{"url_path":"/sec/qdmi/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-29","source_url":"https://www.sec.gov/Archives/edgar/data/1094032/0001213900-26-073119-index.html","accession_number":"0001213900-26-073119","cik":"0001094032","ticker":"QDMI","issuer_name":"QDM International Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1094032/0001213900-26-073119-index.html","primary_entity_key":"0001094032","primary_entity_name":"QDM International Inc."},"word_count":17304,"has_tables":true,"body_markdown":"** **\n\n**Item 1A. Risk Factors**\n\n \n\nOur business is subject to many significant risks,\nas more fully described in this section entitled “Risk Factors.” If any of the risks discussed in this Report actually occur,\nour business, financial condition or operating results could be materially and adversely affected. In particular, our risks include, but\nare not limited to, the following:\n\n \n\n**Summary of Risk Factors**\n\n** **\n\n**Risks Related to Our Business and Industry**\n\n** **\n\n \n●\nOur operating subsidiary derives a significant portion of revenues from selling insurance products supplied by our major insurance company partners and our business is subject to concentration risks arising from dependence on a single or limited number of insurance company partners.\n\n \n\n \n●\nAll of our sales of life and medical insurance products and general insurance products are conducted through our licensed technical representatives. If we are unable to attract and retain highly productive technical representatives, our business could be materially and adversely affected.\n\n \n\n \n●\nMisconduct of the technical representatives may also have a material adverse effect on our business, results of operations or financial condition.\n\n \n\n \n●\nFailure to obtain, renew, or retain licenses, permits or approvals may affect our ability to conduct or expand our business.  \n\n \n \n \n\n \n●\nIf we fail to comply with Hong Kong regulations on referral arrangements and benchmark referral fees, we may be subject to regulatory sanctions, including suspension or revocation of our insurance broker license, and our business, financial condition and results of operations could be materially and adversely affected.\n\n \n\n \n●\nWe face intense competition in the insurance intermediary industry in Hong Kong. If we are unable to compete effectively with both existing and new market participants, we may lose customers and our financial results may be negatively affected.\n\n \n\n \n●\nOur commission revenue is subject to quarterly fluctuations as a result of the seasonality of our business, the timing of policy renewals and the net effect of new and lost business. The factors that cause the quarterly variations are not within our control.\n\n \n\n**Risks Related to Doing Business in Hong Kong**\n\n \n\n \n●\nPolitical risks associated with conducting business in Hong Kong and economic instability in Hong Kong may adversely impact our results of operations. We may also face the risk that changes in the policies of the PRC government could have a significant impact upon the business we conduct in Hong Kong and the profitability of such business.\n\n \n\n25\n\n \n\n \n\n \n●\nSubstantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we conduct in Hong Kong and accordingly on the results of our operations and financial condition.\n\n \n\n \n●\nThe enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region could impact our Hong Kong operating subsidiary.\n\n \n\n \n●\nThe PRC government exerts substantial influence and discretion over the manner in which companies incorporated under the laws of the PRC must conduct their business activities. We are a Hong Kong-based company with no operations in mainland China. There is a risk that the PRC government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong or PRC-based issuers. Any such action of the PRC government could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause our securities to significantly decline in value or become worthless.\n\n \n\n \n●\nIn light of the PRC government’s extension of its authority into Hong Kong, the Chinese government can change Hong Kong’s rules and regulations at any time with little to no advance notice, and can intervene and influence our operations and business activities in Hong Kong.\n\n \n\n \n●\nWe may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers.\n\n \n\n \n●\nWe may rely on dividends and other distributions on equity paid by the Hong Kong operating subsidiary to fund any cash and financing requirements it may have, and any limitations or restrictions, prohibitions, interventions or limitations by the PRC government on the ability of the Company or our Hong Kong operating subsidiary to transfer cash or assets in or out of Hong Kong may result in these funds or assets not being available to fund operations or for other uses outside of Hong Kong, which on the ability of the Hong Kong operating subsidiary to make payments to the Company could have a material and adverse effect on the business.\n\n \n\n \n●\nTrading in our securities may be prohibited under the HFCA Act if the PCAOB determines that it cannot inspect or investigate completely our auditor.\n\n \n\n \n●\nIt may be difficult for shareholders to enforce any judgment obtained in the United States against us, which may limit the remedies otherwise available to our shareholders.\n\n \n\n \n●\nOur business, financial condition and results of operations, and/or the value of our Common Stock or our ability to offer or continue to offer securities to investors may be materially and adversely affected to the extent the laws and regulations of the PRC become applicable to a company such as us.\n\n \n\n**Risks Related to Our Common Stock**\n\n** **\n\n \n●\nAn active market for our common stock may never develop, and we are under no obligation to seek out a more active market for our common stock.\n\n \n\n \n●\nWe may not maintain qualification for OTCQB inclusion, and therefore you may be unable to sell your shares.\n\n   \n\n \n●\nOur controlling shareholder may exercise significant influence over us and may be subject to conflicts of interest.\n\n \n\n \n●\nShares of Series B Preferred\nStock, which are held by Mr. Huihe Zheng, our Chairman of the Board, Chief Executive Officer, have super voting rights that may adversely\naffect our holders of common stock; in addition, Mr. Zheng, as our controlling shareholder, may exercise significant influence over\nus and may be subject to conflicts of interest.\n\n \n\n \n●\nOur common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.\n\n \n\n \n●\nOur management has determined that our disclosure controls and procedures were not effective as of March 31, 2026 and we have identified material weaknesses in our internal control over financial reporting.\n\n \n\n*An investment in our securities is highly speculative\nand involves substantial risks, including the risks described below. You should carefully consider all of the risks described below, together\nwith the other information contained in this Report, before making a decision to invest in our securities. The risks highlighted here\nare not the only ones that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial\nor unlikely to occur could also impair our operations. If any of the risks or uncertainties described below or any such additional risks\nand uncertainties actually occur, our business, prospects, financial condition or results of operations could be negatively affected,\nand you might lose all or part of your investment.*\n\n \n\n26\n\n \n\n \n\n**Risks Related to Our Business and Industry**\n\n \n\n**Our business is subject to concentration\nrisks arising from dependence on a single or limited number of insurance company partners.**\n\n \n\nWe derive a significant portion of revenues from\nselling insurance products supplied by our major insurance company partners. For the fiscal year ended March 31, 2026, approximately 31.3%,\n26.1% and 11.6% of our total commissions were attributable to three insurance company, respectively For the fiscal year ended March 31,\n2025, approximately 68.1% and 12.4% of our total commissions were attributed to two insurance company, respectively.\n\n \n\nBecause of this concentration in the supply of\nthe insurance products we sell, our business and operations would be negatively affected if we experience a partial or complete loss of\nany of these insurance partners. In addition, any significant adverse change in our relationship with any of these insurance company partners\ncould result in loss of revenue, increased costs and distribution delays that could harm our business and customer relationships.\n\n \n\n**If we fail to attract and retain productive\ntechnical representatives to sell the insurance products, our business and operating results could be materially and adversely affected.**\n\n \n\nAll of our sales of life and medical insurance\nproducts and general insurance products are conducted through our licensed technical representatives. We have been actively recruiting\nand will continue to recruit technical representatives to join our distribution and service network. Technical representatives have been\ninstrumental to the development of our life insurance business.\n\n \n\nAs of March 31, 2026, we had 23 technical\nrepresentatives, 8 of whom are our full-time employees. Competition for technical representatives is intense and there can be no assurance\nthat we will be able to attract and retain such personnel. If we are unable to attract and retain highly productive technical representatives,\nour business could be materially and adversely affected.\n\n \n\n**Misconduct of the technical representatives\nmay have a material adverse effect on our business, results of operations or financial condition.**\n\n \n\nMisconduct of the technical representatives could\nresult in regulatory sanctions, litigation or serious reputational or financial harm to us.\n\n \n\nMisconduct may include:\n\n \n\n \n●\nthe conduct during the course of sales and the use of methods of solicitation and advertising that violates the relevant laws and regulations governing insurance industry or other applicable area of laws and regulations in Hong Kong;\n\n \n \n \n\n \n●\nthe use of methods of solicitation and advertising that are not compatible with the integrity and dignity of the profession of insurance broking;\n\n \n\n \n●\nthe use of any illustration, circular, memorandum or other material that misrepresents or is incomplete as regards the terms, benefits or advantages of any insurance policy issued or to be issued to a prospective customer;\n\n \n\n \n●\nthe use of any incomplete or misleading comparison or illustration of any policy or contract of insurance for the purpose of inducing an insured to forfeit or replace a policy or contract of insurance;\n\n \n\n \n●\nthe offer of any unlawful payment, allowance or gift as an inducement to any prospective customer to insure through the technical representative; and\n\n \n\n \n●\nholding out to the public or advertising by means of advertisements, cards, circulars, letters, signs or other methods in an irresponsible, untruthful or otherwise unlawful manner.\n\n \n\nFailure to prevent and detect misconduct may have\na material adverse effect on our business, results of operations or financial condition.\n\n \n\n27\n\n \n\n \n\n**We are subject to extensive regulations\nfor our insurance brokerage business and operations.**\n\n \n\nWe conduct our business primarily in Hong Kong\nas a licensed insurance broker, and our business operations are subject to vigorous regulations in Hong Kong applicable to licensed\ninsurance brokers. Any failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel\nor other sanctions, including revocation of our license as an insurance broker. In addition, we are a registered MPF intermediary and\nsubject to the relevant laws and regulations. Even if a sanction imposed against us or our personnel is small in monetary amount, the\nadverse publicity arising from the imposition of sanctions against us by regulators could harm our reputation and impede our ability to\nretain customers and develop new customer relationships, which may reduce our revenues.\n\n \n\nThe regulatory landscape in the insurance industry\nin Hong Kong is subject to constant evolution and changes. We face the risk of significant intervention by regulatory authorities\nfrom time to time, including increased registered capital requirements, extended training of the insurance agencies’ personnel,\nand adoption of restrictive new regulations that can incur substantial costs on the Company. If any such new regulations and rules become\neffective and applicable to our business, these regulations may materially limit our business activities and operational profitability.