effect on your investment.**\n\n \n\nThe value of the Renminbi\nagainst the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and China’s\nforeign exchange policies, among other things. In 2005, the PRC government changed its decades-old policy of pegging the value\nof the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years.\nBetween July 2008 and June 2010, this appreciation halted and the exchange rate between Renminbi and the U.S. dollar remained within\na narrow band. Since June 2010, Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. With the development\nof the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government\nmay in the future announce further changes to the exchange rate system and we cannot assure you that Renminbi will not appreciate or\ndepreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S.\ngovernment policy may affect the exchange rate between Renminbi and the U.S. dollar in the future.\n\n \n\nSignificant revaluation\nof the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars\nwe receive from our initial public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would\nhave an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi\ninto U.S. dollars for the purpose of making payments for dividends on our ordinary shares or the ADSs or for other business purposes,\nappreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.\n\n \n\n65\n\n \n\n \n\nVery limited hedging options\nare available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any material hedging transactions\nin an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the\nfuture, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or\nat all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert\nRenminbi into foreign currency.\n\n** **\n\n**The preferential tax and other treatments\ncontemplated by us may change or may become unavailable.**\n\n \n\nThe 2021 Implementation\nRules state that private schools enjoy preferential taxation policies, in particular, non-profit private schools enjoy the same preferential\ntaxation policies with those for government-run schools. However, Langfang School no longer enjoy the\nprevious preferential policies on enterprise income tax since 2022, and the other preferential taxation policies shall remain unchanged\nfor the time being. We cannot assure you that the preferential tax and other treatments contemplated by us will not change or that they\nwill apply or continue to apply to Langfang School. The uncertainty in securing such preferential tax\ntreatments could affect our results of operations. See “*Item 10. Additional Information—E. Taxation—People’s\nRepublic of China Taxation.*”\n\n** **\n\n**PRC regulations relating to the establishment\nof offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability\nor penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase its\nregistered capital or distribute profits to us, or may otherwise adversely affect us.**\n\n \n\nThe SAFE promulgated the\nCircular on the Management of Offshore Investment and Financing and Round Trip Investment By Domestic Residents through Special Purpose\nVehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch prior to\nmaking capital contribution in a special purpose vehicle in connection with their establishment or control of an offshore entity established\nfor the purpose of overseas investment or financing with such PRC residents or entities’ legally owned assets or equity interests\nin domestic enterprises or offshore assets or interests. On February 13, 2015, SAFE issued Circular of the State Administration\nof Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, or Circular\n13, which took effect on June 1, 2015, pursuant to which, the power to accept SAFE registration was delegated from local SAFE to\nlocal qualified banks where the assets or interest in the domestic entity was located. In addition, such PRC residents or entities must\nupdate such registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information\n(including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers\nor exchanges of shares, or mergers or divisions. Chinese residents may undertake subsequent operations (including repatriation of profits\nand dividends) upon completion of such registration change formalities.\n\n \n\nMs. Fen Ye, Ms. Hong Ye\nand Ms. Fang Ye who are known to us as being PRC residents have completed the initial foreign exchange registrations as required by SAFE\nCircular 37 and Circular 13. The formalities for updating the registration to reflect the share transfer from Ms. Fang Ye to Ms. Fen\nYe has been submitted to the qualified bank, and the amendment registration has been completed. However, we cannot assure you that all\nexisting and future shareholders or beneficial owners of ours who are PRC residents or entities will be able to update and/or obtain\nany applicable registrations or approvals required by SAFE regulations. Failure by such shareholders or beneficial owners to comply with\nSAFE regulations, or failure by us to amend the foreign exchange registrations of Liandu WFOE, could subject us to fines or legal sanctions,\nrestrict our overseas or cross-border investment activities, limit Liandu WFOE’s ability to make distributions or pay dividends\nto us or affect our ownership structure, which could adversely affect our and the VIEs’ business and prospects.\n\n** **\n\n66\n\n \n\n \n\n**If there are any failures in complying\nwith PRC regulations with respect to the registration requirements for employee stock incentive plans, the PRC plan participants or we\nmay be subject to fines and other legal or administrative sanctions.**\n\n \n\nWe, the VIEs and our and\nthe VIEs’ directors, senior management and other employees who are PRC residents that have been granted options will be subject\nto the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan\nof Overseas Publicly Listed Company, or SAFE Circular 7, issued by SAFE in February 2012, according to which, employees, directors,\nsupervisors and other management members participating in any stock incentive plan of an overseas publicly listed company who are PRC\nresidents are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed\ncompany, and complete certain other procedures. See “*Item 4. Information on the Company—B. Business Overview—Regulation—PRC\nLaws and Regulations Relating to Foreign Investment in Education—Regulations on Stock Incentive Plans.*”\n\n \n\nWe will try our best efforts\nto comply with these requirements upon the granting of the options under our 2020 Equity Incentive Plan. However, we cannot assure you\nthat they can successfully register with SAFE in full compliance with the rules. If the participants or we fail to complete the SAFE\nregistrations, the participants or we may be subject to fines and legal sanctions. It will adversely affect our ability to pay under\nthe share incentive plans or receive dividends or sales proceeds related thereto, or our ability to contribute additional capital into\nour wholly-foreign owned enterprises in China and limit our wholly-foreign owned enterprises’ ability to distribute dividends to\nus. Uncertainties also exist in our ability to adopt additional share incentive plans for our directors and employees under PRC law\nbecause of the regulatory restrictions.\n\n** **\n\n**Any actions by the Chinese government,\nincluding any decision to intervene or influence the operations of our PRC subsidiaries or the VIE or to exert control over any offering\nof securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations\nof our PRC subsidiaries or the VIE, may limit or completely hinder our ability to offer or continue to offer securities to investors,\nand may cause the value of such securities to significantly decline or be worthless.**\n\n \n\nThe Chinese government has\nexercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state\nownership. The ability of our subsidiaries and the VIEs to operate in China may be impaired by changes in its laws and regulations, including\nthose relating to education, taxation, land use rights, foreign investment limitations, and other matters.\n\n \n\nThe central or local governments\nof China may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and\nefforts on our part to ensure that our PRC subsidiaries and the VIEs comply with such regulations or interpretations. As such, our PRC\nsubsidiaries and the VIEs may be subject to various government actions and regulatory interference in the provinces in which they operate.\nThey could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and\ngovernment sub-divisions. They may incur increased costs necessary to comply with existing and newly adopted laws and regulations or\npenalties for any failure to comply.\n\n \n\nOn February 17, 2023, the\nCSRC issued the Trial Measures, which became effective on March 31, 2023. On the same date, the CSRC circulated the Guidance Rules and\nNotice. These new regulations propose to establish a new filing-based regime to regulate overseas offerings and listings by Chinese domestic\ncompanies.