{"url_path":"/sec/nwgl/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 **","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-04-27","source_url":"https://www.sec.gov/Archives/edgar/data/1948294/0001493152-26-019023-index.html","accession_number":"0001493152-26-019023","cik":"0001948294","ticker":"NWGL","issuer_name":"CL Workshop Group Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1948294/0001493152-26-019023-index.html","primary_entity_key":"0001948294","primary_entity_name":"CL Workshop Group Ltd"},"word_count":13448,"has_tables":true,"body_markdown":"**ITEM\n3.**\n**KEY\nINFORMATION**\n\n \n\n**3.A.\n[Reserved]**\n\n \n\n**3.B.\nCapitalization and Indebtedness**\n\n \n\nNot\nApplicable.\n\n \n\n**3.C.\nReasons for the Offer and Use of Proceeds**\n\n \n\nThe\ninformation required by Item 3.C. is included in Item 14 below.\n\n \n\n**3.D.\nRisk Factors**\n\n \n\nYou\nshould carefully consider each of the following risks and all the other information contained in this 2025 20-F Report in evaluating\nus and our common stock. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.\nOur business, financial condition, results of operations and cash flows could be materially and adversely affected by these risks, and,\nas a result, the trading price of our common stock could decline. We have in the past been adversely affected by certain of, and may\nin the future be affected by, these risks. You should not interpret the disclosure of any risk factor to imply that the risk has not\nalready materialized.\n\n \n\n**Risks\nRelated to Our Business and Industry**\n\n \n\n**Our\nrevenues are sensitive to fluctuations of log price and selling price of our products in the forestry industry.**\n\n \n\nHistorically,\nprices for logs have been volatile and are affected by numerous factors that are not under control, including demand for wood and wood\nproducts, supply from illegal logging, changes in currency exchange rates, economic growth rates, foreign and domestic interest rates,\ntrade policies, and prevailing fuel and transportation costs.\n\n \n\nIn\naddition, industry-wide increases in the supply of logs during a favorable price period can also lead to downward pressure on prices\nthrough oversupply. Increased production by us and our competitors could lead to oversupply and lower prices. Oversupply and lower prices\nmay also result from illegal logging activity or decreased government enforcement of logging restrictions. Our revenues and profits are\nextremely sensitive to changes in log prices and selling prices of our products. Slight changes in log prices and selling prices of our\nproducts may cause a disproportionally large change in our revenues and our results of operation. If market prices for logs or our products\nwere to decline, it could have a material adverse effect on our business, financial condition and results of operation.\n\n \n\n**Our\nfinancial statements for the year ended December 31, 2025 contain an explanatory paragraph regarding substantial doubt about our ability\nto continue as a going concern.**\n\n** **\n\nOur\nfinancial statements for the year ended December 31, 2025 contain an explanatory paragraph regarding substantial doubt about our ability\nto continue as a going concern. This going concern assessment may prevent us from obtaining new financing on reasonable terms, if at\nall, and imperil our ability to continue operating as a going concern.\n\n \n\n**We\ndepend on certain major customers.**\n\n \n\nFor\neach of the years ended December 31, 2025, 2024 and 2023, we had a total of 55, 64 and 62 customers respectively, which had purchased\nour wood products. Our five largest customers during the respective periods accounted for approximately 71.4%, 67.1% and 71.2% of our\ntotal turnover respectively; whilst our largest customer accounted for approximately 37.7%, 22.9% and 40.7% of our total turnover respectively.\n\n \n\n**Our\ninability to obtain certificates from the FSC could reduce our future revenues.**\n\n \n\nWe\ncannot assure you that we will be able to retain or renew our existing FSC certificates or obtain new certificates. If we are unable\nto renew or retain certificates, our business, results of operations and financial condition will be materially and adversely affected.\n\n \n\n1\n\n \n\n \n\n**The\ncurrent global market fluctuations and economic downturn could materially and adversely affect our business, financial condition and\nresults of operations.**\n\n \n\nThe\nglobal capital and credit markets have been experiencing extreme volatility and disruption in recent times. Concerns over inflation or\ndeflation, energy costs, geopolitical issues, and the availability and cost of credit have contributed to unprecedented levels of market\nvolatility and diminished expectations for the global economy and the capital and consumer markets in the future. These factors, combined\nwith volatile oil prices, declining business activities and consumer confidence and increased unemployment, have precipitated an economic\nslowdown and a possible prolonged global recession. These events have led to a slowdown in the global economy which a number of economists\npredict could be significant and protracted. As a result, the demand for our wood products may significantly decrease, thereby materially\nand adversely affecting our business, financial condition and results of operations.\n\n \n\n**Social\nconflicts may disrupt our operations.**\n\n \n\nDespite\nPeru’s ongoing economic growth and stabilization, high levels of poverty and unemployment and social and political tensions continue\nto be pervasive problems in the country. Peru has, from time to time, experienced social and political turmoil, including riots, nationwide\nprotests, strikes and street demonstrations. In the past, Peru has experienced periods of political instability that has included a succession\nof regimes with differing economic policies and programs. Since December 2022, Peru has experienced unrelenting political turmoil. Part\nof our operations are conducted in Peru and depend on economic and political developments in the country. As a result, any social conflicts\nmay disrupt our business operations, which could have a material adverse effect on our business and financial performance.\n\n \n\n**Security,\npolitical and economic instability in the Middle East may harm our business.**\n\n \n\nThe\nescalating conflicts between Israel and its neighboring countries and Islamist militia and political groups since late 2023, particularly\nthe Israel-Gaza Strip and attacks targeting vessels in the southern Red Sea, has introduced geopolitical tensions and security risks\nwithin the Middle East region. Such instability may affect the global markets and potentially cause disruptions to the international\ntrade and financial systems. As such, the conflicts and heightened tensions in the Middle East could have an indirect, adverse impact\non our business and financial condition and results of operations.\n\n \n\n**We\nare subject to risks related to U.S. tariffs imposed on imports.**\n\n \n\nWe\nare subject to risks related to U.S. tariffs imposed on imports. Since March 2025, the United States government has imposed tariffs on\nvarious imports to strengthen its domestic production. In particular, the U.S. imposed duty on imports of wood products as of March 25,\n2025. For the years ended December 31, 2025 and 2024, 2.2% and 3.2% of our total revenue were generated from customers located in North\nAmerica. These tariffs may lead to increase in costs for our wood products, compressing our profit margins and causing potential disruptions\nin our supply chain that could hinder production. Market volatility and fluctuations in consumer demand may adversely affect our sales,\ncoupled with the complexities of regulatory compliance. Furthermore, retaliatory actions from Peru, France and China could restrict our\nexport opportunities, creating challenges for our long-term strategic planning. As such, the imposition of U.S tariffs on imports could\nmaterially impact our financial performance and operational stability.\n\n \n\n**We\nface competition from other companies in the forestry industry.**\n\n \n\nWe\nface many local and overseas competitors who also supply wood products to the market. Our primary competitors operate either domestically\nor within the Asia Pacific region. In particular, we face competition from a host of small logging firms, some of which may not comply\nwith environmental and other industry standards to the same extent as we do, resulting in their potentially lower operating costs.\n\n \n\nCompetition\nin our industry is influenced by factors including the costs of new forest acquisitions, regulatory compliance, and forest insurance.\nSome of our competitors may have lower costs than we do, or, if their operations are located in less developed countries, may be subject\nto less stringent environmental and other governmental regulations than we are, because of different or regional laws and business practices.\nIf we are unable to compete effectively, or if competition increases in the future, our revenues could decline, and there may be material\nadverse effects on our business, financial condition, results of operations and cash flows.\n\n \n\n2\n\n \n\n** **\n\n**The\nforestry industry faces competition from solid wood substitutes.