\n\n \n\n**Compliance with changing regulation of corporate\ngovernance and public disclosure as a public company in the U.S., and our management’s limited experiences with such regulations,\nmay result in additional expenses and create an increased risk of non-compliance.**\n\n \n\nChanging laws, regulations and standards relating\nto corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty\nfor public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting.\nOur management team will need to invest significant management time and financial resources to comply with both existing and evolving\nstandards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and\nattention from revenue generating activities to compliance activities. In addition, our management members who are located Hong Kong have\nlimited experience with compliance with U.S. laws (including securities laws). This inexperience may cause us to fall out of compliance\nwith applicable regulatory requirements, which could lead to enforcement action against us and a negative impact on our stock price.\n\n \n\n**Failure to obtain, renew, or retain licenses,\npermits or approvals may affect our ability to conduct or expand our business.**\n\n \n\nWe are required to obtain applicable licenses,\npermits and approvals from different Hong Kong regulatory authorities in order to conduct or expand our business. The IA has promulgated various regulations on the insurance business, including regulations requiring an insurance\nbroker company license. We obtained, renewed and maintained our insurance broker company license as required by the IA. However, there\nis no assurance that the IA will not issue new regulations governing the insurance product and service industry that might require us\nto obtain additional licenses, permits or approvals for our current or future business operations. Our failure to obtain any such additional\nlicenses, permits or approvals may adversely affect our business operations and financial condition.\n\n \n\n**If we fail to comply with Hong Kong regulations\non referral arrangements and benchmark referral fees, we may be subject to regulatory sanctions, including suspension or revocation of\nour insurance broker license, and our business, financial condition and results of operations could be materially and adversely affected.**\n\n** **\n\nWe rely on referrals as an important source of\nnew clients, including visitors from mainland China. As a licensed insurance broker company in Hong Kong, YeeTah is subject to the Insurance\nOrdinance (Cap. 41) and the supervision of the IA, including its requirements on the use of referrers and on cross-border business. Under\nHong Kong law and IA guidance, only licensed insurance intermediaries may carry on regulated activities such as advising on and arranging\ninsurance policies. Business models that, in substance, shift selling or advisory activities to unlicensed persons or incentivize unlicensed\nselling are prohibited.\n\n \n\nOn May 22, 2024, the IA issued a circular addressing\nnon-compliant business models that incentivize unlicensed selling of long-term insurance policies to mainland China visitors. The IA indicated\nthat it will not tolerate licensed insurance intermediaries who rely on or have arrangements with unlicensed persons to conduct regulated\nactivities for them. These business models have features including engaging unlicensed persons to source mainland China clients, paying\ninordinately high, sales-contingent referral fees that absorb most of the commission, received by the licensed broker for selling the\ninsurance policy, referrers paying prohibited rebates to clients to induce them to buy long-term insurance policies, licensed technical\nrepresentatives who, due to insufficient time or resources, are unable to perform their responsibilities beyond a superficial form-filling\nexercise, effectively reducing their role to that of a “rubber stamp” and requiring or encouraging clients to provide inaccurate\nstatements about who performed the regulated activities and where they took place. The IA expects licensed broker companies that rely\non referrers to ensure that any referral model is consistent with the relevant principles and that all regulated activities are performed\nby licensed personnel.\n\n \n\nOn September 1, 2025, the IA issued a further\ncircular on referral fees in respect of certain participating policies. With effect from October 1, 2025, the IA adopted 50% of the total\ncommission or other remuneration receivable by a licensed insurance broker company from an authorized insurer for introducing, arranging\nand servicing a participating policy as a benchmark for referral fees (the “Benchmark”) paid by licensed insurance broker\ncompanies to referrers. Licensed insurance brokers that pay referral fees above the Benchmark are expected to provide enhanced disclosures\nand explanations, and will be subject to on-site inspections, and off-site reviews of their corporate governance and internal controls\nto inform the license renewal process. The IA will also evaluate the strength of the intermediary management oversight exercised by the\nauthorized insurers in working with licensed insurance broker companies to ensure that the Benchmark has been taken into account during\ntheir due diligence process. Historically, including in the quarter ended September 30, 2025, we paid referral fees to certain referrers\nat rates exceeding 50% of the commissions or other remuneration we received in respect of underlying policies. We lowered referral fees\npaid to referrers to levels not exceeding the Benchmark from October 1, 2025 and strengthened our internal controls to ensure that all\nregulated activities are performed by our licensed technical representatives.\n\n \n\n28\n\n \n\n \n\nWe cannot assure you, however, that our past referral\npractices, including the payment of referral fees above the Benchmark and referral business involving mainland China visitors, will not\nbe subject to review, investigation or enforcement action by the IA, or that the IA will not take the view that aspects of our referral\nmodel have incentivized or facilitated unlicensed selling or otherwise failed to meet its expectations. If the IA determines that we have\nnot complied with applicable laws, regulations or regulatory guidance relating to referral arrangements, the Benchmark or our internal\ncontrols and governance over referral business, it may require remedial measures or changes to our business model, issue public sanctions\nor impose pecuniary penalties, impose conditions or restrictions on our license, or suspend or revoke our insurance broker license, and\nmay also take action against our responsible officers, senior management or licensed technical representatives. Any such action could\nresult in significant legal and compliance costs, diversion of management attention, damage to our reputation with clients, referrers\nand insurers, and the termination or reduction of distribution relationships with authorized insurers. In the most serious case, suspension\nor revocation of our insurance broker license would prevent us from continuing to operate as a licensed insurance broker company in Hong\nKong. In addition, any person who, without reasonable excuse, carries on regulated activities without the requisite license commits a\ncriminal offence and is subject to criminal liability, including fines and imprisonment.\n\n \n\nIn addition, our efforts to reduce referral fees\nand adjust our referral arrangements in order to comply with IA expectations may adversely affect the motivation and behavior of our referrers.\nReferrers may be less willing to refer clients to us, may divert business to competitors that offer more attractive economic arrangements\n(to the extent permitted) or may seek to renegotiate existing arrangements on terms that are less favorable to us. We may need to commit\nadditional resources to developing alternative distribution channels, which may be costly and may not fully offset any loss of referral-based\nbusiness. As a result, our revenue and profitability from referral-generated business, particularly business involving mainland China\nvisitors, could decline. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.\n\n \n\n**Competition in our industry is intense and,\nif we are unable to compete effectively with both existing and new market participants, we may lose customers and our financial results\nmay be negatively affected.**\n\n \n\nThe insurance intermediary industry in Hong Kong\nis intensely competitive, and we expect competition to persist and further intensify as more insurance broker companies enter the market.\nIn insurance product distribution, we face competition from insurance companies that use their in-house sales force and exclusive sales\nagents to distribute their products, from business entities that distribute insurance products on an ancillary basis, such as commercial\nbanks, as well as from other traditional insurance intermediaries. Many of our competitors, both existing and newly emerging, have greater\nfinancial and marketing resources than we do and may be able to offer products and services that we do not currently offer and may not\noffer in the future. If we are unable to compete effectively against those competitors, we may lose customers and our financial results\nmay be negatively affected.\n\n \n\n**Because the commission we earn on the sale\nof insurance products is based on premiums and commission rates set by insurance companies, any decrease in these premiums or commission\nrates may have an adverse effect on our results of operations.**\n\n \n\nWe are an insurance broker and derive revenues\nprimarily from commissions paid by the insurance companies whose policies our customers purchase. Our commission rates are set by insurance\ncompanies and are based on the types and terms of the insurance products. Commission rates and premiums can change based on the prevailing\neconomic, regulatory, tax-related and competitive factors that affect insurance companies. These factors, which are not within our control,\ninclude the ability of insurance companies to place new business, underwriting and non-underwriting profits of insurance companies, consumer\ndemand for insurance products, the availability of comparable products from other insurance companies at a lower cost, as well as the\ntax deductibility of commissions and the consumers themselves.\n\n \n\nBecause we do not determine, and cannot predict,\nthe timing or extent of premium or commission rate changes, we cannot predict the effect any of these changes may have on our operations.\nAny decrease in premiums or commission rates may significantly affect our profitability.\n\n \n\n**Quarterly and annual variations in our commission\nrevenue may unexpectedly impact our results of operations.**\n\n \n\nOur commission revenue is subject to quarterly\nfluctuations as a result of the seasonality of our business, the timing of policy renewals and the net effect of new and lost business.\nIn the insurance industry in Hong Kong, the commission revenue from life and medical insurance products is generally the highest during\nthe fourth quarter of a calendar year because of the insurance companies’ drive to meet year end targets, and is generally lowest\nduring the first quarter of a calendar year because business activities usually slow down during the Chinese New Year holiday, which falls\nwithin this time period. Additionally, regulatory changes to product design may result in cessation of products from time to time and\ncause quarterly fluctuation in the results of our operations. Moreover, consumer demand for insurance products can influence the timing\nof renewals, new business and lost business, which generally includes policies that are not renewed, and cancellations, and many of our\ninsurance products last more than one year, contributing to the annual fluctuations in sales. However, our initiatives to mitigate the\nseasonal trends and growth strategy to expand our business may also affect our seasonal performances. For example, we recorded our best\nperforming quarter in the fourth quarter of our fiscal year ended March 31, 2026 (i.e., the first quarter of the calendar year), different\nfrom the general industry trend. As a result of the factors discussed above, quarterly or annual comparisons of our operating results\nmay not be used as an indication of our future performance.\n\n \n\n29\n\n \n\n \n\n**Our future success depends on the continuing\nefforts of our senior management team and other key personnel, and our business may be harmed if we lose their services.