\n\n \n\nUnder the Trial Measures\nand the Guidance Rules and Notice, domestic companies conducting overseas securities offering and listing activities, either in direct\nor indirect form, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working\ndays following its submission of initial public offerings or listing application. Since the date of effectiveness of the Trial Measures,\nthe domestic enterprises falling within the scope of filing that have been listed overseas or met the following circumstances are existing\nenterprises: before the effectiveness of the Trial Measures, the application for indirect overseas issuance and listing has been agreed\nby the overseas regulators or overseas stock exchanges (such as having passed the hearing on the Hong Kong market or registration become\neffective as agreed on the U.S. market, etc.), and it is not required to perform issuance and listing supervision procedures of the overseas\nregulators or overseas stock exchanges (such as rehearing on the Hong Kong market, etc.), and the overseas issuance and listing will\nbe completed by September 30, 2023. Existing enterprises are not required to file immediately, and filing should be made as required\nif they involve refinancing and other filing matters. In such cases, where an existing enterprise issues securities in the same overseas\nmarket after its initial public offering and listing overseas, it shall file with the CSRC within three working days of completion of\nissuance; where an existing enterprise issues securities in other overseas markets after its initial public offering and listing overseas,\nit shall file with the CSRC within three working days of submission of application documents for initial public offering and listing\noverseas.\n\n \n\n67\n\n \n\n \n\nAs advised by our PRC legal\ncounsel, Beijing DeHeng Law Offices, since we are existing enterprises, we are not required to fulfill the filing procedures for our\ninitial public offering in 2020.\n\n \n\nIf the CSRC or any other\nPRC regulatory body subsequently implements rules that would require us to file with or obtain approvals of the CSRC or other governmental\nbodies for our initial public offering in 2020, we may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies,\nwhich may include fines and penalties on our operations in China, limitations on our operating privileges in China, delays in or restrictions\non the repatriation of the proceeds from any such offering into the PRC, restrictions on or prohibition of the payments or remittance\nof dividends by our subsidiaries in China, or other actions that could have a material and adverse effect on our and the VIEs’\nbusiness, reputation, financial condition, results of operations, prospects, as well as the trading price of the ADSs.\n\n \n\nHowever, we have completed\nthe filing procedures with the CSRC on August 20, 2024 for our 2023 Private Placement. Besides, we have submitted the filing documents\nto the CSRC in respect of 2024 Private Placement. As of the date of the annual report, we have not received any notice or determination\nfrom the CSRC confirming that we have completed our filing procedures for our 2024 Private Placement. It is uncertain whether such filing\ncan be completed or how long it will take to complete such filing. Any delay in completing such filing procedures might affect the other\nfiling procedures with respect to other applicable circumstances, under the Trial Measures in the future, such as the secondary listing,\nprimary listing, spin-off listing and making overseas offering and listing anew after being delisted from an overseas exchange, which\nmight affect our future public market financings and capital market transactions.\n\n \n\nAccordingly, government\nactions in the future, including any decision to intervene or influence the operations of our PRC subsidiaries or the VIEs at any time,\nor to exert control over an offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us\nto make material changes to the operations of our PRC subsidiaries or the VIEs, may limit or completely hinder our ability to offer or\ncontinue to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless.\n\n** **\n\n**Implementation of the Law of the PRC on\nSafeguarding National Security in Hong Kong involves uncertainty, and the recent policy pronouncements by the PRC government regarding\nbusiness activities of U.S.-listed PRC businesses may negatively impact Lixiang’s existing and future operations in Hong Kong.**\n\n \n\nOn June 30, 2020, the\nStanding Committee of the NPC promulgated the Law of the PRC on Safeguarding National Security in Hong Kong. The interpretation of the\nLaw of the PRC on Safeguarding National Security in Hong Kong involves a degree of uncertainty. Recently, the PRC government announced\nthat it would step up supervision of overseas listed PRC businesses. Under the new measures, the PRC government will enhance regulation\nof cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance,\nmarket manipulation and insider trading. The PRC government will also check sources of funding for securities investment and control\nleverage ratios. The PRC government has also opened a probe into several U.S.-listed technology companies focusing on anti-monopoly,\nfinancial technology regulation and more recently, with the passage of the PRC Data Security Law, how companies collect, store, process\nand transfer personal data. Currently these laws (other than the Law of the PRC on Safeguarding National Security in Hong Kong) are expected\nto apply to China domestic businesses, rather than businesses in Hong Kong which operate under a different set of laws from China. However,\nthere can be no assurance that the government of Hong Kong will not enact similar laws and regulations applicable to companies operating\nin Hong Kong.\n\n \n\nWe and the VIEs conduct\nbusiness operations in the PRC although we have established a subsidiary in Hong Kong, Hong Kong Mengxiang Education Development Group\nLimited, as a holding company to facilitate overseas securities offering. Although none of our or the VIEs’ business activities\nappears to be within the current targeted areas of concern mentioned above by the PRC government as our Hong Kong subsidiary is a holding\ncompany with no business operations as of the date of the annual report, given the PRC government’s significant oversight over\nthe conduct of business operations in China and in Hong Kong, and in light of the PRC government’s recent extension of authority\nnot only in China but into Hong Kong, there are risks and uncertainties which we cannot foresee for the time being. For example, the\nPRC government may pressure the government of Hong Kong to enact similar laws and regulations to those in the PRC, which may seek to\nexert control over offerings conducted overseas by Hong Kong companies. If any or all of the foregoing were to occur, and if our Hong\nKong subsidiary elects to carry out substantive business activities in the future, it could lead to a material adverse change in Lixiang’s\noperations and limit or hinder our ability to offer securities to overseas investors or remain listed in the U.S., which could cause\nthe value of our ADSs to significantly decline or become worthless.\n\n** **\n\n68\n\n \n\n \n\n**Based on the recent development of PRC\nlaw, there is significant uncertainty about the application and interpretation of the Law on the Promotion of Private Education, the\n2021 Implementation Rules and their detailed implementation rules and regulations. We and the VIEs may be subject to significant limitations\non our ability to engage in the private education business, acquire private schools, or receive payments from the VIEs and may otherwise\nbe materially and adversely affected by changes in PRC laws and regulations.**\n\n \n\nPursuant to the Law on the\nPromotion of Private Education, sponsors of private schools may choose to establish schools as either non-profit or for-profit schools.\nSponsors are not permitted to establish for-profit schools that provide compulsory education services. Sponsors of for-profit private\nschools are entitled to retain the profits from their schools and any operating surplus may be allocated to the sponsors pursuant to\nthe PRC company law and other relevant laws and regulations. Sponsors of non-profit private schools are not entitled to any distribution\nof profits from their schools and all revenue must be used for the operation of the schools.