**\n\n \n\nIn\naddition to competition within the forestry industry, the forest industry faces competition from solid wood substitutes. We face competition\nfrom companies that manufacture wood substitutes, such as imitation wood, fiber-cement wood, ceramic tile and other materials that are\nused as alternative materials mainly in construction and furniture production. The demand for wood products is also affected by changes\nin consumer trends and tastes. Preference for wood substitutes among manufacturers, construction companies and consumers could decrease\ndemand for our products and have a material adverse effect on our revenue, financial condition and results of operations.\n\n \n\n**We\nare subject to certain risks relating to the delivery of our products.**\n\n \n\nWe\noften rely on third-party logistics service providers for the delivery of our wood products to customers. Such delivery services could\nbe suspended and thus interrupt the supply of our wood products if unforeseen events occur which are beyond our control, such as transportation\nbottlenecks, natural disasters, disease outbreaks or labor strikes. Any failure of this personnel to provide high-quality or timely delivery\nto our customers may negatively impact the purchase experience of our customers, damage our reputation and cause us to lose customers.\nAny negative publicity or poor feedback regarding our customer service overall may harm our brand and reputation and in turn cause us\nto lose customers and market share.\n\n \n\n**Disruption\nto the supply of raw materials or increase in raw material prices could materially and adversely affect our Group’s business, financial\ncondition and results of operations.**\n\n \n\nThe\nmajor raw materials used to produce our wood products are logs and wooden materials. However, our Group has not entered into any long-term\nsupply contracts with our suppliers. In the event that the ban on commercial logging is imposed by the French government or the places\nwhere our suppliers are located or natural disasters, the supply of timber for the production of our wood products and the hosting of\ntimber auctions may be affected. It is therefore possible that our Group will not be able to purchase sufficient raw materials from our\nsuppliers, in a timely manner and on commercially acceptable terms, or at all.\n\n \n\nIn\naddition, if we are unable to acquire raw materials from our existing suppliers for any reason, we cannot assure that our Group will\nbe able to source the raw materials from alternative sources within a reasonable period of time, and at acceptable prices or at all.\nOur Group cannot assure that such shortages will not occur in the future. Any failure to obtain adequate supplies of raw materials on\na timely basis may disrupt our Group’s operation, and may have a material adverse effect on the business, financial condition and\nresults of operations of our Group.\n\n \n\n**Our\nnetworks and those of our third-party service providers may be vulnerable to cybersecurity risks.**\n\n \n\nOur\nnetwork and those of our third-party service providers and our customers may be vulnerable to unauthorized access, computer attacks,\nviruses and other security problems. Persons who circumvent security measures could wrongfully access and obtain or use information on\nour network or cause service interruptions, delays or malfunctions in our devices, services or operations, any of which could harm our\nreputation, cause demand for our products and services to fall, and compromise our ability to pursue our business plans. Recently, there\nhave been reported several significant, widespread security attacks and breaches that have compromised network integrity for many companies\nand governmental agencies, in some cases reportedly originating from outside the United States. In addition, there are reportedly private\nproducts available in the market today that may attempt to unlawfully intercept communications made using our network. We may be required\nto expend significant resources to respond to, contain, remediate, and protect against these attacks and threats, including compliance\nwith applicable data breach and security laws and regulations, and to alleviate problems, including reputational harm and litigation,\ncaused by these security incidents. Although we have implemented and intend to continue to implement security measures, these measures\nmay prove to be inadequate. These security incidents could have a significant effect on our systems, devices and services, including\nsystem failures and delays that could limit network availability, which could harm our business and our reputation and result in substantial\nliability.\n\n \n\n3\n\n \n\n** **\n\n**Risks\nRelated to Doing Business in China**\n\n \n\n**Due\nto the long arm provisions under the current PRC laws and regulations, if the Chinese government exercises any significant oversight\nand discretion over the conduct of our business and intervenes in or influences our operations, our operations and/or the value of our\nADSs could be affected. The policies, regulations, rules, and the enforcement of laws of the Chinese government may also be changed or\namended with little advance notice and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system could be\nuncertain.**\n\n \n\nOur\nCompany is a holding company and we conduct our operations through our Operating Subsidiaries in Peru, France, Hong Kong, Macau and China.\nAs at the date of this report, we are not materially affected by recent statements by the Chinese Government indicating an extent to\nexert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. However,\ndue to long arm provisions under the current PRC laws and regulations, there remains regulatory uncertainty with respect to the implementation\nand interpretation of laws in China. The PRC government may choose to exercise significant oversight and discretion, and the policies,\nregulations, rules, and enforcement of laws of the Chinese government to which we are subject may change from time to time. As a result,\nthe application, interpretation, and enforcement of new and existing laws and regulations in the PRC and our assertions and beliefs of\nthe risk imposed by the PRC legal and regulatory system could also be uncertain. In addition, these laws and regulations may be interpreted\nand applied inconsistently by different agencies or authorities, and inconsistently with current policies and practices. New laws, regulations,\nand other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries or investigations\nor any other government actions may:\n\n \n\n \n●\ndelay\nor impede our development;\n\n \n \n \n\n \n●\nresult\nin negative publicity or increase our operating costs;\n\n \n \n \n\n \n●\nrequire\nsignificant management time and attention; and\n\n \n \n \n\n \n●\nsubject\nus to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our\ncurrent or historical operations, or demands or orders that we modify or even cease our business practices.\n\n \n\nWe\nare aware that since 2021, the PRC government has initiated a series of regulatory actions and statements to regulate business operations\nin certain areas in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based\ncompanies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews,\nand expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain\nhow soon legislative or administrative regulation-making bodies will respond and what existing or new laws or regulations or detailed\nimplementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations\nwill have on our daily business operation, the ability to accept foreign investments and list on a U.S. or other foreign exchange.\n\n \n\nThe\nChinese government may intervene or influence our operations at any time or may exert more control over offerings conducted overseas\nand foreign investment in China-based issuers, which may affect our operations and/or the value of our ADSs. The promulgation of new\nlaws or regulations, or the new interpretation of existing laws and regulations, in each case that restricts or otherwise unfavorably\nimpacts the ability or way we conduct our business and could require us to change certain aspects of our business to ensure compliance,\nwhich could decrease demand for our services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals\nor certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented,\nour business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our\nADSs, potentially rendering them worthless.\n\n \n\n4\n\n \n\n** **\n\n**If\nthe Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment\nin China-based issuers, such action may significantly limit or completely hinder our ability to offer or continue to offer ADSs to investors\nand cause the value of our ADSs to significantly decline or be worthless.