**\n\n \n\nOur future success depends heavily upon the continuing\nservices of the members of our senior management team and other key personnel, in particular, Mr. Huihe Zheng, our President and Chief\nExecutive Officer. If our senior executives or other key personnel are unable or unwilling to continue in their present positions, we\nmay not be able to replace them easily, or at all. As such, our business may be disrupted and our financial condition and results of operations\nmay be materially and adversely affected. Competition for senior management and key personnel in the insurance brokerage industry is intense\nbecause of a number of factors, including the limited pool of qualified candidates. We may not be able to retain the services of our senior\nexecutives or key personnel, or attract and retain high-quality senior executives or key personnel in the future. In addition, if any\nmember of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose customers,\nsensitive trade information, key professionals and staff members.\n\n \n\n**We may not be able to ensure the accuracy\nand completeness of product information and the effectiveness of our recommendation of insurance products.**\n\n \n\nOur customers rely on the insurance product information\nwe provide through our technical representatives. While we believe that such information is generally accurate, complete and reliable,\nthere can be no assurance that the accuracy, completeness or reliability of the information can be maintained in the future. If our technical\nrepresentatives provide any inaccurate or incomplete information due to either their own fault or that of our insurance partners, or we\nfail to present accurate or complete information of any insurance products which could lead to our customers’ failure to get the\nprotection or we being warned or punished by regulatory authorities, our reputation could be harmed and we could experience reduced businesses,\nwhich may adversely affect our business and financial performance.\n\n \n\nThough we have not experienced any material cybersecurity\nincidents in the past, if our database was compromised by outside sources or if we were accused of failing to protect the confidential\ninformation of our customers, we may be forced to expend significant financial and managerial resources in remedying the situation, defending\nagainst these accusations and we may face potential liability. Any negative publicity, especially concerning breaches in our cybersecurity\nsystems, may adversely affect our public image and reputation. Though we take proactive measures to protect against these risks and believe\nthat our efforts in this area are sufficient for our business, there can be no assurance that such measures will prove effective against\nall cybersecurity risks.\n\n \n\n**Failure to comply with the Personal Data\n(Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong) may result in material and adverse effect on our business, financial condition\nand results of operations.**\n\n \n\nThe Personal Data (Privacy) Ordinance (Chapter\n486 of the Laws of Hong Kong) provides the principles that a Data User must follow in any acts concerning information, existing in a form\nwhich access to or processing of is practicable, which relates to a living individual and can be used to identify that individual. Contravention\nwith the PDPO may entitle the Privacy Commissioner for Personal Data to issue a written enforcement notice directing such Data User to\ntake prescribed steps within a specified timeframe to remedy and prevent recurrence of contravention. Contravention with the above enforcement\nnotice issued by the Privacy Commissioner for Personal Data is an offence and on first conviction, the offender is liable to a maximum\nfine of HK$50,000 and imprisonment for 2 years, with a daily penalty of HK$1,000. Subsequent convictions can result in a maximum fine\nof HK$100,000 and imprisonment for 2 years, with a daily penalty of HK$2,000. However, if a Data User has taken all due diligence to comply\nwith the enforcement notice, then such Data User may have a defense against the above offence.\n\n \n\nIn the course of our business, we collect data\nthat are related to our business, all with consent from owners of such information. We are committed to protecting the privacy and security\nof such data, and have established and implemented policies on data collection, processing and usage. We believe we are in full compliance\nwith the PDPO of Hong Kong. While we strive to comply with applicable data protection laws and regulations as well as our own privacy\npolicies and other obligations, we may have, with respect to privacy and data protection, instances of failure or perceived failure to\ncomply with these laws, regulations, policies and other obligations, which may result, and in some cases has resulted, in customer complaints,\nand may also result in inquiries and other proceedings or actions against us by government agencies or others, as well as negative publicity\nand damage to our reputation and brand, each of which could cause us to lose consumers, and have an adverse effect on our business, financial\ncondition and results of operations.\n\n \n\n30\n\n \n\n \n\n**Failure to comply with Hong Kong Competition\nLaw may result in material and adverse effect on our business, financial condition and results of operations.**\n\n \n\nWe face competition in the market due to the presence\nof a large number of insurance brokers and service providers. We may be subject to the Competition Ordinance, which came into force on\nDecember 14, 2015, laying down three forms of behaviors and imposing three rules intended to prevent and discourage anti-competitive conducts:\n(i) the first conduct rule prohibits (a) the making of agreements by any entity, regardless of its legal status or the way in which it\nis financed, engaged in economic activity, and includes a natural person engaged in economic activity; (b) the engagement in concerted\npractice by Undertakings; or (c) the making or giving effect of decisions by members of an association of Undertakings, that have the\nobject or effect of preventing, restricting or distorting competition in Hong Kong; (ii) the second conduct rule prohibits undertakings\nwith a substantial degree of market power in a market from abusing that power by engaging in conduct that has the object or effect of\npreventing, restricting or distorting competition in Hong Kong; and (iii) the merger rule prohibits Undertakings from directly or indirectly\ncarrying out mergers that have or are likely to have the effect of substantially lessening competition in Hong Kong. Currently, the merger\nrule only applies where an Undertaking that directly or indirectly holds or, directly or indirectly controls an Undertaking that holds\na “carrier license” within the meaning of the Telecommunications Ordinance (Chapter 106 of the Laws of Hong Kong) is involved\nin a merger. As we are not engaged in the telecommunication industry and do not hold such carrier license, such merger rule is currently\nnot applicable to our business.\n\n \n\nThe Competition Commission is an independent\nstatutory body in Hong Kong established under the Competition Ordinance to investigate any contravention against the competition rules\nand enforce the provisions of the Competition Ordinance, and the Competition Tribunal is a superior court of record set up by the Competition\nOrdinance, as part of the Hong Kong judiciary, to hear and decide cases relating to competition law in Hong Kong. Under the guidelines\nand policies published by the Competition Commission, possible outcomes of the investigation of a contravention of the Competition Ordinance\nmay include the acceptance by the Competition Commission of a commitment given by the infringer to take any action or refrain from taking\nany action, the issuance of a warning notice or infringement notice, the commencement of proceedings in the Competition Tribunal, the\napplication for a consent order, the referral of the complaint to a government agency and the conduct of a market study. The Competition\nTribunal may order remedies including imposing a pecuniary penalty, making a disqualification order or other orders under the Competition\nOrdinance.\n\n \n\nWe have not adopted any anti-competitive conduct\ndescribed in the Competition Ordinance and will continue to act in compliance with the Competition Ordinance. However, there may be uncertainties\non the full effect of the rules in respect of compliance, infringement, and its effect on our business in particular when tendering is\ninvolved in securing contracts. We may face difficulties and may need to incur legal costs in ensuring our compliance with the rules.\nIf we face any complaints of infringement of the Competition Ordinance, we may incur substantial legal costs and may result in business\ndisruption and/or negative media coverage, which could adversely affect our business, results of operations and reputation.\n\n \n\n**We may face potential liability, loss of\ncustomers and damage to our reputation for any failure to protect the confidential information of our customers.**\n\n \n\nOur customer database holds confidential information\nconcerning our customers. We may be unable to prevent third parties, such as hackers or criminal organizations, from stealing information\nprovided by our customers. Confidential information of our customers may also be misappropriated or inadvertently disclosed through insurance\nagents’ misconduct or mistake. We may also in the future be required to disclose certain confidential information concerning our\ncustomers to government authorities. Any compromise of our security could have a material adverse effect on our reputation, business,\nprospects, financial condition and results of operations.\n\n \n\nThough we have not experienced any material cybersecurity\nincidents in the past, if our database was compromised by outside sources or if we were accused of failing to protect the confidential\ninformation of our customers, we may be forced to expend significant financial and managerial resources in remedying the situation, defending\nagainst these accusations and we may face potential liability. Any negative publicity, especially concerning breaches in our cybersecurity\nsystems, may adversely affect our public image and reputation. Though we take proactive measures to protect against these risks and believe\nthat our efforts in this area are sufficient for our business, there can be no assurance that such measures will prove effective against\nall cybersecurity risks.\n\n \n\n31\n\n \n\n \n\n**We rely on dividends and other distributions\non equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries\nto make payments to us could have a material adverse effect on our ability to conduct our business.**\n\n \n\nQDM is a holding company incorporated in Florida,\nand it relies on dividends and other distributions on equity paid by its subsidiaries for its cash and financing requirements, including\nthe funds necessary to pay dividends and other cash distributions to its shareholders and service any debt it may incur. If any of QDM’s\nsubsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends\nor make other distributions to QDM.\n\n \n\nWithin our structure, funds from foreign investors\ncan be directly transferred to our Hong Kong operating subsidiary by way of capital injection or in the form of a shareholder loan\nfrom the Company in connection with our future equity or debt offerings. As a holding company, we may rely on dividends and other distributions\non equity paid by our Hong Kong operating subsidiary for our cash and financing requirements. We are permitted under the laws of\nthe state of Florida and our articles of incorporation (as amended from time to time) to provide funding to our Hong Kong operating\nsubsidiary incorporated in Hong Kong through loans and/or capital contributions. According to the Companies Ordinance (Chapter 622\nof the Laws of Hong Kong), a Hong Kong company may only make a distribution out of profits available for distribution. Any limitation\non the ability of our Hong Kong subsidiary to pay dividends or make other distributions to us could materially and adversely limit our\nability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct\nour business. Our Hong Kong subsidiaries are permitted under the laws of Hong Kong to issue cash dividends to us without limitation\non the size of such dividends, subject to availability of distributable profits. In addition, if our Hong Kong operating subsidiary\nincur debt on their own behalf, the instruments governing such debt may restrict their ability to pay dividends. We do not maintain cash\nmanagement policies or procedures with respect to the size or means of such transfers. There can be no assurance that the PRC government\nwill not restrict or prohibit the flow of cash in or out of Hong Kong. Any restrictions, prohibitions, interventions or limitations\nby the PRC government on the ability of the Company or our Hong Kong operating subsidiary to transfer cash or assets in or out of\nHong Kong may result in these funds or assets not being available to fund operations or for other uses outside of Hong Kong.