\n\n \n\nAs a holding company, our\nability to generate profits, pay dividends and other cash distributions to our shareholders under the Law on the Promotion of Private\nEducation, the 2021 Implementation Rules and other relevant laws and regulations are affected by many factors, including whether our\nschools are characterized as for-profit or non-profit schools, the profitability of our schools, and our ability to receive dividends\nand other distributions from our PRC subsidiary, Liandu WFOE, which in turn depends on the service fees paid to Liandu WFOE from the\nVIEs. Liandu WFOE has respectively entered into exclusive management services and business cooperation agreements with each of the VIEs,\nMs. Fen Ye and Ms. Hong Ye, as the shareholders of the VIEs, pursuant to which Liandu WFOE has the exclusive right to provide\ncomprehensive technical and business support services to the VIEs. As of August 2021, our right to receive the service fees from Lianwai\nSchool and other affiliated entities did not, to our knowledge, contravene any PRC laws and regulations then in force. Likewise, the\npayment of service fees under our contractual arrangements should not be regarded as the distribution of returns, dividends or profits\nto the sponsors of our schools under the PRC laws and regulations then in force.\n\n \n\nHowever, according to the\n2021 Implementation Rules, private schools providing compulsory education shall not conduct any transaction with any related party. As\na result, the clauses or provisions of the exclusive management services and business cooperation agreements, in relation to related\nparty transactions between Lianwai School and Liandu WFOE, are not legally enforceable since September 1, 2021. Therefore, we executed\nan acknowledgment agreement on April 20, 2022 to confirm all the terms of rights and obligations relating to Lianwai School and\nthe directors appointed by the sponsor under the contractual arrangements in relation to Lianwai School, which shall be terminated on\nAugust 31, 2021. Since September 1, 2021, we have stopped transacting with Lianwai School. However, to keep Lianwai School\nproviding compulsory education in operations, we continued to provide essential services without recognizing any revenues relating to\nsuch activities to schools providing compulsory education in our discontinued operations, which are key to the normal daily operation\nof it. As of the date of the annual report, schools providing compulsory education to which we continue to provide services have not\nreceived any further rectification requirements or penalty notices from the relevant competent authorities, and the possibility and impact\nof illegal risks are still unable to be assessed clearly. We are continuously assessing the impact of relevant regulations on our and\nthe VIEs’ business and making necessary measures and efforts to comply with the requirements under these regulations and implementations.\n\n \n\nFurthermore, we and the\nVIEs entered into a series of contractual arrangements with respect to the operation of Qingtian International School, Lishui International\nSchool and Langfang School. The contractual arrangements enable us to receive substantially all of the economic benefits of the VIEs\nin consideration for the services provided by us. However, as there are substantial uncertainties regarding the interpretation and application\nof PRC laws and regulations, and we cannot assure you that the PRC government would agree that our corporate structure or any of the\nabove contractual arrangements comply with current or future PRC laws or regulations.\n\n \n\nIn particular, the validity\nof our contractual arrangements may be challenged, and our corporate structure may need to be restructured to comply with the new regulations,\nwhich may be time-consuming and expensive and impose additional restrictions on our and the VIEs’ business expansion and may further\nadversely affect our and the VIEs’ business operations and results of operations. See *“—Risks Related to Our Corporate\nStructure—Our and the VIEs’ private education service business is subject to extensive regulation in China. We and the VIEs\nmay be subject to severe penalties if the PRC government finds that the agreements that establish the structure for operating our and\nthe VIEs’ business in China do not comply with applicable PRC laws and regulations*.”\n\n** **\n\n69\n\n \n\n \n\n**Our subsidiaries and affiliated entities\nin China are subject to restrictions on making dividends and other payments to us.**\n\n \n\nWe are a holding company\nand rely principally on dividends paid by our subsidiaries in China for our cash needs, including paying dividends and other cash distributions\nto our shareholders to the extent we choose to do so, servicing any debt we and the VIEs may incur and paying our operating expenses.\nThe income for our PRC subsidiaries, especially Liandu WFOE, in turn depends on the service fees paid by the VIEs. Current PRC regulations\npermit our subsidiaries in China to pay dividends to us only out of their accumulated profits, if any, determined in accordance with\nChinese accounting standards and regulations. Under the applicable requirements of PRC law, our PRC subsidiaries may only distribute\ndividends after they have made allowances to fund certain statutory reserves. These reserves are not distributable as cash dividends.\nPursuant to the Law on the Promotion of Private Education, sponsors of for-profit private schools are entitled to retain the profits\nfrom their schools and the operating surplus may be allocated to the sponsors pursuant to the PRC company law and other relevant laws\nand regulations. Sponsors of non-profit private schools are not entitled to any distribution of profits from their schools and all revenue\nmust be used for the operation of the schools. According to 2021 Implementation Rules, a non-profit private school should allocate no\nless than 10% of its audited annual non-restricted net asset increase, or a for-profit private school should allocate no less than 10%\nof its audited annual net income, to its development, respectively. In addition, prior to the specific Implementation Rules of the Law\non the Promotion of Private Education being promulgated by the State Council and other relevant regulations promulgated by other local\nand regional governments, at the end of each fiscal year, each of our schools that are private schools in China is required to allocate\na certain amount to its development fund for the construction or maintenance of the school properties or purchase or upgrade of school\nfacilities. In particular, our schools that require reasonable returns must allocate no less than 25.0% of their annual net income, and\nour schools that do not require reasonable returns must allocate no less than 25.0% of their annual increase in the net assets of the\nschool for such purposes. However, the relevant authorities have yet to promulgate any detailed implementation rules and regulations\nunder the 2021 Implementation Rules. We remain uncertain as to the timing and substance of the rules under the Law on the Promotion of\nPrivate Education and the 2021 Implementation Rules to be promulgated, and how such rules will impact our operation. Furthermore, if\nour subsidiaries or the VIEs in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their\nability to pay dividends or make other payments to us. Any such restrictions may materially affect such entities’ ability to make\ndividends or make payments, in service fees or otherwise, to us, which may materially and adversely affect our and the VIEs’ business,\nfinancial condition and results of operations.\n\n** **\n\n**Failure to comply with governmental regulations\nand other legal obligations concerning data protection and cybersecurity may materially and adversely affect our and the VIEs’\nbusiness, as we and the VIEs routinely collect, store and use data during the conduct of the business.**\n\n \n\nWe and the VIEs routinely\ncollect, store and use data during our operations. We and the VIEs are subject to PRC laws and regulations governing the collecting,\nstoring, sharing, using, processing, disclosure and protection of data on the Internet and mobile platforms as well as cybersecurity.\n\n \n\nThe PRC Cybersecurity Law\nwhich promulgated in November 7, 2016 and became effective in June 1, 2017 provides that personal information and important\ndata collected and generated by operators of critical information infrastructure in the course of their operations in the PRC should\nbe stored in the PRC, and the law imposes heightened regulation and additional security obligations on operators of critical information\ninfrastructure.\n\n \n\nOn June 10, 2021, the\nStanding Committee of the NPC promulgated the Data Security Law which took effect on September 1, 2021. The Data Security Law provides\nfor data security and privacy obligations of entities and individuals carrying out data activities, prohibits entities and individuals\nin China from providing any foreign judicial or law enforcement authority with any data stored in China without approval from competent\nPRC authority, and sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations,\nincluding rectification order, warning, fines of up to RMB10 million, suspension of relevant business, and revocation of business\npermits or licenses.\n\n \n\nOn August 20, 2021,\nthe Standing Committee of the NPC adopted the Personal Information Protection Law, which came into force as of November 1, 2021.