**\n\n \n\nSome\nstatements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas\nand/or foreign investments in China-based issuers. On July 6, 2021, the General Office of the Communist Party of China Central Committee\nand the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and\npromote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities\nto strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed\noverseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On December 24, 2021, the\nCSRC published the drafts of the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by\nDomestic Companies, and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies\nfor public comment. On February 17, 2023, the CSRC published the formal Overseas Listing Measures to regulate overseas securities offering\nand listing activities by domestic companies.\n\n \n\nFurthermore,\non December 28, 2021, the CAC, the National Development and Reform Commission (“**NDRC**”), and several other administrations\njointly issued the revised Measures for Cybersecurity Review, or the “Revised Review Measures”, which became effective on\nFebruary 15, 2022 and replaced the existing Measures for Cybersecurity Review. According to the Revised Review Measures, if an “online\nplatform operator” that is in possession of the personal data of more than one million users intends to list in a foreign country,\nit must apply for a cybersecurity review. Moreover, the CAC released the draft of the Regulations on Network Data Security Management\nin November 2021 for public consultation, which among other things, stipulates that a data processor listed overseas must conduct an\nannual data security review by itself or by engaging a data security service provider and submit the annual data security review report\nfor a given year to the municipal cybersecurity department before January 31 of the following year. On July 7, 2022, the CAC released\nthe Measures for the Security Assessment of Cross-Border Data, which becomes effective on September 1, 2022. According to the Measures\nfor the Security Assessment of Cross-Border Data, where a data processor provides data abroad under any of the following circumstances,\nit shall apply for exit security assessment of data to the national cyberspace administration through the local provincial cyberspace\nadministration: (1) the data processor provides important data abroad; (2) the operators of key information infrastructure and data processors\nthat process the personal information of more than 1 million people provide personal information abroad; (3) data processors who have\nprovided 100,000 personal information or 10,000 sensitive personal information abroad in aggregate since January 1 of last year provide\npersonal information abroad; and (4) other situations required for security assessment as stipulated by the state cyberspace administration.\nGiven the recency of the issuance of the Measures for the Security Assessment of Cross-Border Data, no guidance on the interpretation\nor implementation of such Measures has been published.\n\n \n\nWe\nsell a range of logs and flooring primarily in Hong Kong and Macau respectively. Our subsidiaries in Hong Kong and Macau have not collected\nor stored any data (including certain personal information) from PRC individuals. As a result, the likelihood of us being subject to\nthe review of the CAC is remote.\n\n \n\n**In\nthe event that we rely on dividends and other distributions on equity paid by our PRC or Hong Kong subsidiaries to fund any cash and\nfinancing requirements, we may have, any limitation on the ability of our PRC or Hong Kong subsidiaries to make payments to us could\nhave a material and adverse effect on our ability to conduct our business.**\n\n \n\nIn\ngeneral, our PRC subsidiary’s ability to distribute dividends is based upon their distributable earnings. Current PRC regulations\npermit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits, if any, determined in accordance\nwith PRC accounting standards and regulations. In addition, our PRC subsidiary, as a Foreign Invested Enterprise, or FIE, is required\nto draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the\naggregate balance of the common reserve has already accounted for over 50 percent of its registered capital. These reserves are not distributable\nas cash dividends. If our PRC subsidiary incurs debt on its own in the future, the instruments governing the debt may restrict its ability\nto pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or other payments\nto its shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial\nto our business, pay dividends or otherwise fund and conduct our business.\n\n \n\nThe\nEnterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends\npayable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements\nbetween the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.\n\n \n\n5\n\n \n\n \n\nUnder\nHong Kong law, dividends could only be paid out of distributable profits (that is, accumulated realized profits less accumulated realized\nlosses) or other distributable reserves. Dividends cannot be paid out of share capital. Under the current practice of the Inland Revenue\nDepartment of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us.\n\n \n\nAny\nlimitation on the ability of our PRC or Hong Kong subsidiaries to pay dividends or make other distributions to us could materially and\nadversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise\nfund and conduct our business.\n\n \n\n**To\nthe extent cash or assets in our business is in the PRC or in our PRC subsidiaries, the funds or assets may not be available to fund\noperations or for other use outside of the PRC due to interventions in or the imposition of restrictions and limitations on our ability\nor the ability of our subsidiaries by the PRC government to transfer cash or assets.**\n\n \n\nWe\nmay in the future depend on dividends and other distributions on equity paid by our PRC subsidiaries or depend on our assets located\nin China for our cash and financing requirements. The PRC government imposes controls on the convertibility of the Renminbi into foreign\ncurrencies and, in certain cases, the remittance of currency out of China. Shortages in the availability of foreign currency may then\nrestrict the ability of our PRC subsidiary to remit sufficient foreign currency to our offshore entities for our offshore entities to\npay dividends or make other payments or otherwise to satisfy our foreign-currency-denominated obligations. Therefore, to the extent cash\nor assets in our business is in the PRC or in our PRC subsidiaries, the funds or assets may not be available to fund operations or for\nother use outside of the PRC due to interventions in or the imposition of restrictions and limitations on our ability or the ability\nof our subsidiaries by the PRC government to transfer cash or assets.\n\n \n\nThe\nPRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting processes may be put forward\nby the State Administration of Foreign Exchange of the PRC for cross-border transactions. Any limitation on the ability of our PRC subsidiaries\nto pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or\nacquisitions that could be beneficial to our business, pay dividends or otherwise fund and conduct our business.\n\n \n\n**Although\nthe audit report included in this report is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee\nthat future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of\nthe benefits of such inspection. Furthermore, trading in our ADSs may be prohibited under the HFCA Act if the SEC subsequently determines\nour audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national\nsecurities exchanges, such as the Nasdaq, may determine to delist our securities. Furthermore, on December 29, 2022, the Accelerating\nHolding Foreign Companies Accountable Act was enacted, which amended the HFCA Act and requires the SEC to prohibit an issuer’s\nsecurities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead\nof three, and thus reducing the time before our ADSs may be prohibited from trading or delisted.**\n\n \n\nAs\nan auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB,\nour auditor is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with\nthe laws of the United States and professional standards. The PCAOB is currently unable to conduct inspections without the approval of\nthe Chinese government authorities. Inspections of other auditors conducted by the PCAOB outside mainland China have at times identified\ndeficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the inspection\nprocess to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in mainland China prevents the PCAOB\nfrom regularly evaluating auditors’ audits and their quality control procedures. As a result, if there is any component of our\nauditor’s work papers become located in mainland China in the future, such work papers will not be subject to inspection by the\nPCAOB. As a result, investors would be deprived of such PCAOB inspections, which could result in limitations or restrictions on our access\nto the U.S. capital markets.\n\n \n\nOn\nMay 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed\nby auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in\nthe auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was\nsigned into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued\nrecommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and departments with\nrespect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States.\nIn response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated\nwith investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such\nrisks.