\n\n \n\nUnder the current practice of the Inland Revenue\nDepartment of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by our Hong Kong subsidiaries to us. See “*Item\n1. Business – Regulation - Regulations Related to Hong Kong Taxation*.” Any limitation on the ability of our Hong Kong\nsubsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments\nor acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.\n\n \n\n**Risks Related to Doing Business in Hong Kong**\n\n \n\n**Political risks associated with conducting\nbusiness in Hong Kong and economic instability in Hong Kong may adversely impact our results of operations. We may also face the risk\nthat changes in the policies of the PRC government could have a significant impact upon the business we conduct in Hong Kong and the profitability\nof such business.**\n\n \n\nOur operational activities are primarily conducted\nin Hong Kong. Accordingly, political and economic conditions in Hong Kong and the surrounding region may directly affect our business.\nHong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic\nLaw, namely, the constitutional document for Hong Kong, which provides Hong Kong with a high degree of autonomy and executive, legislative\nand independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. However,\nthere is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future.\nSince all of our operations are primarily based in Hong Kong, any change of such political arrangements may pose an immediate threat to\nthe stability of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financial positions.\n \n\n \n\n32\n\n \n\n \n\nOur revenue is susceptible to ongoing incidents\nor factors which affect the stability of the social, economic and political conditions in Hong Kong. Any drastic events may adversely\naffect the business operations of our Hong Kong operating subsidiary. Such adverse events may include changes in economic conditions and\nregulatory environment, social and/or political conditions, civil disturbance or disobedience, as well as significant natural disasters.\nGiven the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on the business operations\nof our Hong Kong operating subsidiary, which could in turn adversely and materially affect our business, our results of operations and\nfinancial condition. Furthermore, legislative or administrative actions in respect of China-U.S. relations could cause investor uncertainty\nfor affected issuers, including us, and the market price of our Ordinary Shares could be adversely affected.\n\n \n\nIn addition, economic, political and legal developments\nand social conditions in the PRC may significantly affect our business, financial condition, results of operations and prospects. The\nPRC economy is in transition from a planned economy to a market-oriented economy subject to plans adopted by the government that set national\neconomic development goals. Policies of the PRC government can have significant effects on economic conditions in the PRC and Hong Kong.\nWhile we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and that business\ndevelopment in the PRC will continue to follow market forces, we cannot assure you that this will be the case. Our business operations\nand prospects, financial condition, and results of operations may be adversely affected by changes in policies by the PRC government,\nincluding:\n\n \n\n \n●\nchanges in laws, regulations or their interpretation;\n\n \n \n \n\n \n●\nconfiscatory taxation;\n\n \n \n \n\n \n●\nrestrictions on currency conversion, imports or sources of supplies, or ability to continue as a for-profit enterprise;\n\n \n \n \n\n \n●\nexpropriation or nationalization of private enterprises; and\n\n \n \n \n\n \n●\nthe allocation of resources.\n\n \n\n**Substantial uncertainties and restrictions\nwith respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact\nupon the business that we conduct in Hong Kong and accordingly on the results of our operations and financial condition. In addition,\nif we become subject to the oversight of the CSRC, CAC or other regulatory agencies of the PRC government, the PRC government could significantly\nlimit or completely hinder our ability to offer or continue to offer securities to investors and cause of our common stock to significantly\ndecline in value or become worthless.**\n\n \n\nOur business operations may be adversely affected\nby the current and future political environment in the PRC. The PRC government has exercised and continues to exercise substantial control\nover virtually every sector of the Chinese economy through regulation and state ownership. The interpretations of many laws, regulations\nand rules may not always be uniform and the enforcement of these laws, regulations and rules may involve uncertainties for you and us.\nOur ability to operate in Hong Kong, conduct overseas offerings and continue to investment in Hong Kong based issuers may be harmed by\nthese changes in its laws and regulations, including those relating to taxation, import and export tariffs, healthcare regulations, environmental\nregulations, land use and property ownership rights, and other matters. Accordingly, government actions in the future, including any decision\nnot to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in\nthe implementation of economic policies, could have a significant effect on economic conditions in Hong Kong or particular regions thereof,\nand could limit or completely hinder our ability to offer or continue to offer securities to investors or require us to divest ourselves\nof any interest we then hold in Hong Kong properties or joint ventures. Any such actions (including divesture or similar actions) could\nresult in a material adverse effect on us and on your investment in us and could render our securities and your investment in our securities\nworthless.\n\n \n\n33\n\n \n\n \n\nThere are substantial uncertainties regarding\nthe interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our\nbusiness, or the enforcement and performance of our contractual arrangements in the event of the imposition of statutory liens, death,\nbankruptcy or criminal proceedings. Only after 1979 did the Chinese government begin to promulgate a comprehensive system of laws that\nregulate economic affairs in general, deal with economic matters such as foreign investment, corporate organization and governance, commerce,\ntaxation and trade, as well as encourage foreign investment in China. Although the influence of the law has been increasing, China has\nnot developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic\nactivities in China. Also, because these laws and regulations are relatively new, and because of the limited volume of published cases\nand their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.\nNew laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, there have\nbeen constant changes and amendments of laws and regulations over the past 30 years in order to keep up with the rapidly changing society\nand economy in China. Because government agencies and courts that provide interpretations of laws and regulations and decide contractual\ndisputes and issues may change their interpretation or enforcement very rapidly with little advance notice at any time, we cannot predict\nthe future direction of Chinese legislative activities with respect to either businesses with foreign investment or the effectiveness\non enforcement of laws and regulations in China. The uncertainties, including new laws and regulations and changes of existing laws, as\nwell as may cause possible problems to foreign investors.\n\n \n\nAlthough the PRC government has been pursuing\neconomic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth\nin the PRC through the allocation of resources, controlling payments of foreign currency, setting monetary policy and imposing policies\nthat impact particular industries in different ways. For example, according to the Circular on Further Promoting the Facilitation of Individual\nCurrent Account Foreign Exchange Business and its annexes issued and implemented by the State Administration of Foreign Exchange on March\n25, 2021, the purchase of foreign exchange by individuals of mainland China shall not be used to purchase overseas life insurance or investment\ndividend-returning insurance. We cannot assure you that the PRC government will continue to pursue policies favoring a market-oriented\neconomy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political\ndisruption, or other circumstances affecting political, economic and social life in the PRC.\n\n \n\n**The enactment of the Law of the PRC on Safeguarding\nNational Security in the Hong Kong Special Administrative Region (the “Hong Kong National Security Law”) could impact our\nHong Kong operating subsidiary.**\n\n** **\n\nOn June 30, 2020, the Standing Committee of the\nPRC National People’s Congress passed the Hong Kong National Security Law. Hong Kong’s chief executive promulgated it in Hong\nKong later the same day. This law defines the duties and government bodies of the Hong Kong for safeguarding national security and four\ncategories of 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, the former U.S. President Donald Trump signed the Hong Kong Autonomy\nAct, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined\nto have materially contributed to the erosion of Hong Kong’s autonomy. The HKAA further authorizes secondary sanctions, including\nthe imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign\npersons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as\nany third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact\nof the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our Hong Kong operating subsidiary\nis determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, the business operations,\nour financial position and results of operations could be materially and adversely affected.\n\n \n\n**Our business operations are located in Hong\nKong, which renders us especially sensitive to local conditions and changes, such as those with respect to laws and regulations, economic\nand political environments, force majeure events, natural disasters or mass civil movements.**\n\n \n\nCurrently, our business operations are based in\nHong Kong, and we have no plan to operate in other territories in the near future. Our business operations are therefore exposed to any\ndeterioration in the economic, social and/or political conditions, significant changes in laws and regulations governing the insurance\nbrokerage services industry, as well as any change of legal system, incidence of social movements, strike, riot, civil disturbances, mass\ncivil movements, disobedience, recurrence of past outbreaks or epidemics, occurrence of any future epidemic outbreaks, natural disasters\nor other catastrophic events in Hong Kong. Since our business operations are limited to Hong Kong, the aforesaid adverse circumstances\nmay materially and adversely disrupt operations of our insurance brokerage services, and in turn, our revenues and profitability, and\nconsequently, our results of operations and financial condition.\n\n** **\n\n34\n\n \n\n** **\n\n**Our Hong Kong subsidiaries may be subject\nto restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements,\nconduct business and pay dividends to holders of our common stock. Dividends payable to our foreign investors and gains on the sale of\nour shares of common stock by our foreign investors may become subject to tax by the PRC.**\n\n** **\n\nQDM is a holding company incorporated in Florida\nwith its operating subsidiary located in Hong Kong. Accordingly, most of our cash is maintained in Hong Kong Dollars. We conduct no other\nbusiness and, as a result, we depend entirely upon our Hong Kong operating subsidiary’s earnings and cash flow. If we decide in\nthe future to pay dividends, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of\ndividends or other payments from our Hong Kong operating subsidiary. There are currently no restrictions of transferring funds between\nour Florida holding company and our operating subsidiary in Hong Kong or limitations on the ability of our Hong Kong subsidiaries to issue\ndividends or other distributions to its overseas shareholders. However, we cannot assure you that\nthe oversight of the PRC government will not be extended to companies operating in Hong Kong like our Hong Kong operating subsidiary.