\nThe Personal Information Protection Law includes the basic rules for personal information processing, the rules for cross-border provision\nof personal information, the rights of individuals in personal information processing activities, the obligations of personal information\nprocessors, and the legal responsibilities for illegal collection, processing, and use of personal information.\n\n \n\n70\n\n \n\n \n\nOn December 28, 2021,\nthirteen PRC governmental and regulatory agencies, including the CAC published the Measures for Cyber Security Review which further restates\nand expands the applicable scope of the cybersecurity review. Pursuant to the Measures for Cyber Security Review, network platform operators\ngrasping the personal information of more than 1 million users must apply with the Cybersecurity Review Office of CAC for a cybersecurity\nreview in order to pursue a foreign listing, and operators of critical information infrastructure purchasing network products and services\nand online platform operators engaging in data processing activities which affect or may affect national security of the PRC are also\nobligated to apply for a cybersecurity review. Although the Measures for Cyber Security Review provides no further explanation on the\nextent of “network platform operator”, “affect or may affect national security” or “foreign” listing,\nas advised by our PRC legal counsel, Beijing DeHeng Law Offices, as of the date of this annual report, we do not need to apply for a\ncybersecurity review pursuant to the above regulation to maintain the listing status of our ADSs on the Nasdaq, given that (i) we\nare not in possession of personal information of over one million users and it is also very unlikely that it will reach such threshold\nin the near future; and (ii) as of the date of the annual report, we have not received any notice or determination from applicable\nPRC governmental authorities identifying us as a critical information infrastructure operator or an online platform operator engaging\nin relevant data processing activities which affect or may affect national security of the PRC. However, we cannot guarantee that we\nwill not be subject to cybersecurity review in the future. During such review, we and the VIEs may be required to suspend our operation\nexperience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our company\nand diversion of our managerial and financial resources.\n\n \n\nWe and the VIEs currently\nhave less than 200 subscribers on our digital platform such as WeChat public account. We and the VIEs have no registered users on our\nwebsite. We and the VIEs only require and obtain user information after users register with us. Although we believe we and the VIEs currently\nare not required to obtain clearance from the CAC for our offering under the Measures for Cyber Security Review or the Opinions on Strictly\nCracking Down on Illegal Securities Activities, we and the VIEs face uncertainties as to the interpretation or implementation of such\nregulations or rules, and if required, whether such clearance can be timely obtained, or at all.\n\n** **\n\n**The opinions recently issued by the General\nOffice of the Central Committee of the Communist Party of China and the General Office of the State Council may subject us to additional\ncompliance requirement in the future.**\n\n \n\nThe General Office of the\nCentral Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely\nCracking Down on Illegal Securities Activities According to Law,” or the “Opinions,” which were made available to the\npublic on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities and\nthe supervision on overseas listings by China-based companies. These Opinions proposed to take effective measures, such as promoting\nthe construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and\nthe demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules to be enacted\nmay subject us to additional compliance requirement in the future. The official guidance to act upon, and interpretation of the Opinions,\nremain unclear in several respects at this time. Therefore, we cannot assure you that we and the VIEs will remain fully compliant with\nall new regulatory requirements of the Opinions or any future implementation rules on a timely basis, or at all.\n\n** **\n\n**Risks Relating to Our ADSs**\n\n** **\n\n**The trading price of our ADSs may be volatile,\nwhich could result in substantial losses to you.**\n\n \n\nThe trading price of our\nADSs has ranged from US$1.83 to US$500.8 in 2025. The trading prices of our ADSs are likely to be volatile and could fluctuate\nwidely due to factors beyond our control. This may happen due to broad market and industry factors, such as performance and fluctuation\nin the market prices or under performance or deteriorating financial results of other listed companies based in China. The securities\nof some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial\nprice declines in the trading prices of their securities. The trading performances of other Chinese companies’ securities may affect\nthe attitudes of investors towards China-based and U.S.-listed companies, which consequently may affect the trading performance of our\nADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance\npractices or fraudulent accounting, corporate structure or matters of other Chinese companies may also negatively affect the attitudes\nof investors towards Chinese companies in general, including us, regardless of whether we and the VIEs have conducted any inappropriate\nactivities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are not related\nto our operating performance, which may have a material and adverse effect on the trading price of our ADSs.\n\n \n\n71\n\n \n\n \n\nIn addition to the above\nfactors, the price and trading volume of our ADSs may be highly volatile due to multiple factors, including the following:\n\n \n\n●regulatory\ndevelopments affecting us or our industry;\n\n \n\n●variations\nin our revenue, profit, and cash flow;\n\n \n\n●changes\nin the economic performance or market valuations of other education service providers;\n\n \n\n●actual\nor anticipated fluctuations in our quarterly results of operations and changes or revisions\nof our expected results;\n\n \n\n●changes\nin financial estimates by securities research analysts;\n\n \n\n●detrimental\nnegative publicity about us, our services, our officers, directors, Controlling Shareholder,\nor our industry;\n\n \n\n●announcements\nby us or our competitors of new service offerings, acquisitions, strategic relationships,\njoint ventures, capital raisings or capital commitments;\n\n \n\n●additions\nto or departures of our senior management;\n\n \n\n●potential\nlitigation or regulatory proceedings involving us, our officers, directors, or controlling\nshareholder;\n\n \n\n●negative\npublicity on our direct and indirect shareholders;\n\n \n\n●release\nor expiry of lock-up or other transfer restrictions on our outstanding shares or\nour ADSs; and\n\n \n\n●sales\nor perceived potential sales of additional ordinary shares or ADSs.\n\n \n\nAny of these factors may\nresult in large and sudden changes in the volume and price at which our ADSs will trade.\n\n \n\nIn the past, shareholders\nof public companies have often brought securities class action suits against those companies following periods of instability in the\nmarket price of their securities. If we and the VIEs were involved in a class action suit, it could divert a significant amount of our\nmanagement’s attention and other resources from our and the VIEs’ business and operations and require us to incur significant\nexpenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could\nharm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us,\nwe and the VIEs may be required to pay significant damages, which could have a material adverse effect on our financial condition and\nresults of operations.\n\n** **\n\n**Our dual-class share structure\nwith different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change\nof control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.**\n\n \n\nWe have established a dual-class share\nstructure upon the approval of variation of our share capital in our annual general meeting on November 18, 2024, and our ordinary shares\nnow consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders\nof Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled\nto 200 votes per share based on our dual-class share structure. Each Class B ordinary share is convertible into one Class A\nordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares\nunder any circumstances.