\n\n \n\n6\n\n \n\n \n\nOn\nMarch 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements\nin the HFCA Act. On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements\nin the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued\nby a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate.\nWe will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year under a process\nto be subsequently established by the SEC. The final amendments require any identified registrant to submit documentation to the SEC\nestablishing that the registrant is not owned or controlled by a government entity in the public accounting firm’s foreign jurisdiction,\nand also require, among other things, disclosure in the registrant’s annual report regarding the audit arrangements of, and government\ninfluence on, such registrants. Under the HFCA Act (as amended by the Accelerating Holding Foreign Companies Accountable Act, which was\nenacted on December 29, 2022), our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor\nis not inspected by the PCAOB for two consecutive years, and this ultimately could result in our ADSs being delisted.\n\n \n\nOn\nJune 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the\nHFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not\nsubject to PCAOB inspections for two consecutive years instead of three, and thus, would reduce the time before our ADSs may be prohibited\nfrom trading or delisted.\n\n \n\nOn\nSeptember 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,\nas contemplated under the HFCA Act, whether the Board is unable to inspect or investigate completely registered public accounting firms\nlocated in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.\n\n \n\nOn\nNovember 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable\nAct. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to\ninspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by\none or more authorities in that jurisdiction.\n\n \n\nOn\nDecember 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered\npublic accounting firms headquartered in Mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions,\nwhich determinations were vacated on December 15, 2022. The PCAOB made its determinations pursuant to PCAOB Rule 6100, which provides\na framework for how the PCAOB fulfills its responsibilities under the HFCA Act, which determinations were vacated on December 15, 2022.\nThe report further listed in its Appendix A and Appendix B, the Registered Public Accounting Firms Subject to the Mainland China Determination\nand Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively, which determinations were vacated on December\n15, 2022. Our auditor, WWC, P.C. is headquartered in the United States, and did not appear as part of the report under the lists in its\nAppendix A or Appendix B.\n\n \n\nOn\nAugust 26, 2022, the PCAOB signed SOP Agreements with the China Securities Regulatory Commission (the “**CSRC**”) and\nChina’s Ministry of Finance. The SOP Agreements established a specific, accountable framework to make possible complete inspections\nand investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. On December 15, 2022,\nthe PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered\nin mainland China and Hong Kong completely in 2022. The PCAOB vacated its previous 2021 determinations that the PCAOB was unable to inspect\nor investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB\nwill continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland\nChina and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control. However,\nif the PCAOB continues to be prohibited from conducting complete inspections and investigations of PCAOB-registered public accounting\nfirms in mainland China and Hong Kong, the PCAOB is likely to determine by the end of 2023 that positions taken by authorities in the\nPRC obstructed its ability to inspect and investigate registered public accounting firms in mainland China and Hong Kong completely,\nthen the companies audited by those registered public accounting firms would be subject to a trading prohibition on U.S. markets pursuant\nto the HFCA Act.\n\n \n\nThe\nSEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described\nabove. Future developments in respect of increasing U.S. regulatory access to audit information are uncertain, as the legislative developments\nare subject to the legislative process and the regulatory developments are subject to the rule-making process and other administrative\nprocedures.\n\n \n\n7\n\n \n\n \n\nWhile\nwe understand that there has been dialogue among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-registered accounting\nfirms in mainland China, there can be no assurance that we will be able to comply with requirements imposed by U.S. regulators if there\nis a significant change to current political arrangements between mainland China, Macau and Hong Kong, or if any component of our auditor’s\nwork papers become located in mainland China in the future. Delisting of our ADSs would force holders of our ADSs to sell their ADSs.\nThe market price of our ADSs could be adversely affected as a result of anticipated negative impacts of these executive or legislative\nactions, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance.\n\n \n\n**If\nwe fail to comply with work safety or environmental regulations, we could be exposed to penalties, fines, suspensions or action in other\nforms.**\n\n \n\nOur\noperations are subject to the work safety, fire safety and environmental protection laws and regulations promulgated by the PRC government.\nThese laws and regulations require us to maintain safe working conditions and adopt effective measures to control and properly dispose\nof solid waste and other environmental pollutants. We could be exposed to penalties, fines, suspensions or actions in other forms if\nwe fail to comply with these laws and regulations. The laws and regulations in China may be amended from time to time and changes in\nthose laws and regulations may cause us to incur additional costs in order to comply with the more stringent rules. In the event that\nchanges to existing laws and regulations require us to incur additional compliance costs or require costly changes to our production\nprocess, our costs could increase and we may suffer a decline in sales for certain products, as a result of which our business, results\nof operations and financial condition could be materially and adversely affected.\n\n \n\n**Increases\nin labor costs and enforcement of stricter labor laws and regulations in China and our additional payments of statutory employee benefits\nmay adversely affect our business and profitability.**\n\n \n\nThe\naverage wage in China has increased in recent years and is expected to continue to grow. The average wage level for our employees has\nalso increased in recent years. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless\nwe are able to pass on these increased labor costs to our customers, our profitability and results of operations may be materially and\nadversely affected. In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with\nour employees and paying various statutory employee benefits, including pensions, housing funds, medical insurance, work related injury\ninsurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. Pursuant\nto the PRC Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing labor\ncontracts, paying remuneration, determining the term of employee’s probation and unilaterally terminating labor contracts. In the\nevent that we decide to terminate some of our employees or otherwise change our employment or labor practices, the PRC Labor Contract\nLaw and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely\naffect our business and results of operations.\n\n \n\nPursuant\nto PRC laws and regulations, companies registered and operating in China are required to apply for social insurance registration and\nhousing fund deposit registration within 30 days of their establishment and to pay for their employees various social insurance including\npension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to the extent required\nby law. According to the Social Insurance Law, if an employing entity does not pay the full amount of social insurance premiums as scheduled\nor required, the social insurance premium collection institution shall order it to make the payment or make up the difference within\nthe stipulated period and impose a daily fine equivalent to 0.05% of the overdue payment from the day on which the payment is overdue.