\nThere is a possibility that the PRC government could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict\nthe deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our\nability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders and could\nresult in a material adverse change to our business operations, our prospects, financial condition, and results of operations, and could\ncause our common stock to significantly decline in value or become worthless.\n\n \n\n**The market price for our securities could\nbe adversely affected by increased tensions between the United States and China.**\n\n \n\nRecently there have been heightened tensions in\nthe economic and political relations between the United States and China. On June 30, 2020, the Standing Committee of the PRC National\nPeople’s Congress issued the Hong Kong National Security Law. This law defines the duties and government bodies of Hong Kong for\nsafeguarding national security and four categories of offences-secession, subversion, terrorist activities and collusion with a foreign\ncountry or external elements to endanger national security-and their corresponding penalties. On July 14, 2020, former U.S. President\nDonald Trump signed the Hong Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against\nindividuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7,\n2020, the U.S. government imposed HKAA-authorized sanctions on eleven individuals, including then Hong Kong chief executive Carrie Lam.\nOn October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying\npersons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or\nthe Basic Law”. On March 16, 2021, the U.S. State Department submitted a report listing an additional 24 foreign persons determined\nto meet the HKAA criteria. This report is an update to the October 2020 and March 2021 reports, consistent with section 5(e) of the HKAA.\nIn July 2021, President Joe Biden warned investors about the risks of doing business in Hong Kong and on July 16, 2021, the U.S. Departments\nof State, Commerce, Homeland Security and the Treasury issued an advisory saying China’s push to exert more control over Hong Kong\nthreatens the rule of law and endangers employees and data. The HKAA further authorizes secondary sanctions, including the imposition\nof blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned\nunder this authority. The imposition of sanctions such as those provided in the HKAA is in practice discretionary and highly political,\nespecially in a relationship as extensive and complex as that between the United States and China. It is difficult to predict the full\nimpact of the HKAA on Hong Kong and companies like us. Furthermore, legislative or administrative actions in respect of Sino-U.S. relations\ncould cause investor uncertainty for affected issuers, including us, and the market price of our securities could be adversely affected.\n\n \n\n**We may be affected by the currency peg system\nin Hong Kong.**\n\n \n\nSince 1983, Hong Kong dollars have been pegged\nto the U.S. dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that this policy will not be changed in the\nfuture. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated\nin foreign currency may increase. This would in turn adversely affect the operations and profitability of our business.\n\n** **\n\n**Our business, financial condition and results\nof operations, and/or the value of our common stock or our ability to offer or continue to offer securities to investors may be materially\nand adversely affected to the extent the laws and regulations of mainland China become applicable to a company such as us.**\n\n** **\n\nWe currently have no operations in mainland China.\nYeeTah does not sell any insurance products in mainland China or solicit customers or collect, store or process any personal data of\nany customer in mainland China, and is not regulated by any insurance regulator in mainland China. As a result, the laws and regulations\nof the PRC do not currently have any material impact on YeeTah’s business, financial condition and results of operations. However,\nas we operate in Hong Kong, a special administrative region of China, there is no guarantee that if certain existing or future laws of\nmainland China become applicable to a company such as us, it will not have a material adverse impact on our business, financial condition\nand results of operations and/or our ability to offer or continue to offer securities to investors, any of which may cause the value\nof such securities to significantly decline or be worthless.\n\n \n\n35\n\n \n\n \n\nExcept for the Basic Law, national laws of the\nPRC do not apply in Hong Kong unless they are listed in Annex III of the Basic Law and applied locally by promulgation or local legislation.\nNational laws that may be listed in Annex III are currently limited under the Basic Law to those which fall within the scope of defense\nand foreign affairs as well as other matters outside the limits of the autonomy of Hong Kong. National laws and regulations relating to\ndata protection, cybersecurity and the anti-monopoly have not been listed in Annex III and do not apply directly to Hong Kong.\n\n \n\nThe laws and regulations in the PRC are evolving,\nand their enactment timetable, interpretation and implementation involve significant uncertainties. To the extent any mainland China laws\nand regulations become applicable to us, we may be subject to the risks and uncertainties associated with the legal system in the PRC,\nincluding with respect to the enforcement of laws and the possibility of changes of rules and regulations with little or no advance notice.\n\n \n\nWe may also become subject to the laws and regulations\nof mainland China to the extent we commence business and customer facing operations in mainland China as a result of any future acquisition,\nexpansion or organic growth.\n\n \n\n**The PRC government exerts substantial influence\nand discretion over the manner in which companies incorporated in mainland China must conduct their business activities. We are a Hong\nKong-based company with no operations in mainland China. There is a risk that the PRC government may intervene or influence our operations\nat any time, or may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong or mainland China-based\nissuers. Any such action of the PRC government could significantly limit or completely hinder our ability to offer or continue to offer\nsecurities to investors and cause our securities to significantly decline in value or become worthless.**\n\n** **\n\nWe have no operation in mainland China. We primarily\noperate in Hong Kong, a special administrative region of China. In addition, YeeTah does not sell any insurance products in mainland\nChina or solicit any customer in mainland China, and is not regulated by any insurance regulator in mainland China. However, we may be\nsubject to such direct influence or discretion in the future due to changes in laws or other unforeseeable reasons or as a result of our\nexpansion or acquisition of operations in mainland China.\n\n \n\nThe PRC legal system is evolving rapidly and the\nPRC laws, regulations, and rules may change quickly with short notice. In particular, because these laws, rules and regulations are relatively\nnew, and because of the limited number of published decisions and the non-precedential nature of these decisions, the interpretation\nof these laws, rules and regulations may contain inconsistences, the enforcement of which involves uncertainties. The PRC government has\nexercised and continues to exercise substantial control over many sectors of the economy of mainland China through regulation and/or state\nownership. The PRC government actions have had, and may continue to have, a significant effect on economic conditions in mainland China\nand businesses which are subject to such government actions. We may become subject to the PRC government’s significant oversight\nand discretion over the conduct of our business, and the government may intervene or influence our operations at any time as the government\ndeems appropriate. The PRC government has published new policies that significantly affected certain industries in mainland China, such\nas the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies\nextending the oversight and regulation to certain business and industries in Hong Kong, including our industry, that could adversely affect\nour business, financial condition and results of operations. Furthermore, the PRC government has recently indicated an intent to exert\nmore oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment\nin mainland China-based companies. If such action is extended to cover companies in Hong Kong, like ours, such actions could significantly\nlimit or completely hinder our ability to offer or continue to offer securities to investors and cause such securities to significantly\ndecline in value or become worthless.\n\n \n\nWe may become subject to the direct intervention\nor influence of the PRC government at any time due to changes in laws or other unforeseeable reasons or as a result of our development,\nexpansion or acquisition of operations in the PRC, or due to the expansion of the PRC government’s oversight onto our industry in\nHong Kong, and it may require a material change in our operations and/or result in increased costs necessary to comply with existing and\nnewly adopted laws and regulations or penalties for any failure to comply. In addition, the market prices of our common stock could be\nadversely affected as a result of anticipated negative impacts of any such government actions, as well as negative investor sentiment\ntowards Hong Kong-based companies subject to direct PRC government oversight and regulation, regardless of our actual operating\nperformance. There can be no assurance that the Chinese government would not intervene in or influence our operations at any time.\n\n \n\n36\n\n \n\n \n\nIn the opinion of our PRC counsel, we are not\ncurrently required to obtain permission from the PRC government for the trading of our common stock on the OTCQB; however, there is no\nguarantee that this will continue to be the case in the future, or even when such permission is obtained, it will not be subsequently\ndenied or rescinded. Any actions by the PRC government to exert more oversight and control over offerings (including businesses whose\nprimary operations are in Hong Kong) that are conducted overseas and/or foreign investments in Hong Kong-based issuers could significantly\nlimit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to\nsignificantly decline or be worthless.\n\n \n\nWe are aware that the PRC government initiated\na series of regulatory actions and statements to regulate business operations in mainland China with little advance notice, including\ncracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas\nusing variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts\nin anti-monopoly enforcement. Our PRC counsel has advised us that we are not subject to cybersecurity review with the CAC, given that:\n(i) we do not possess a large amount of personal information in our business operations; and (ii) data processed in our business does\nnot have a bearing on national security and thus may not be classified as core or important data by the authorities. In addition, our\nPRC counsel has advised us that we are not subject to merger control review by the anti-monopoly enforcement agency of the PRC government\ndue to the level of our revenues which provided from us and audited by our auditor, and the fact that we currently do not expect to propose\nor implement any acquisition of control of, or decisive influence over, any company with revenues within mainland China of more than RMB800\nmillion. Currently, these statements and regulatory actions have had no impact on our daily business operation, the ability to accept\nforeign investments and list our securities on an U.S. or other foreign exchange. Since these statements and regulatory actions are new,\nit is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations\nor detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new\nlaws and regulations will have on our daily business operation, the ability to accept foreign investments and list our securities on an\nU.S. or other foreign exchange. *See “Item 1. Business – Regulatory Permissions and Developments” on page 4.