\n\n \n\n72\n\n \n\n \n\nOur chairlady of board of\ndirectors, Ms. Fen Ye, beneficially own all of our issued Class B ordinary shares. These Class B ordinary shares constitute\napproximately 2.35% of our total issued and outstanding share capital immediately after the completion of our 2024 Private Placement and\n82.78% of the aggregate voting power of our total issued and outstanding share capital due to the disparate voting powers associated with\nour dual-class share structure. As a result of the dual-class share structure and the concentration of ownership, holders of\nour Class B ordinary shares will have considerable influence over matters such as decisions regarding mergers, consolidations and\nthe sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions\nthat are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a\nchange in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium\nfor their shares as part of a sale of our company and may reduce the market price of our ADSs. This concentrated control will limit your\nability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control\ntransactions that holders of Class A ordinary shares and ADSs may view as beneficial.\n\n \n\n**Our dual-class voting structure\nmay render the ADSs representing our Class A ordinary shares ineligible for inclusion in certain stock market indices, and thus\nadversely affect the trading price and liquidity of the ADSs.**\n\n \n\nWe cannot predict whether\nour dual-class share structure with different voting rights will result in a lower or more volatile market price of the ADSs, adverse\npublicity, or other adverse consequences. Certain index providers have announced restrictions on including companies with multi-class share\nstructures in certain of their indices. For example, S&P Dow Jones and FTSE Russell have changed their eligibility criteria for inclusion\nof shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and\ncompanies whose public shareholders hold no more than 5% of total voting power from being added to such indices. As a result, our dual-class voting\nstructure may prevent the inclusion of the ADSs representing our Class A ordinary shares in such indices, which could adversely\naffect the trading price and liquidity of the ADSs representing our Class A ordinary shares. In addition, several shareholder advisory\nfirms have announced their opposition to the use of multiple class structure and our dual-class structure may cause shareholder\nadvisory firms to publish negative commentary about our corporate governance, in which case the market price and liquidity of the ADSs\ncould be adversely affected.\n\n** **\n\n**If securities or industry analysts do not\npublish or publish inaccurate or unfavorable research about our and the VIEs’ business, or if they adversely change their recommendations\nregarding our ADSs, the market price for our ADSs and trading volume could decline.**\n\n \n\nThe trading market for our\nADSs will depend in part on the research and reports that securities or industry analysts publish about us or our and the VIEs’\nbusiness. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers\nus downgrades our ADSs or publishes inaccurate or unfavorable research about our and the VIEs’ business, the market price for our\nADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,\nwe could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.\n\n** **\n\n**The sale or availability for sale of substantial\namounts of our ADSs in the public market could adversely affect their market price.**\n\n \n\nSales of substantial amounts\nof our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs\nand could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any,\nmarket sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for\nfuture sale will have on the market price of our ADSs.\n\n** **\n\n73\n\n \n\n \n\n**Because the amount, timing, and whether\nor not we distribute dividends at all is entirely at the discretion of our board of directors, you must rely on price appreciation of\nour ADSs for return on your investment.**\n\n \n\nAlthough we currently intend\nto distribute dividends in the future, the amount, timing, and whether or not we actually distribute dividends at all is entirely at\nthe discretion of our board of directors. Our board of directors has complete discretion as to whether to distribute dividends. In addition,\nour shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors.\nIn either case, all dividends are subject to certain restrictions under the Cayman Islands law, namely that our company may only pay\ndividends out of profits or share premium account, and provided always that in no circumstances may a dividend be paid if this would\nresult in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors\ndecides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our\nfuture results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us\nfrom our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.\nAccordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. We\ncannot assure you that our ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize\na return on your investment in our ADSs and you may even lose your entire investment in our ADSs.\n\n** **\n\n**The voting rights of holders of our ADSs\nare limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct how the Class A ordinary\nshares represented by your ADSs are voted.**\n\n \n\nHolders of our ADSs do not\nhave the same rights as our registered shareholders. As a holder of ADSs, you will not have any direct right to attend general meetings\nof our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights that are carried by the\nunderlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance\nwith the provisions of the deposit agreement. If we instruct the depositary to ask for your instructions, then upon timely receipt of\nyour voting instructions, the depositary will try, as far as practicable, to vote the underlying Class A ordinary shares represented\nby your ADSs in accordance with your instructions. If we do not instruct the depositary to ask for your instructions, the depositary\nmay still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise your\nright to vote with respect to the underlying Class A ordinary shares represented by your ADSs unless you withdraw the shares and become\nthe registered holder of such shares prior to the record date for the general meeting. Under our memorandum and articles of association,\nthe minimum notice period required to be given by our company to our registered shareholders for convening a general meeting is 10 calendar\ndays.\n\n \n\nWhen a general meeting is\nconvened, you may not receive sufficient advance notice of the meeting to withdraw the Class A ordinary shares underlying your ADSs and\nbecome the registered holder of such shares to allow you to vote directly with respect to any specific matter or resolution to be considered\nand voted upon at the general meeting. In addition, under our memorandum and articles of association, for the purposes of determining\nthose shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and fix\nin advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent\nyou from withdrawing the Class A ordinary shares underlying your ADSs and becoming the registered holder of such shares prior to the\nrecord date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions, the depositary\nwill notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the depositary at\nleast thirty (30) days’ prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will receive the\nvoting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary shares represented by\nyour ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner\nof carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the Class A ordinary\nshares underlying your ADSs are voted and you may have no legal remedy if the Class A ordinary shares underlying your ADSs are not voted\nas you requested.\n\n** **\n\n74\n\n \n\n \n\n**The depositary shall deem you to have instructed\nthe depositary to give us a discretionary proxy to vote the Class A ordinary shares underlying your ADSs if you do not give timely voting\ninstructions to the depositary to direct how the Class A ordinary shares underlying your ADSs are voted, except in limited circumstances,\nwhich could adversely affect your interests.**\n\n \n\nUnder the deposit agreement\nfor the ADSs, if you do not give timely voting instructions to the depositary to direct how the Class A ordinary shares underlying your\nADSs are voted, the depositary shall deem you to have instructed the depositary to give us a discretionary proxy to vote the Class A\nordinary shares underlying your ADSs at shareholders’ meetings unless:\n\n \n\n●we\nhave instructed the depositary that we do not wish a discretionary proxy to be given;\n\n \n\n●we\nhave informed the depositary that there is substantial opposition as to a matter to be voted\non at the meeting;\n\n \n\n●a\nmatter to be voted on at the meeting would have a material adverse impact on shareholders;\nor\n\n \n\n●the\nvoting at the meeting is to be made on a show of hands.\n\n \n\nThe effect of this discretionary\nproxy is that if you do not give timely voting instructions to the depositary to direct how the Class A ordinary shares underlying your\nADSs are voted, you cannot prevent the Class A ordinary shares underlying your ADSs from being voted, except under the circumstances\ndescribed above. This may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary\nshares are not subject to this discretionary proxy.