\nIf the payment is not made within the prescribed time ordered by the social insurance authority, the authority shall impose a fine ranging\nfrom one to three times of the overdue payment amount. According to the Regulations on Management of Housing Provident Funds, where an\nentity fails to deposit the housing provident fund in full within the prescribed deadline, it shall be ordered by the housing provident\nfund management center to deposit the fund within a time limit; if it still fails to deposit the fund within the time limit, the housing\nprovident fund management center may apply to the People’s Court for enforcement. We have paid social insurance for all employees\nand housing provident fund for most of our employees in China. While our payment base of social insurance and housing provident fund\nmeets the respective local government’s minimum requirements in respect of the locations of our PRC subsidiary, it is lower than\nthe national legal standard. As of the date of this report, we have not received any notice of warning or been subject to any material\nadministrative penalties or other material disciplinary actions from the relevant governmental authorities for our historical shortfall\nin social insurance and housing fund contribution. However, as the PRC government enhanced its enforcement measures relating to social\ninsurance collection, we may be required to make up the contributions for our employees, and may be further subjected to late fees payment\nand administrative fines, which may adversely affect our financial condition and results of operations. As the interpretation and implementation\nof labor-related laws and regulations are still evolving, we cannot assure you that our current employment practices do not and will\nnot violate other effective or future labor-related laws and regulations in China, which may subject us to labor disputes or government\ninvestigations. In addition, we may incur additional expenses in order to comply with such laws and regulations, which may adversely\naffect our business and profitability.\n\n \n\n8\n\n \n\n \n\n**The\nenactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong\nNational Security Law”) could impact our Hong Kong subsidiaries.**\n\n \n\nOn\nJune 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law\ndefines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories\nof offences — secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger\nnational security — and their corresponding penalties. On July 14, 2020, former U.S. President Donald Trump signed the Hong Kong\nAutonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who\nare determined to have materially contributed to the erosion of Hong Kong’s autonomy. The spokesperson of the PRC government has\nissued statements that this document was grossly trampled on the international law and basic norms of international relations, seriously\ninterfered in China’s internal affairs, and should have been repealed a long time ago. On August 7, 2020 the U.S. government imposed\nHKAA-authorized sanctions on eleven individuals, including HKSAR chief executive Carrie Lam. On October 14, 2020, the U.S. State Department\nsubmitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the\nfailure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes\nsecondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a\nsignificant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect foreign\nfinancial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It\nis difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong.\nAny such continued tension between the U.S. and the PRC may affect the economy of Hong Kong and in turn, materially and adversely affect\nour business and operation. If our subsidiaries in Hong Kong are determined to be in violation of the Hong Kong National Security Law\nor the HKAA by competent authorities, our business operations, financial position and results of operations could be materially and adversely\naffected.\n\n \n\n**A\ndownturn in Hong Kong, China or the global economy, and the economic and political policies of China could materially and adversely affect\nour business and financial condition.**\n\n \n\nWe\nconduct our operation through our Operating Subsidiaries in Europe, the U.S. and Asia, primarily in Hong Kong and China. Accordingly,\nour business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic\nand social conditions in Hong Kong and China generally and by continued economic growth in Hong Kong and China as a whole. The Chinese\neconomy differs from the economies of most developed countries in many respects, including the amount of government involvement, level\nof development, growth rate, control of foreign exchange and allocation of resources. While the Chinese economy has experienced significant\ngrowth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government\nhas implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit\nthe overall Chinese economy but may have a negative effect on us.\n\n \n\nEconomic\nconditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy\nmay affect potential clients’ confidence in the financial market as a whole and have a negative impact on our business, results\nof operations and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability\nto access the capital markets to meet liquidity needs.\n\n \n\n**The\nHong Kong legal system embodies uncertainties which could limit the legal protections available to our Company.**\n\n \n\nHong\nKong is a Special Administrative Region of the PRC and enjoys a high degree of autonomy under the “one country, two systems”\nprinciple. The Hong Kong Special Administrative Region’s constitutional document, the Basic Law, ensures that the current political\nsituation will remain in effect for 50 years. Hong Kong has enjoyed the freedom to function with a high degree of autonomy for its affairs,\nincluding currencies, immigration and custom, an independent judiciary system and a parliamentary system. The National People’s\nCongress of the PRC has the right to amend the Basic Law. We cannot assure you that there will not be any amendment to the Basic Law\nthat may affect the judiciary and legal systems of Hong Kong and guarantee the implementation of the “one country, two systems”\nprinciple and the level of autonomy as currently in place at the moment. Any changes in the state of the political environment in Hong\nKong may materially and adversely affect our business and operation. Additionally, intellectual property rights and confidentiality protections\nin Hong Kong may not be as effective as in the United States or other countries. These uncertainties could limit the legal protections\navailable to us, including our ability to enforce our agreements with our clients.\n\n \n\n9\n\n \n\n** **\n\n**Changes\nin international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China and other\nmarkets where the majority of our clients reside.**\n\n \n\nPolitical\nevents, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy,\nand could have a material adverse effect on us and our customers, service providers and other partners. International trade disputes\ncould result in tariffs and other protectionist measures which may materially and adversely affect our business.\n\n \n\nTariffs\ncould increase the cost of goods and products which could affect customers’ investment decisions. In addition, political uncertainty\nsurrounding international trade disputes and the potential of the escalation to trade war and global recession could have a negative\neffect on customer confidence, which could materially and adversely affect our business. We may have also access to fewer business opportunities,\nand our operations may be negatively impacted as a result. In addition, the current and future actions or escalations by either the United\nStates or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets,\nour business, or our results of operations, as well as the financial condition of our clients. and we cannot provide any assurances as\nto whether such actions will occur or the form that they may take.\n\n \n\nUnder\nthe Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, Hong Kong is exclusively in charge\nof its internal affairs and external relations, while the government of the PRC is responsible for its foreign affairs and defense. As\na separate customs territory, Hong Kong maintains and develops relations with foreign states and regions. However, based on recent political\ndevelopment, the U.S. State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy\nfrom China. Hong Kong’s preferential trade status was removed by the United States government and the United States may impose\nthe same tariffs and other trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other\nrecent actions may represent an escalation in political and trade tensions involving the U.S., China and Hong Kong, which could potentially\nharm our business.\n\n \n\n**Fluctuations\nin exchange rates could have a material and adverse effect on our results of operations and the value of your investment.**\n\n \n\nOur\nrevenues and expenses will be denominated in Hong Kong dollars, EUR, Renminbi and U.S. dollars. Although the exchange rate between the\nHong Kong dollar to the U.S. dollar has been pegged since 1983, we cannot assure you that the Hong Kong dollar will remain pegged to\nthe U.S. dollar. Any significant fluctuations in the exchange rates between Hong Kong dollars to the U.S. dollars may have a material\nadverse effect on our revenue and financial condition. We have not used any forward contracts, futures, swaps or currency borrowings\nto hedge our exposure to foreign currency risk.\n\n \n\n**Risks\nRelated to Our ADSs**\n\n \n\n**An\nactive trading market for the ADSs on Nasdaq might not develop or be sustained, their trading prices might fluctuate significantly and\nthe liquidity of our ADSs would be materially affected.