*\n\n \n\n**The HFCA Act and the related regulations\ncontinue to evolve. Further implementations and interpretations of or amendments to the HFCA Act or the related regulations, or a PCAOB\ndetermination of its lack of sufficient access to inspect our auditor, might pose regulatory risks to and impose restrictions on us.** \n\n \n\nOn December 18, 2020, the HFCA Act was signed\ninto law. The HFCA Act has since then been subject to amendments by the U.S. Congress and interpretations and rulemaking by the SEC. On\nJune 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”),\nwhich proposes to reduce the period of time for foreign companies to comply with PCAOB audits from three to two consecutive years,\nthus reducing the time period before the securities of such foreign companies may be prohibited from trading or delisted.\n\n \n\nOn December 16, 2021, PCAOB announced the\nPCAOB HFCA Act determinations relating to the PCAOB’s inability to inspect or investigate completely registered public accounting\nfirms headquartered in mainland China and Hong Kong, because of a position taken by one or more authorities in mainland China or\nHong Kong. The inability of the PCAOB to conduct inspections of auditors in China made it more difficult to evaluate the effectiveness\nof these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject\nto the PCAOB inspections, which could cause existing and potential investors in issuers operating in China to lose confidence in such\nissuers’ procedures and reported financial information and the quality of financial statements.\n\n \n\nOur auditor, ZH CPA, LLC, an U.S. based independent\nregistered public accounting firm that issues the audit report included elsewhere in this Report, as an auditor of companies that are\ntraded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant\nto which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our\nauditor is subject to inspection by the PCAOB on a regular basis with the latest inspection in 2025. As of the date of this Report, our\nauditor is not among the firms listed on the PCAOB Determination List issued in December 2021.\n\n \n\n37\n\n \n\n \n\nOn August 26, 2022, the PCAOB announced and\nsigned a Statement of Protocol (the “Protocol”) with the CSRC and the Ministry of Finance of the People’s Republic of\nChina (together, the “PRC Authorities”). The Protocol provides the PCAOB with: (1) sole discretion to select the firms,\naudit engagements and potential violations it inspects and investigates, without any involvement of Chinese authorities; (2) procedures\nfor PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information\nas needed; (3) direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or\ninvestigates.\n\n \n\nOn December 15, 2022, the PCAOB announced\nin its 2022 HFCA Act Determination Report (the “2022 Report”) its determination that the PCAOB was able to secure complete\naccess to inspect and investigate audit firms headquartered in mainland China and Hong Kong in 2022, and the PCAOB Board voted to\nvacate previous determinations to the contrary. According to the 2022 Report, this determination was reached after the PCAOB had thoroughly\ntested compliance with every aspect of the Protocol necessary to determine complete access, including on-site inspections and investigations\nin a manner fully consistent with the PCAOB’s methodology and approach in the U.S. and globally. According to the 2022 Report,\nthe PRC authorities had fully assisted and cooperated with the PCAOB in carrying out the inspections and investigations according to the\nProtocol, and have agreed to continue to assist the PCAOB’s investigations and inspections in the future. The PCAOB may reassess\nits determinations and issue new determinations consistent with the HFCA Act at any time.\n\n \n\nOn December 29, 2022, the Consolidated Appropriations\nAct, 2023 was signed into law, which, among others, amended the HFCA Act to reduce the number of consecutive years an issuer can be identified\na Commission-Identified Issuer before the SEC must impose an initial trading prohibition on the issuer’s securities from three\nyears to two.\n\n \n\nFurther developments related to the HFCA Act\ncould add uncertainties to our offering. We cannot assure you what further actions the SEC, the PCAOB or the stock exchanges will take\nto address these issues and what impact such actions will have on U.S. companies that have significant operations in the PRC and\nhave securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market).\nFurthermore, any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to\naudit information could create uncertainty for investors, the market price of our common stock could be adversely affected, and we could\nbe delisted if we and our auditor are unable to meet the PCAOB inspection requirement. Such a delisting would substantially impair your\nability to sell or purchase our common stock when you wish to do so, and would have a negative impact on the price of our common stock.\n\n** **\n\n**If we become directly subject to the recent\nscrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate\nand resolve the matter which could harm our business operations and our reputation and could result in a loss of your investment in our\nshares, especially if such matter cannot be addressed and resolved favorably.**\n\n \n\nU.S. public companies that have substantially\nall of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators\nand regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting\nirregularities, a lack of effective internal controls over financial accounting and reporting, inadequate corporate governance policies\nor a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity,\nthe publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually\nworthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and\nexternal investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity\nwill have on our company and our business. If we become the subject of any unfavorable allegations, whether such allegations are proven\nto be true or untrue, we may have to expend significant resources to investigate such allegations and/or defend the Company. This situation\nmay be a major distraction to our management. If such allegations are not proven to be groundless, our Company and business operations\nwill be severely hampered and your investment in our stock could be rendered worthless. In addition, major issues with other U.S. listed\nChinese companies in the future, could have a negative effect on the value of your investment, even though the Company is not involved.\n\n \n\n38\n\n \n\n \n\n**There may be risks and uncertainties regarding\nthe interpretation, application, and enforcement of current and future PRC laws, rules and regulations.**\n\n \n\nBecause substantially all of our operations are\nbased in Hong Kong, we are subject to the regulations and rules of the Hong Kong government as well as the influence of the Chinese government.\nThe Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy\nthrough regulation and state ownership. Our ability to operate in Hong Kong may be harmed by changes in its laws and regulations, including\nthose relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of\nthese jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures\nand efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,\nincluding any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional\nor local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular\nregions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.\n\n \n\nAs such, the Company’s business segments\nmay be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject\nto regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions.\nThe Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure\nto comply. The Company’s operations could be adversely affected, directly or indirectly, by existing or future laws and regulations\nrelating to its business or industry. Given that the Chinese government may intervene or influence our operations at any time with little\nto no advanced notice, it could result in a material change in our operation and the value of our common stock. Given recent statements\nby the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, any such\naction could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the\nvalue of such securities to significantly decline or be worthless.\n\n \n\nFurthermore, it is uncertain when and whether\nthe Company will be required to obtain permission from the PRC government for our current quotation on the OTCQB or any future application\nto have our securities list on a U.S. stock exchange, and even when such permission is obtained, whether it will be denied or rescinded.\nAlthough the Company is currently not required to obtain permission from any PRC regulatory authorities and has not received any denial\nto list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations\nrelating to its business or industry. As a result, our common stock may decline in value dramatically or even become worthless should\nwe become subject to new requirement to obtain permission from the PRC government to list on U.S. exchange in the future.\n\n \n\nThe General Office of the Central Committee of\nthe Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on\nIllegal Securities Activities, which were available to the public on July 6, 2021. These opinions emphasized the need to strengthen the\nadministration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed\nto take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing\nChina-based overseas-listed companies and the demand for cybersecurity and data privacy protection. Moreover, the State Internet Information\nOffice issued the Measures of Cybersecurity Review (Revised Draft for Comments, not yet effective) on July 10, 2021, which require operators\nwith personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity\nReview. On December 28, 2021, the Cyberspace Administration of China (the “CAC”) jointly with the relevant authorities formally\npublished Measures for Cybersecurity Review (2021) which took effect on February 15, 2022, replacing the former Measures for Cybersecurity\nReview (2020) issued on July 10, 2021. Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure\npurchasing network products and services, and online platform operators (together with the operators of critical information infrastructure,\nthe “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity\nreview, and any online platform operator who controls more than one million users’ personal information must undergo a cybersecurity.\n\n \n\nOn July 7, 2022, the CAC issued the Measures\nfor the Security Assessment of Cross-border Transfer of Data, which stipulates that data processor who provides overseas the important\ndata collected and generated during operations within the PRC and personal information that shall be subject to security assessment shall\nconduct a security assessment. Furthermore, if the data processor provides data overseas and meets one of the following circumstances,\nit shall declare the security assessment: (i) where a data processor provides critical data abroad; (ii) where a key information\ninfrastructure operator or a data processor processing the personal information of more than one million people provides personal information\nabroad; (iii) where a data processor has provided personal information of 100,000 people or sensitive personal information of 10,000\npeople in total abroad since January 1 of the previous year; and (iv) other circumstances prescribed by the CAC for which declaration\nfor security assessment for outbound data transfers is required.\n\n \n\n39\n\n \n\n \n\nOn February 17, 2023, with the approval of the\nState Council, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies,\nor the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, (i) domestic\ncompanies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC\npursuant to the requirements of the Trial Measures within three working days following their submission of initial public offerings or\nlisting applications. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies\nany major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify,\nwarnings and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons\nmay also be subject to administrative penalties, such as warnings and fines; (ii) if the issuer meets both of the following criteria,\nthe overseas offering and listing conducted by such issuer shall be deemed an indirect overseas offering and listing by a PRC domestic\ncompany: (A) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its\naudited consolidated financial statements for the most recent fiscal year were derived from PRC domestic companies; and (B) the majority\nof the issuer’s business activities are carried out in mainland China, or its main place(s) of business are located in mainland\nChina, or the majority of its senior management team in charge of its business operations and management are PRC citizens or have their\nusual place(s) of residence located in mainland China. In such circumstances, where a PRC domestic company is seeking an indirect overseas\noffering and listing in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures\nwith the CSRC, and where an issuer makes an application for an initial public offering or listing in an overseas market, the issuer shall\nsubmit filings with the CSRC within three business days after such application is submitted.\n\n \n\nOn February 24, 2023, the CSRC, together with\nthe MOF, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions issued\nby the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009. The revised\nProvisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas\nSecurities Offering and Listing by Domestic Companies,” and became effective on March 31, 2023 together with the Trial Measures.\nOne of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as\nis consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to,\neither directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including\nsecurities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or\nworking secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy\nadministrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas\nlisted entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers,\nand overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest,\nshall strictly fulfill relevant procedures stipulated by applicable national regulations. On March 22, 2024, the CAC issued the Provisions\non Promoting and Regulating Cross-border Data Flows, which stipulates that a data handler providing personal information abroad may be\nexempted from declaring security assessment for data to be provided abroad, concluding a standard contract for personal information to\nbe provided abroad or passing authentication for protection of personal information if it satisfies certain conditions. In addition, to\nprovide the data collected and generated in such activities as international trade, cross-border transport, academic cooperation, transnational\nmanufacturing and marketing, which do not contain personal information or important data, to overseas parties is exempted from all these\nprocedures aforementioned.\n\n \n\nThe aforementioned policies and any related implementation\nrules to be enacted may subject us to additional compliance requirement in the future. While we believe that our operations are not affected\nby this, as these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects\nat this time. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions\nor any future implementation rules on a timely basis, or at all.\n\n \n\n**It may be difficult for shareholders to\nenforce any judgment obtained in the United States against us, which may limit the remedies otherwise available to our shareholders.**\n\n \n\nSubstantially all of our assets are located in\nHong Kong. Moreover, half of our current directors and officers are Chinese nationals or domiciled in mainland China. All or a substantial\nportion of their assets are located outside the United States. As a result, it may be difficult for our shareholders to effect service\nof process within the United States upon our subsidiaries or any individuals. In addition, there is uncertainty as to whether the\ncourts of Hong Kong or mainland China would recognize or enforce judgments of U.S. courts obtained against us or our officers\nand/or directors predicated upon the civil liability provisions of Hong Kong against us or such persons predicated upon the securities\nlaws of the United States or any state thereof. It is unclear if extradition treaties now in effect between the United States\nand the PRC would permit effective enforcement against us or our officers and directors of criminal penalties under the United States\nFederal securities laws or otherwise.\n\n \n\nIn addition, the recognition and enforcement of\nforeign judgments are provided for under the PRC Civil Procedures Law. The 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 forms of written arrangement with the\nUnited States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC\nCivil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that\nthe judgment violates the basic principles of the PRC laws or national sovereignty, security, or public interest. As a result, it is uncertain\nwhether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.\n\n \n\n40\n\n \n\n \n\n**It may be difficult for overseas regulators\nto conduct investigations or collect evidence within China.**\n\n \n\nShareholder claims or regulatory investigation\nthat are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example,\nin the PRC, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation\noutside the PRC or otherwise with respect to foreign entities. Although the authorities in the PRC may establish a regulatory cooperation\nmechanism with its counterparts of another country or region to monitor and oversee cross-border securities activities, such regulatory\ncooperation with the securities regulatory authorities in the United States may not be efficient in the absence of a practical cooperation\nmechanism. Furthermore, according to Article 177 of the PRC Securities Law, or “Article 177,” which became effective\nin March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within\nthe territory of the PRC. Article 177 further provides that Chinese entities and individuals are not allowed to provide documents\nor materials related to securities business activities to foreign agencies without prior consent from the securities regulatory authority\nof the State Council and the competent departments of the State Council. While detailed interpretation of or implementing rules under\nArticle 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence\ncollection activities within the PRC may further increase difficulties faced by you in protecting your interests.\n\n \n\n**Risks Related to Our Common Stock**\n\n \n\n**An active market for our common stock may\nnever develop, and we are under no obligation to seek out a more active market for our common stock.**\n\n \n\nThere is a thin trading market or “float” for our common\nstock the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float,\nour common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of\nour common stock may be more volatile. In addition, in the absence of an active public trading market, investors may be unable to liquidate\ntheir investment in us. Furthermore, the stock market is subject to significant price and volume fluctuations, and the price of our common\nstock could fluctuate widely in response to several factors, including, but not limited to:\n\n \n\n \n●\nour quarterly or annual operating results;\n\n \n\n \n●\nchanges in our earnings estimates or the failure to accurately forecast and appropriately plan our expenses;\n\n \n\n \n●\nfailure to achieve our growth expectations;\n\n \n\n \n●\nfailure to attract customers and retain them;\n\n \n\n \n●\nthe effect of increased or variable competition on our business;\n\n \n\n \n●\nadditions or departures of key or qualified personnel;\n\n \n\n \n●\nfailure to adequately protect our intellectual property;\n\n \n\n \n●\ncosts associated with defending claims, including intellectual property infringement claims and related judgments or settlements;\n\n \n\n \n●\nchanges in governmental or other regulations affecting our business;\n\n \n\n \n●\nour compliance with governmental or other regulations affecting our business; and\n\n \n\n \n●\nchanges in global or regional industry, general market, or economic conditions.\n\n \n\nThe stock market has experienced extreme price\nand volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies, including\ncompanies in our industry. The changes may not be possible to predict and often appear to occur without regard to specific operating performance.\nThe price of our common stock could fluctuate based upon factors that have little or nothing to do with our Company and these fluctuations\ncould materially reduce our stock price.\n\n \n\n41\n\n \n\n \n\n**We may not maintain\nthe qualification for OTCQB inclusion, and therefore you may be unable to sell your shares.**\n\n \n\nOur common stock is eligible\nfor quotation on the OTCQB. However, trading of our common stock could be suspended. If for any reason our common stock does not become\neligible or maintain eligibility for quotation on the OTCQB or a public trading market does not develop, purchasers of shares of our common\nstock may have difficulty selling their shares should they desire to do so. If we are unable to satisfy the requirements for quotation\non the OTCQB, any quotation in our common stock could be conducted in the “pink sheets” market. As a result, a purchaser of\nour common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the price of their shares. This would\nmaterially and adversely affect the liquidity of our securities.\n\n** **\n\n**Our controlling shareholder may exercise\nsignificant influence over us and may be subject to conflicts of interest.**\n\n \n\nOur Chairman of the Board, Chief Executive Officer\nand President, Huihe Zheng, owns approximately 99.2% of our outstanding voting power. Mr. Zheng thus has the power, on his own, to determine\nthe outcome of any corporate transaction or other matters submitted to our shareholders for approval, including mergers, consolidations\nand the sale of all or substantially all of our assets, election of directors, approval of equity incentive plans, and other significant\ncorporate actions. Mr. Zheng also has the power to prevent or cause a change in control. In addition, without the consent of Mr. Zheng,\nwe could be prevented from entering into transactions that could be beneficial to us. The interests of Mr. Zheng may differ from the interests\nof our other shareholders, which cause him to be faced with conflicts of interests that may not be resolved in favor of or to the satisfaction\nof our minority shareholders. \n\n \n\n**Shares of Series B Preferred Stock, which\nare held by our Chairman of the Board, Chief Executive Officer, have super voting rights that may adversely affect our holders of common\nstock.**\n\n \n\nExcept as required by law, shares of Series B\nPreferred Stock (which are currently held by Huihe Zheng, our Chairman of the Board, Chief Executive Officer) are entitled to super voting\nrights. Each share of Series B Preferred Stock is entitled to 100 votes and will vote on all matters upon which common stock holders are\nentitled to vote. The voting rights of holders of our common stock will be diluted as a result of these super voting rights.\n\n \n\n**Our common stock may be considered a “penny\nstock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.**\n\n \n\nOur common stock, which is currently quoted on\nOTCQB, may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny\nstock” under Section 3a51-1 of the Exchange Act, as amended. Our common stock may be a “penny stock”\nif it meets one or more of the following conditions: (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT\ntraded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Capital Market, or even if so, has a\nprice less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible\nassets less than $5 million. The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating\nin sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated\nunder the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential\ninvestors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document\nat least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires\nbroker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock\nto that investor. This procedure requires the broker-dealer to: (i) obtain from the investor information concerning his or her\nfinancial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that\ntransactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably\ncapable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the\nbasis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such\nstatement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and\ninvestment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock\nto resell their shares to third parties or to otherwise dispose of them in the market or otherwise.