\n\n** **\n\n**Your right to participate in any future\nrights offerings may be limited, which may cause dilution to your holdings.**\n\n \n\nWe may from time to time\ndistribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in\nthe United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption\nfrom the registration requirement is available. Under the deposit agreement, the depositary will not make rights available to you unless\nboth the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt\nfrom the registration requirement under the Securities Act. We are under no obligation to file a registration statement with respect\nto any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able\nto establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights\nofferings in the future and may experience dilution in your holdings.\n\n** **\n\n**Techniques employed by short sellers may\ndrive down the market price of the ADSs.**\n\n \n\nShort selling is the practice\nof selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical\nsecurities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities\nbetween the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that\npurchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short\nsellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order\nto create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the\npast, led to selling of shares in the market.\n\n \n\nPublic companies that have\nsubstantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has\ncentered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities\nand mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a\nresult, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are\nsubject to shareholder lawsuits and/or SEC enforcement actions.\n\n \n\nIt is not clear what effect\nsuch negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are\nproven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend\nourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can\nproceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality.\nSuch a situation could be costly and time-consuming, and could distract our management from growing our and the VIEs’ business.\nEven if such allegations are ultimately proven to be groundless, allegations against us could severely impact our and the VIEs’\nbusiness operations, and any investment in the ADSs could be greatly reduced or even rendered worthless.\n\n** **\n\n75\n\n \n\n \n\n**You may not receive cash dividends if the\ndepositary decides it is impractical to make them available to you.**\n\n \n\nThe depositary will pay\ncash distributions on the ADSs only to the extent that we decide to distribute dividends on our ordinary shares or other deposited securities.\nTo the extent that there is a distribution, the depositary has agreed to pay you the cash dividends or other distributions it or the\ncustodian receives on our Class A ordinary shares or other deposited securities after deducting its fees and expenses. You will receive\nthese distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary may, at its discretion,\ndecide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may\ndetermine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may\nbe less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property to you.\n\n** **\n\n**We and the depository are entitled to amend\nthe deposit agreement and to change the rights of ADS holders under the terms of such agreement, and we may terminate the deposit agreement,\nwithout the prior consent of the ADS holders.**\n\n \n\nWe and the depository are\nentitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the prior\nconsent of the ADS holders. We and the depositary may agree to amend the deposit agreement in any way we decide is necessary or advantageous\nto us. Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes\nin the terms of our business relationship with the depositary. In the event that the terms of an amendment are disadvantageous to ADS\nholders, ADS holders will only receive days’ advance notice of the amendment, and no prior consent of the ADS holders is required\nunder the deposit agreement. Furthermore, we may decide to terminate the ADS facility at any time for any reason. For example, terminations\nmay occur when we decide to list our shares on a non-U.S. securities exchange and determine not to continue to sponsor an ADS\nfacility or when we become the subject of a takeover or a going-private transaction. If the ADS facility is terminated, ADS holders will\nreceive at least thirty (30) days’ prior notice, but no prior consent is required from them. Under the circumstances that\nwe decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the\nADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying shares, but will have no\nright to any compensation whatsoever.\n\n** **\n\n**ADS holders may not be entitled to a jury\ntrial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in\nany such action.**\n\n \n\nThe deposit agreement governing\nthe ADSs representing our Class A ordinary shares provides that, to the fullest extent permitted by applicable law, holders and beneficial\nowners of ADSs irrevocably waive the right to a jury trial of any claim that they may have against us or the depositary arising from\nor relating to our Class A ordinary shares, our ADSs or the deposit agreement, including any claim under the U.S. federal securities\nlaws. The waiver continues to apply to claims that arise during the period when a holder holds the ADSs, even if the ADS holder subsequently\nwithdraws the underlying Class A ordinary shares. However, you will not be deemed, by agreeing to the terms of the deposit agreement,\nto have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.\nIn fact, you cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated\nthereunder.\n\n \n\nIf we or the depositary\nopposed a demand for jury trial relying on above-mentioned jury trial waiver, it is up to the court to determine whether such waiver\nwas enforceable considering the facts and circumstances of that case in accordance with the applicable state and federal law.\n\n \n\nIf this jury trial waiver\nprovision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury\ntrial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated\nby a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable\nunder the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York.\nIn determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial\nwaiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We\nbelieve that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury\ntrial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s\nnegligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which\nwe believe are applicable in the case of the deposit agreement or the ADSs. If you or any other holders or beneficial owners of ADSs\nbring a claim against us or the depositary relating to the matters arising under the deposit agreement or our ADSs, including claims\nunder federal securities laws, you or such other holder or beneficial owner may not have the right to a jury trial regarding such claims,\nwhich may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary according\nto the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according\nto different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less\nfavorable to the plaintiff(s) in any such action.\n\n \n\n76\n\n \n\n \n\nMoreover, as the jury trial\nwaiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that, as a matter of construction\nof the clause, the waiver would likely continue to apply to ADS holders who withdraw the Class A ordinary shares from the ADS facility\nwith respect to claims arising before the cancelation of the ADSs and the withdrawal of the Class A ordinary shares, and the waiver would\nmost likely not apply to ADS holders who subsequently withdraw the Class A ordinary shares represented by ADSs from the ADS facility\nwith respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the\njury trial waiver to ADS holders who withdraw the Class A ordinary shares represented by the ADSs from the ADS facility.\n\n** **\n\n**ADS holders have limited choice of forum,\nwhich could limit your ability to obtain a favorable judicial forum for complaints against us, the depositary or our or the depositary’s\nrespective directors, officers or employees.