**\n\n \n\nWe\ncannot assure you that an active trading market for the ADSs on Nasdaq will develop or be sustained. If an active trading market of our\nADSs on Nasdaq does not develop or is not sustained, the market price and liquidity of our ADSs could be materially and adversely affected.\n\n \n\n**We\nincurred increased costs as a result of being a public company, and will continue to incur increased costs particularly after we cease\nto qualify as an “emerging growth company.”**\n\n \n\nWe\nincurred significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley\nAct of 2002, as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices\nof public companies. We are an “emerging growth company” as defined in the JOBS Act and will remain an emerging growth company\nuntil the earlier of (1) the last day of the fiscal year (a)following the fifth anniversary of the completion of this offering, (b) in\nwhich we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which\nmeans the market value of our ADSs that are held by non-affiliates exceeds $700 million as of the last business day of our most recently\ncompleted second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior\nthree-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise\napplicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404\nin the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new\nor revised accounting standards until such time as those standards apply to private companies.\n\n \n\n10\n\n \n\n \n\nCompliance\nwith these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming\nand costly. After we are no longer an “emerging growth company”, or until five years following the completion of our initial\npublic offering, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring\ncompliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we\nhave been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls\nand procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional\ncosts associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve\non our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules\nand regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing\nof such costs.\n\n \n\n**If\nwe fail to meet applicable listing requirements, Nasdaq may delist our ADSs from trading, in which case the liquidity and market price\nof our ADSs could decline.**\n\n \n\nWe\ncannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. If we fail to comply with the\napplicable listing standards and Nasdaq delists our ADSs, we and our shareholders could face significant material adverse consequences,\nincluding**:**\n\n \n\n \n●\na\nlimited availability of market quotations for our ADSs;\n\n \n \n \n\n \n●\nreduced\nliquidity for our ADSs;\n\n \n \n \n\n \n●\na\ndetermination that our ADSs are “penny stock”, which would require brokers trading in our ADSs to adhere to more stringent\nrules and possibly result in a reduced level of trading activity in the secondary trading market for our ADSs;\n\n \n \n \n\n \n●\na\nlimited amount of news about us and analyst coverage of us; and\n\n \n \n \n\n \n●\na\ndecreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.\n\n \n\nThe\nNational Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the\nsale of certain securities, which are referred to as “covered securities.” Because we expect that our ADSs will be listed\non Nasdaq, such securities will be covered securities. Although the states are preempted from regulating the sale of our securities,\nthe federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent\nactivity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed\non Nasdaq, our securities would not be covered securities and we would be subject to regulations in each state in which we offer our\nsecurities.\n\n \n\n**Volatility\nin our ADSs price may subject us to securities litigation.**\n\n \n\nThe\nmarket for our ADSs may have, when compared to seasoned issuers, significant price volatility and we expect that our ADS price may continue\nto be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities\nclass action litigation against a company following periods of volatility in the market price of its securities. We may, in the future,\nbe the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s\nattention and resources.\n\n \n\n**The\nprice and the trading volume of our ADSs may be volatile which could result in substantial losses for investors.**\n\n \n\nThe\nprice and trading volume of our ADSs may be volatile. The market price of our ADSs may fluctuate significantly and rapidly as a result\nof the following factors, among others, some of which are beyond our control:\n\n \n\n \n●\nfluctuations\nin stock market price and volume;\n\n \n \n \n\n \n●\ndepth\nand liquidity of the market for our ADSs;\n\n \n \n \n\n \n●\ninvestors’\nperceptions of us and our business;\n\n \n \n \n\n \n●\nactions\nby institutional shareholders;\n\n \n \n \n\n \n●\nchanges\nin accounting standards, policies, guidance, interpretations and principles;\n\n \n\n11\n\n \n\n \n\n \n●\nadditions\nor departures of our key personnel;\n\n \n \n \n\n \n●\nregulatory\nor legal developments, including involvement in litigation; and\n\n \n \n \n\n \n●\ngeneral\nglobal economic, political and stock market conditions.\n\n \n\nThere\nwere instances of extreme stock price run-ups followed by rapid price declines and stock price volatility seemingly unrelated to company\nperformance following a number of recent initial public offerings, particularly among companies with relatively smaller public floats.\nSuch volatility, including stock run-up, may be unrelated or disproportionate to the actual or expected operating performance and financial\ncondition or prospects of such companies, making it difficult for investors to assess the rapidly changing value of our ADSs.\n\n \n\nIn\naddition, if the trading volumes of our ADSs are low, persons buying or selling in relatively small quantities may easily influence prices\nof our ADSs. This low volume of trades could also cause the price of our ADSs to fluctuate greatly, with large percentage changes in\nprice occurring in any trading day session. Holders of our ADSs may also not be able to readily liquidate their investment or may be\nforced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions\nmay also adversely affect the market price of our ADSs. As a result of this volatility, investors may experience losses on their investment\nin our ADSs. A decline in the market price of our ADSs also could adversely affect our ability to issue additional ADSs and our ability\nto obtain additional financing in the future. No assurance can be given that an active market in our ADSs will develop or be sustained.\nIf an active market does not develop, holders of our ADSs may be unable to readily sell the ADSs they hold or may not be able to sell\ntheir shares at all.\n\n \n\n**We\nare a “controlled company” within the meaning of Nasdaq rules and we will qualify for and may rely on exemptions from certain\ncorporate governance requirements.**\n\n \n\nWe\nare a “controlled company” within the meaning of Nasdaq Stock Market Rules. As at the date of this report, TUTU Business\nServices Limited, our controlling shareholder, which is owned as to 100% by Ms. Wang Liying, our Director and Chief Executive Officer,\nowns 92,932,850 Class B Ordinary Shares, representing 100% of our total issued and outstanding Class B Ordinary Shares and approximately\n99.16% of the total voting power of our capital stock. As a result of the dual-class share structure and the concentration of ownership,\nMs. Wang Liying, through TUTU Business Services Limited, will be able to control the management and affairs of our Company and all matters\nrequiring shareholder approval, including without limitation, the election of directors, amendment of organizational documents, and approval\nof major corporate transactions, such as a change in control, merger, consolidation, or sale of assets.\n\n \n\nUnder\nthe Nasdaq rules, a company of which more than 50% of the voting power with respect to the election of directors is held by an individual,\na company or a group of persons acting together is a “controlled company” and may elect not to comply with certain stock\nexchange rules regarding corporate governance, including the following requirements:\n\n \n\n \n–\nthat\na majority of its board of directors consists of independent directors;\n\n \n \n \n\n \n–\nthat\nits director nominees be selected or recommended for the board’s selection by a majority of the board’s independent directors\nin a vote in which only independent directors participate or by a nominating committee comprised solely of independent directors,\nin either case, with a formal written charter or board resolutions, as applicable, addressing the nominations process and such related\nmatters as may be required under the federal securities laws; and\n\n \n \n \n\n \n–\nthat\nits compensation committee is composed solely of independent directors with a written charter addressing the committee’s purpose\nand responsibilities.\n\n \n\nIf\nwe elect to be treated as a controlled company and use these exemptions, you may not have the same protections afforded to stockholders\nof companies that are subject to all of Nasdaq rules regarding corporate governance, which could make our ADSs less attractive to investors\nor otherwise harm our stock price.