\n\n \n\nCompliance with these requirements may make it\nmore difficult for our investors to resell their shares of common stock to third parties or to otherwise dispose of them. Shareholders\nshould be aware that, according to Securities and Exchange Commission Release No. 34-29093, dated April 17, 1991, the market for\npenny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include: (i) control of the market for the security\nby one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged\nmatching of purchases and sales and false and misleading press releases; iii) boiler room practices involving high-pressure sales\ntactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differential and\nmarkups by selling broker-dealers; (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices\nhave been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.\nOur management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a\nposition to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within\nthe confines of practical limitations to prevent the described patterns from being established with respect to our securities.\n\n \n\n42\n\n \n\n \n\nThe low price of our common stock might have a\nnegative effect on the amount and percentage of transaction costs paid by individual shareholders. The low price of our common stock also\nlimits our ability to raise additional capital by issuing additional shares. There are several reasons for these effects. First, the internal\npolicies of certain institutional investors prohibit the purchase of low-priced stocks. Second, many brokerage houses do not permit\nlow-priced stocks to be used as collateral for margin accounts or to be purchased on margin. Third, some brokerage house policies\nand practices tend to discourage individual brokers from dealing in low-priced stocks. Finally, broker’s commissions on low-priced stocks\nusually represent a higher percentage of the stock price than commissions on higher priced stocks. As a result, the Company’s shareholders\nmay pay transaction costs that are a higher percentage of their total share value than if our share price were substantially higher.\n\n \n\n**FINRA sales practice requirements may also\nlimit your ability to buy and sell our common stock, which could depress the price of our shares.**\n\n \n\nFINRA rules require broker-dealers to have reasonable\ngrounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending\nspeculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information\nabout the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these\nrules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers.\nThus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit\nyour ability to buy and sell our shares, have an adverse effect on the market for our shares, and thereby depress our share price.\n\n \n\n**You may face significant restrictions on\nthe resale of your shares due to state “blue sky” laws.**\n\n \n\nEach state has its own securities laws, often\ncalled “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered\nin that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business\ndirectly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction,\nor it must be exempt from registration. The applicable broker-dealer must also be registered in that state.\n\n \n\nWe do not know whether our securities will be\nregistered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers,\nif any, who agree to serve as market makers for our common stock. We have not yet applied to have our securities registered in any state\nand will not do so until we receive expressions of interest from investors resident in specific states after they have viewed this Report.\nThere may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities.\nYou should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your shares without\nthe significant expense of state registration or qualification.\n\n \n\n**Our management has determined that our disclosure\ncontrols and procedures are not effective and we have identified material weaknesses in our internal control over financial reporting.**\n\n \n\nIn connection with the preparation of our financial\nstatements for the fiscal years ended March 31, 2026 and 2025, our management concluded that our internal control over financial\nreporting was not effective and we identified several material weaknesses. A material weakness is a deficiency, or a combination of deficiencies,\nin internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or\ninterim financial statements will not be prevented or detected on a timely basis. In addition, as of March 31, 2026, our management\nconcluded that our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial\nreporting. The material weaknesses result from the following: (i) lack of proper segregation of duties and risk assessment process;\n(ii) lack of formal documentation in internal controls over financial reporting; and (iii) lack of independent directors and\nan audit committee.\n\n \n\n43\n\n \n\n \n\nEach of the material weaknesses described above\ncould result in a misstatement of our accounts or disclosures that would result in a material misstatement of our annual or interim consolidated\nfinancial statements that would not be prevented or detected.\n\n \n\nTo remediate our identified material weaknesses,\nwe plan to adopt measures to improve our internal controls over financial reporting, including, among others: (i) hiring more qualified\naccounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen our financial reporting function\nand to set up a financial and system control framework; (ii) organizing regular training for our accounting staff, especially training\nrelated to U.S. GAAP and SEC reporting requirements, (iii) formulating U.S. GAAP accounting policies and procedures manual, which will\nbe maintained, reviewed and updated, on a regular basis, to the latest U.S. GAAP accounting standards, (iv) establishing assessment of\nSarbanes-Oxley compliance requirements and improvement of overall internal control; and (v) establishing an audit committee of the\nBoard consisting of three committee members meeting independence requirements under the Nasdaq listing rules and SEC rules.\n\n \n\nWhile implementation of the remediation plan remains\nongoing, as of the date of this Report, we have: (i) hired a qualified full-time Chief Financial Officer of the Company; (ii) established\ninternal audit function by engaging an external consulting firm to assist the Company with assessment of Sarbanes-Oxley compliance\nrequirements and improvement of overall internal control; and (iii) appointed two independent directors and an independent director nominee\nwho will serve on the Board upon the commencement of trading of the shares of common stock of the Company on Nasdaq, to strengthen our\ncorporate governance.\n\n \n\nAll other actions required to complete our remediation\nplan remain to be completed at this time. There is no guarantee that we will complete as planned or our efforts will be successful. As\nof the date of this Report, we have not incurred material costs as part of the remediation efforts. Due to the nature of the remediation\nprocess and the need for adequate time after implementation to evaluate and test the effectiveness of the implemented controls, we cannot\nprovide an estimate of costs expected to be incurred in connection with implementation of the remediation plan. We expect the remediation\nto be time-consuming and place significant demands on the Company’s financial and operational resources. We cannot assure you\nthat any measures we may take in the future will be sufficient to remediate the material weaknesses described above or avoid potential\nfuture material weaknesses. If we are unable to report financial information timely and accurately or to maintain effective disclosure\ncontrols and procedures, our stock price could be negatively impacted and we could be subject to, among other things, regulatory or enforcement\nactions by the SEC.\n\n** **\n\n**If securities or industry analysts do not\npublish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price\nand trading volume could decline.**\n\n \n\nThe trading market for our common stock will be\ninfluenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have\nand may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price\nof our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock,\nour stock price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us,\nwe could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.\n\n \n\n**We do not foresee paying cash dividends\nin the near future and, as a result, our investors’ sole source of gain, if any, will depend on capital appreciation, if any.**\n\n \n\nWe do not plan to declare or pay any cash dividends\non our shares of common stock in the near future and currently intend to retain any future earnings for funding growth. As a result, investors\nshould not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if\nany, of our shares may be investors’ sole source of gain for the near future. Moreover, investors may not be able to resell their\ncommon stock at or above the price they paid for them.\n\n \n\n**Our articles of incorporation allow our\nBoard to create new series of preferred stock without approval by our shareholders, which could adversely affect the rights of the holders\nof our common stock.**\n\n \n\nOur Board has the authority to fix and determine\nthe relative rights and preferences of preferred stock. Our Board also has the authority to issue preferred stock without shareholder\napproval. As a result, our Board could authorize the issuance of a series of preferred stock granting holders a preferred right to our\nassets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock, and the\nright to redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board could\nauthorize the issuance of an additional series of preferred stock that has greater voting power than our common stock or that is\nconvertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing\nshareholders.\n\n \n\n44\n\n \n\n \n\n**You may experience additional dilution as\na result of future equity offerings.**\n\n \n\nIn order to raise additional capital, we have\nissued equity securities in the past and may in the future offer additional shares of our common stock or other securities convertible\ninto or exchangeable for our common stock at prices that may not be the same as the price per unit in our previous equity offering. The\nprice per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in\nfuture transactions, may be lower than the price per share paid by investors in our previous equity offering.\n\n \n\n**Shares of our common stock that have not\nbeen registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set forth in Rule\n144(i) which apply to a former “shell company.”**\n\n** **\n\nPrior to the closing of the Share Exchange, we\nwere deemed a “shell company” under applicable SEC rules and regulations because we had no or nominal operations and either\nno or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents\nand nominal other assets. Pursuant to Rule 144 promulgated under the Securities Act, sales of the securities of a former shell company,\nsuch as us, under that rule are not permitted (i) until at least 12 months have elapsed from the date on which our Current Report on Form\n8-K reflecting our status as a non-shell company, was filed with the SEC; (ii) unless at the time of a proposed sale, we are subject to\nthe reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed\nby Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports; or (iii) until\nthe effectiveness of a registration statement under the Securities Act relating to our common stock. Therefore, unless we register such\nshares of common stock for sale under the Securities Act, most of our shareholders will be forced to hold their shares of our common stock\nfor at least that 12-month period before they are eligible to sell those shares, and even after that period, sales may not be made under\nRule 144 unless we and the selling shareholders are in compliance with other requirements of Rule 144. Further, it will be more difficult\nfor us to raise funding to support our operations through the sale of debt or equity securities unless we agree to register such securities\nunder the Securities Act, which could cause us to expend significant time and cash resources. Additionally, our previous status as a shell\ncompany could also limit our use of our securities to pay for any acquisitions we may seek to pursue in the future (although none are\ncurrently planned). The lack of liquidity of our securities as a result of the inability to sell under Rule 144 for a longer period of\ntime than a non-former shell company could cause the market price of our securities to decline."}