**\n\n \n\nThe deposit agreement governing\nour ADSs provides that, (i) the deposit agreement and the ADSs will be interpreted in accordance with the laws of the State of New\nYork, and (ii) as an owner of ADSs, you irrevocably agree that any legal action arising out of the deposit agreement and the ADSs\ninvolving us or the depositary may only be instituted in a state or federal court in the city of New York. Any person or entity purchasing\nor otherwise acquiring any our ADSs, whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and\nhave irrevocably agreed and consented to these provisions. This choice of forum provision may increase your cost and limit your ability\nto bring a claim in a judicial forum that you find favorable for disputes with us, the depositary or our and the depositary’s respective\ndirectors, officers or employees, which may discourage such lawsuits against us, the depositary and our and the depositary’s respective\ndirectors, officers or employees. However, it is possible that a court could find such choice of forum provisions to be inapplicable\nor unenforceable. The enforceability of similar choice of forum provisions has been challenged in legal proceedings. It is possible that\na court could find this type of provisions to be inapplicable or unenforceable.\n\n \n\nTo the extent that any such\nclaims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits\nbrought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22\nof the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability\ncreated by the Securities Act or the rules and regulations thereunder. Accordingly, actions by our ADS holders to enforce any duty\nor liability created by the Exchange Act, the Securities Act or the respective rules and regulations thereunder must also be brought\nin federal court. Our ADS holders will not be deemed to have waived our compliance with the federal securities laws and the regulations\npromulgated thereunder.\n\n** **\n\n**You may be subject to limitations on transfer\nof your ADSs.**\n\n \n\nYour ADSs are transferable\non the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems it expedient\nin connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including\nin connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of\nADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays.\nThe depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books of the\ndepositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of\nany government or governmental body, or under any provision of the deposit agreement, or for any other reason.\n\n** **\n\n77\n\n \n\n \n\n**You may experience difficulties in protecting\nyour interests, and your ability to protect your rights through U.S. courts may be limited as we are incorporated under the Cayman Islands\nlaw.**\n\n \n\nAs an exempted company with\nlimited liability incorporated under the laws of the Cayman Islands, our corporate affairs are governed by our memorandum and articles\nof association, as amended from time to time, together with the Companies Act (As Revised) of the Cayman Islands and the common law of\nthe Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary\nduties of our directors to us under the Cayman Islands law are largely governed by the common law of the Cayman Islands. The common law\nof the Cayman Islands is derived partly from the comparatively limited judicial precedent in the Cayman Islands and also the common law\nof England and Wales, whose precedents are only of persuasive but not binding authority on a court in the Cayman Islands. The rights\nof our shareholders and the fiduciary duties of our directors under the Cayman Islands law are not as clearly established as they would\nbe under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed\nbody of securities laws compared to that of the United States. Some U.S. states, such as Delaware, have more fully developed and judicially\ninterpreted bodies of corporate law than the Cayman Islands. Moreover, a company incorporated in the Cayman Islands may not have standing\nto initiate a shareholder derivative action in a federal court of the United States. In addition, controlling shareholders owe a fiduciary\nduty to the companies they control and the minority shareholders under Delaware laws, while our Controlling Shareholder do not owe any\nsuch fiduciary duties to our company or to our minority shareholders under the Cayman Island laws. As a result, our Controlling Shareholder\nmay exercise their powers, including the voting rights in respect of their shares, as shareholders in a manner as they think fit.\n\n \n\nShareholders of Cayman Islands\ncompanies like us have no general rights under the Cayman Islands law to inspect corporate records or to obtain copies of the register\nof members of these companies, other than the memorandum and articles of association and any special resolutions passed by such companies,\nand the registers of mortgages and charges of such companies. The Registrar of Companies of the Cayman Islands shall make available the\nlist of the names of the current directors of the Company (and where applicable the current alternate directors of the Company) for inspection\nby any person upon payment of a fee by such person. Our directors have discretion under our memorandum and articles of association to\ndetermine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged\nto make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any\nfacts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.\n\n \n\nCertain corporate governance\npractices in our home country, the Cayman Islands are significantly different from the requirements for companies incorporated in other\njurisdictions such as the United States. Currently, we will rely on home country practice with respect to our corporate governance subject\nto the applicable Nasdaq listing standards and the U.S. securities law, our shareholders may be afforded less protection than they otherwise\nwould under rules and regulations applicable to the domestic issuers in the United States.\n\n \n\nIn light of the above, public\nshareholders may experience more difficulties in protecting their interests in the face of actions taken by our management, members of\nour board of directors, or our Controlling Shareholder than they would as public shareholders of a company incorporated in the United\nStates. For a discussion of the significant differences between the provisions applicable to companies incorporated in the Cayman Islands\nand their shareholders, and the Companies and the relevant provision in laws of the United States, see also “*Item 10. Additional\nInformation—B. Memorandum and Articles of Association—Differences in Corporate Law*.”\n\n** **\n\n**Our memorandum and articles of association\nprovides that the courts of the Cayman Islands will be the sole and exclusive forum for a claim arising under the internal affairs doctrine,\nand that the U.S. federal district courts will be the exclusive forum within the United States of America for the resolution of any complaint\nasserting a cause of action arising under the Securities Act of 1933, as amended, which could limit investors’ ability to obtain\na favorable judicial forum for disputes with us.**\n\n \n\nWe have adopted a forum\nselection provision under our memorandum and articles of association that provides that, unless we consent in writing to the selection\nof an alternative forum, the federal district courts of the United States of America shall be the exclusive forum within the United States\nof America for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. This\nforum selection clause does not apply to claims under the Securities Exchange Act of 1934, which are subject to the exclusive jurisdiction\nof U.S. federal district courts, and it does not require investors to waive the requirements of the U.S. federal securities laws.\n\n \n\n78\n\n \n\n \n\nIn addition, the forum selection\nprovision in our memorandum and articles of association provides that the courts of the Cayman Islands shall be the sole and exclusive\nforum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach\nof a fiduciary duty owed by any director, officer or other employee of the Company to the Company or its members, (iii) any action\nasserting a claim arising pursuant to any provision of the Companies Act (As Revised) of the Cayman Islands or the memorandum and articles\nof association including but not limited to any purchase or acquisition of Shares, security or guarantee provided in consideration thereof,\nor (iv) any action asserting a claim against the Company which if brought in the United States of America would be a claim arising\nunder the internal affairs doctrine (as such concept is recognized under the laws of the United States of America from time to time).\n\n \n\nThis forum selection provision\nmay limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors,\nofficers or other employees, which may discourage such lawsuits. Our forum selection provision seeks to reduce litigation costs and increase\noutcome predictability. While forum selection provisions in corporate charters and by-laws are becoming more commonplace for public companies\nin the United States and have been upheld by courts in certain states, it is possible that in connection with any action a court could\nfind the forum selection provision contained in our memorandum and articles of association to be inapplicable or unenforceable in such\naction. If a court were to find our forum selection by-law inapplicable to, or unenforceable in respect of, one or more of the specified\ntypes of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions and we may\nnot obtain the benefits of limiting jurisdiction to the courts selected. If a court were to find the forum selection provision to be\ninapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur\nadditional costs associated with resolving such action in other jurisdictions, which could adversely affect our and the VIEs’ business,\nfinancial condition and results of operations.