\n\n \n\n**Our\ndisclosure controls and procedures may not prevent or detect all errors or acts of fraud.**\n\n \n\nWe\nare subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide\nreasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated\nto management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.\nWe believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute,\nassurance that the objectives of the control system are met.\n\n \n\n12\n\n \n\n \n\nThese\ninherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of\nsimple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or\nmore people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements\ndue to error or fraud may occur and not be detected.\n\n \n\n**We\nmay not pay any dividends on the ADSs.**\n\n \n\nFor\nthe years ended December 31, 2025, 2024 and 2023 and up to the date of this report, we did not declare or pay any dividends. We cannot\nguarantee when, if, or in what form, dividends will be paid on the ADSs following the listing. A declaration of dividends must be proposed\nby our board of directors and will be based on, and limited by, various factors, including our business and financial performance, capital\nand regulatory requirements and general business conditions. Furthermore, we may not have sufficient profits to make dividend distributions\nto our shareholders in the future, even if our financial statements prepared in accordance with IFRS indicate that our operations have\nbeen profitable.\n\n \n\n**Securities\nanalysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our\nshare price or trading volume to decline.**\n\n \n\nIf\na trading market for our ADSs develops, the trading market will be influenced to some extent by the research and reports that industry\nor financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow\nto attract research coverage and the analysts who publish information about our ADSs will have had relatively little experience with\nus or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to\nmeet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate\nor unfavorable research or issue an adverse opinion regarding our share price, our share price could decline. If one or more of these\nanalysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn\ncould cause our share price or trading volume to decline and result in the loss of all or a part of your investment in us.\n\n \n\n**Investors\nmay have difficulty enforcing judgments against us, our Directors and management.**\n\n \n\nWe\nare incorporated under the laws of the BVI and all of our Directors and officers reside outside the United States. Moreover, many of\nthese persons do not have significant assets in the United States. As a result, it may be difficult or impossible to effect service of\nprocess within the United States upon these persons, or to recover against us or them on judgments of U.S. courts, including judgments\npredicated upon the civil liability provisions of the U.S. federal securities laws. Even if you are successful in bringing an action\nof this kind, the laws of the BVI could render you unable to enforce a judgment against our assets or the assets of our Directors and\nofficers.\n\n \n\nThere\nis uncertainty as to whether the courts of the BVI would (i) recognize or enforce judgments of U.S. courts obtained against us or our\nDirectors or officers predicated upon the civil liability provisions of the securities laws of the U.S. or any state in the U.S. or (ii)\nentertain original actions brought in the BVI against us or our Directors or officers predicated upon the securities laws of the U.S.\nor any state in the U.S.\n\n \n\nThe\nU.S. and the BVI do not have a treatment providing for reciprocal recognition and enforcement of judgments of courts of the U.S. in civil\nand commercial matters and that a final judgment for the payment of money rendered by any general or state court in the U.S. based on\ncivil liability, whether or not predicated solely upon the U.S. federal securities laws would not be enforceable in the BVI. A final\nand conclusive judgment obtained in U.S. federal or state courts under which a sum of money is payable as compensatory damages (i.e.,\nnot being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or in respect\nof a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in the court of the BVI under the common\nlaw doctrine of obligation. Furthermore, it is uncertain that BVI courts would: (1) recognize or enforce judgments of U.S. courts obtained\nin actions against us or our Directors or officers predicated upon the civil liability provisions of the U.S. federal securities laws;\nor (2) entertain original actions brought against us or other persons predicated upon the Securities Act.\n\n \n\n**You\nmay have more difficulty protecting your interests than you would as a shareholder of a U.S. corporation.**\n\n \n\nOur\ncorporate affairs are governed by the provisions of our memorandum and articles of association, as amended and restated from time to\ntime, and by the provisions of applicable BVI law. The rights of shareholders and the fiduciary responsibilities of our Directors and\nofficers under BVI law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in\nthe U.S., and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law.\n\n \n\n13\n\n \n\n \n\nThese\nrights and responsibilities are to a large extent governed by the BVI Act and the common law of the BVI. The common law of the BVI is\nderived in part from judicial precedent in the BVI as well as from English common law, which has persuasive, but not binding, authority\non a court in the BVI. In addition, BVI law does not make a distinction between public and private companies and some of the protections\nand safeguards (such as statutory pre-emption rights, save to the extent expressly provided for in the memorandum and articles of association)\nthat investors may expect to find in relation to a public company are not provided for under BVI law.\n\n \n\nThere\nmay be less publicly available information about us than is regularly published by or about U.S. issuers. Also, the BVI regulations governing\nthe securities of BVI companies may not be as extensive as those in effect in the U.S., and the BVI law and regulations regarding corporate\ngovernance matters may not be as protective of minority shareholders as state corporation laws in the U.S. Therefore, you may have more\ndifficulty protecting your interests in connection with actions taken by our Directors and officers or our principal shareholders than\nyou would as a shareholder of a corporation incorporated in the U.S.\n\n \n\n**The\nlaws of BVI may provide less protections for minority shareholders than those under U.S. law, so minority shareholders will not have\nthe same options for recourse in comparison to the United States if the shareholders are dissatisfied with the conduct of our affairs.**\n\n \n\nUnder\nthe laws of the BVI, there is limited statutory protection of minority shareholders other than the provisions of the BVI Act dealing\nwith shareholder remedies. The principal protections under BVI statutory law are derivative actions, actions brought by one or more shareholders\nfor relief from unfair prejudice, oppression and unfair discrimination and/or to enforce the BVI Act or the memorandum and articles of\nassociation. Shareholders are entitled to have the affairs of the company conducted in accordance with the BVI Act and the memorandum\nand articles of association, and are entitled to payment of the fair value of their respective shares upon dissenting from certain enumerated\ncorporate transactions.\n\n \n\nThere\nare common law rights for the protection of shareholders that may be invoked, largely dependent on English company law since the common\nlaw of the BVI is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will\ngenerally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction\nwith the conduct of the company’s affairs by the majority of the board of directors. However, every shareholder is entitled to\nseek to have the affairs of the company conducted properly according to the law and the constitutional documents of the company. As such,\nif those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s\nmemorandum and articles of association, then the courts may grant relief. Generally, the areas in which the courts will intervene are\nthe following: (i) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification\nby the majority; (ii) where the company has not complied with provisions requiring approval of a special or extraordinary majority of\nshareholders; (iii) acts that infringe or are about to infringe on the personal rights of the shareholders, such as the right to vote;\nor (iv) acts that constitute fraud on the minority where the wrongdoers control the company.\n\n \n\nThese\nrights may be more limited than the rights afforded to minority shareholders under the laws of states in the United States.\n\n \n\nOther\nthan as set forth in the BVI Act, shareholders of BVI companies like us have no general rights under BVI law to inspect corporate records\nor to obtain copies of lists of shareholders of these companies. Our Directors have the discretion to determine whether or not, and under\nwhat conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders,\nother than as set forth in the BVI Act. This may make it more difficult for you to obtain the information needed to establish any facts\nnecessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.