\n\n** **\n\n**Our memorandum and articles of association\ncontain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity\nto sell their Class A ordinary shares, including Class A ordinary shares represented by the ADSs, at a premium.**\n\n \n\nOur memorandum and articles\nof association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions.\nThese provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing\nmarket prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For\nexample, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more\nseries and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the\nqualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation\npreferences, any or all of which may be greater than the rights associated with our Class A ordinary shares, in the form of ADSs or otherwise.\nPreferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal\nof management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting\nand other rights of the holders of our Class A ordinary shares and our ADSs may be materially and adversely affected.\n\n** **\n\n**We are a foreign private issuer within\nthe meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public\ncompanies.**\n\n \n\nBecause we qualify as a\nforeign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United\nStates that are applicable to U.S. domestic issuers, including:\n\n \n\n●the\nrules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or\ncurrent reports on Form 8-K;\n\n \n\n●the\nsections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations\nin respect of a security registered under the Exchange Act;\n\n \n\n●the\nsections of the Exchange Act requiring insiders to file public reports of their stock ownership\nand trading activities and liability for insiders who profit from trades made in a short\nperiod of time; and\n\n \n\n●the\nselective disclosure rules by issuers of material nonpublic information under Regulation\nFD.\n\n \n\n79\n\n \n\n \n\nWe will be required to file\nan annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results\non a half-year basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Global Market. Press releases\nrelating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we\nare required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the\nSEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to\nyou were you investing in a U.S. domestic issuer.\n\n** **\n\n**As a company incorporated in the Cayman\nIslands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly\nfrom the Nasdaq Global Market listing standards; these practices may afford less protection to shareholders than they would enjoy if\nwe complied fully with the Nasdaq Global Market listing standards.**\n\n \n\nAs a Cayman Islands company\nlisted on the Nasdaq Global Market, we are subject to the Nasdaq Global Market listing standards. However, the Nasdaq Global Market rules\npermit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance\npractices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Global Market listing standards.\nWe have relied on and intend to continue to rely on some of these exemptions. For instance, we will not have regularly scheduled executive\nsessions with only independent directors each year. As a result, you may not be provided with the benefits of certain corporate governance\nrequirements of the Nasdaq Global Market.\n\n \n\n**As a “controlled company” under\nthe Nasdaq Stock Market Rules, we may rely on exemptions from certain corporate governance requirements that provide protection to shareholders\nof other companies.**\n\n \n\nWe are a “controlled\ncompany” as defined under the Nasdaq Stock Market Rules. Ms. Fen Ye, chairlady of board of directors beneficially owns 2.48% of\nour total issued and outstanding ordinary shares, representing 82.8% of the total voting power. As a result, Ms. Fen Ye has the ability\nto control or significantly influence the outcome of matters requiring approval by shareholders. For so long as we remain a controlled\ncompany under that definition, we are permitted to elect to rely, and may choose to rely, on certain exemptions from corporate governance\nrules, including an exemption from the rule that a majority of our board of directors must be independent directors. As a result, you\nwill not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.\nEven if we cease to be a controlled company, we may still rely on exemptions available to foreign private issuers, including being able\nto adopt home country practices in relation to corporate governance matters and an exemption from the rule that a majority of our board\nof directors must be independent directors.\n\n** **\n\n**There can be no assurance that we will\nnot be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could\nsubject United States investors in the ADSs or Class A ordinary shares to significant adverse United States federal income tax consequences.**\n\n \n\nWe will be classified as\na passive foreign investment company, or PFIC, for any taxable year if either (i) 75% or more of our gross income for such year consists\nof certain types of “passive” income, or (ii) 50% or more of the value of our assets (determined on the basis of a quarterly\naverage) during such year produce or are held for the production of passive income, or the asset test. Although the law in this regard\nis not entirely clear, we treat the consolidated VIEs as being owned by us for U.S. federal income tax purposes because we control their\nmanagement decisions and are entitled to substantially all of the economic benefits associated with them. As a result, we consolidate\ntheir results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we are not the owner\nof the consolidated VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxable year and any subsequent\ntaxable year.\n\n \n\n80\n\n \n\n \n\nAssuming that we are the\nowner of the consolidated VIEs for U.S. federal income tax purposes, and based upon our current and expected income and assets, including\ngoodwill, we do not presently expect to be classified as a PFIC for the current taxable year and/or the foreseeable future.\n\n \n\nWhile we do not expect to\nbe a PFIC, because the value of our assets for purposes of the asset test may be determined by reference to the market price of our ADSs,\nfluctuations in the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years. The determination\nof whether we will be or become a PFIC will also depend, in part, on the composition and classification of our income. Because there\nare uncertainties in the application of the relevant rules, it is possible that the IRS may challenge our classification of certain income\nand assets as non-passive which may result in our being or becoming a PFIC in the current or subsequent years. In addition,\nthe composition of our income and assets will also be affected by how, and how quickly, we use our liquid assets and the cash in our\ninitial public offering. If we determine not to deploy significant amounts of cash for active purposes, our risk of being a PFIC may\nsubstantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination\nmade annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year\nor any future taxable year.\n\n \n\nIf we are a PFIC in any\ntaxable year, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income\nTaxation”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of our\nADSs or Class A ordinary shares and on the receipt of distributions on our ADSs or Class A ordinary shares to the extent such gain or\ndistribution is treated as an “excess distribution” under the United States federal income tax rules, and such holder may\nbe subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. Holder holds our ADSs or\nour Class A ordinary shares, we will generally continue to be treated as a PFIC for all succeeding years during which such U.S. Holder\nholds our ADSs or our Class A ordinary shares. For more information, see “*Item 10. Additional Information—E. Taxation—United\nStates Federal Income Taxation—Passive Foreign Investment Company Rules*.”\n\n** **\n\n**We incur increased costs because of being a public company. **\n\n** **\n\nWe are a public company and we incur significant\nlegal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 and the rules subsequently\nimplemented by the SEC and the Nasdaq Global Market contain detailed requirements concerning corporate governance practices of public\ncompanies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities\nmore time-consuming and costly. Our management will be required to devote substantial time and attention to our public company reporting\nobligations and other compliance matters. \n\n \n\n81"}