\n\n \n\nAs\na result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken\nby our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company\nincorporated in the United States.\n\n \n\n14\n\n \n\n** **\n\n**We\nare a foreign private issuer and, as a result, will not be subject to U.S. proxy rules and will be subject to more lenient and less frequent\nExchange Act reporting obligations than a U.S. issuer.**\n\n \n\nWe\nreport under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer\nunder the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies,\nincluding (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security\nregistered under the Exchange Act; (ii) the sections 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 period of time; and (iii) the rules under the\nExchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information,\nor current reports on Form 8-K upon the occurrence of specified significant events. In addition, our officers, directors and principal\nshareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act\nand the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders\npurchase or sell our shares. In addition, foreign private issuers are not required to file their annual report on Form 20-F until one\nhundred twenty (120) days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to\nfile their annual report on Form 10-K within seventy-five (75) days after the end of each fiscal year. Foreign private issuers also are\nexempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result\nof the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.\n\n \n\nIf\nwe lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements\napplicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may\nalso be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory\nand compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S.\ndomestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss\nof foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time-consuming\nand costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it\nwould make it more difficult and expensive for us to obtain and maintain directors’ and officers’ liability insurance, and\nwe may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could\nalso make it more difficult for us to attract and retain qualified members of our board of directors.\n\n \n\n**As\na foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ\nsignificantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they\nwould enjoy if we complied fully with corporate governance listing standards.**\n\n \n\nAs\na foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home\ncountry’s law for certain governance matters. Certain corporate governance practices in our home country, the BVI, may differ significantly\nfrom Nasdaq corporate governance listing standards.\n\n \n\nPursuant\nto the home country rule exemption set forth under Nasdaq Listing Rule 5615(a)(3)(A), which provides (with certain exceptions not relevant\nto the conclusions expressed herein) that a foreign private issuer may follow its home country practice in lieu of the requirements of\nthe Nasdaq Marketplace Rule 5600 Series, we elected to be exempt from the requirements:\n\n \n\n \n●\nNasdaq\nMarketplace Rule 5635(c) which requires a Nasdaq-listed company to obtain shareholder approval prior to the issuance of securities\nwhen a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or\nmaterially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants, subject to certain\nexceptions.\n\n \n\nExcept\nfor the foregoing, we endeavor to comply with the Nasdaq corporate governance practices and except for the foregoing, there is no significant\ndifference between our corporate governance practices and what the Nasdaq requires of domestic U.S. companies.\n\n \n\nIf\nwe choose to further follow home country practices in the future, our shareholders may be afforded less protection than they would otherwise\nenjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.\n\n \n\n15\n\n \n\n \n\n**There\ncan be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable\nyear, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs.**\n\n \n\nA\nnon-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain\ntypes of “passive” income; or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of\nthe assets) during such year is attributable to assets that produce passive income or are held for the production of passive income,\nor the asset test. Based on our current and expected income and assets, we do not presently expect to be a PFIC for the current taxable\nyear or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will\nbecome a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets.\nIn addition, there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would\nnot successfully challenge our position. Fluctuations in the market price of our ADSs may cause us to become a PFIC for the current or\nsubsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market\nprice of our ADSs. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and\nthe cash raised in the IPO. If we were to be or become a PFIC for any taxable year during which a U.S. Holder holds our ADSs, certain\nadverse U.S. federal income tax consequences could apply to such U.S. Holder.\n\n \n\n**We\nmay not be able to pay any dividends on our ADSs in the future due to BVI law.**\n\n \n\nUnder\nBVI law, we may only pay dividends to our shareholders if the value of our assets exceeds our liabilities and we are able to pay our\ndebts as they become due. We cannot give any assurance that we will declare dividends of any amounts, at any rate, or at all in the future.\nFuture dividends, if any, will be at the discretion of our board of directors, and will depend upon our results of operations, cash flows,\nfinancial condition, payment to us of cash dividends by our subsidiaries, capital needs, future prospects and other factors that our\nDirectors may deem appropriate.\n\n \n\n**We\nmay lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.**\n\n \n\nWe\nare a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting\nrequirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an\nissuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than\n50% of our ADSs are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary\nto maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file\nwith the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the\nforms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers,\ndirectors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of\nthe Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under\nthe Nasdaq rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting\nand other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain\na listing on a U.S. securities exchange.\n\n \n\n**We\nare an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.**\n\n \n\nWe\nare an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable\nto other public companies that are not emerging growth companies, including, most significantly, not being required to comply with the\nauditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company.\nAs a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information\nthey may deem important.\n\n \n\nThe\nJOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards\nuntil such date that a private company is otherwise required to comply with such new or revised accounting standards. We do not plan\nto opt out of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements may not\nbe comparable to companies that comply with public company effective data.\n\n \n\n16\n\n \n\n \n\n**We\nmay amend the deposit agreement without consent from holders of ADSs and, if such holders disagree with our amendments, their choices\nwill be limited to selling the ADSs or cancelling and withdrawing the underlying Class A Ordinary Shares.**\n\n \n\nWe\nmay agree with the depositary to amend the deposit agreement without consent from holders of ADSs. If an amendment increases fees to\nbe charged to ADS holders or prejudices a substantial existing right of ADS holders, it will not become effective until 30 days after\nthe depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, ADS holders are considered, by continuing\nto hold their ADSs, to have agreed to the amendment and to be bound by the amended deposit agreement. If holders of ADSs do not agree\nwith an amendment to the deposit agreement, their choices will be limited to selling the ADSs or cancelling and withdrawing the underlying\nClass A Ordinary Shares. No assurance can be given that a sale of ADSs could be made at a price satisfactory to the holder in such circumstances.\n\n \n\n**Holders\nof ADSs may be subject to limitations on transfer of their ADSs.**\n\n \n\nADSs\nare transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time\nwhen it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer,\nor register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary\ndeems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the\ndeposit agreement, or for any other reason."}