{"url_path":"/sec/raasy/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-08","source_url":"https://www.sec.gov/Archives/edgar/data/1804583/0001493152-26-021875-index.html","accession_number":"0001493152-26-021875","cik":"0001804583","ticker":"RAASY","issuer_name":"Cloopen Group Holding Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1804583/0001493152-26-021875-index.html","primary_entity_key":"0001804583","primary_entity_name":"Cloopen Group Holding Ltd"},"word_count":45492,"has_tables":true,"body_markdown":"**ITEM\n3. KEY INFORMATION**\n\n \n\n**Our\nHolding Company Structure and Contractual Arrangements with the VIE and Its Shareholders**\n\n \n\n**The\nVIE structure and its associated risks**\n\n \n\nCloopen\nGroup Holding Limited, our ultimate Cayman Islands holding company, does not have any substantive operations other than (1) directly\ncontrolling Anxun Guantong, our wholly-owned PRC subsidiary and a foreign-invested enterprise under PRC laws that controls the VIE and\nits subsidiaries through certain contractual arrangements instead of direct equity ownership, and (2) directly controlling our overseas\nsubsidiaries that conduct our overseas business operations. Investors in the ADSs are purchasing equity securities of our ultimate Cayman\nIslands holding company rather than purchasing equity securities of the affiliated entities.\n\n \n\nWe,\ntogether with our WFOE and the affiliated entities, are subject to PRC laws relating to, among others, restrictions over foreign investment\nin companies that engage in value-added telecommunications services as set out in the Negative List (2024 Version) promulgated by the\nMinistry of Commerce, or the MOFCOM, and the National Development and Reform Commission, or the NDRC. As a result, we operate value-added\ntelecommunications business in China through the affiliated entities, and rely on a series of contractual arrangements by and among WFOE,\nthe VIE and its shareholders to control and receive the economic benefits of the business operations of the affiliated entities. Our\nVIE structure is used to replicate foreign investment in China-based companies where the PRC law prohibits direct foreign investment\nin the operating companies. The contractual agreements enable us to (1) exercise effective control over the affiliated entities; (2)\nreceive substantially all of the economic benefits of the affiliated entities; and (3) have an exclusive option to purchase all or part\nof the equity interests in the affiliated entities when and to the extent permitted by PRC law. See “Item 4. Information on the\nCompany—C. Organizational Structure—Contractual Arrangements.” As a result of our direct ownership in WFOE and the\ncontractual agreements with the VIE, we are regarded as the primary beneficiary of the VIE, and the VIE and its subsidiaries are treated\nas our consolidated affiliated entities under U.S. GAAP. However, our contractual arrangements with the VIE are not equivalent of an\ninvestment in the VIE, and the PRC regulatory authorities could disallow our corporate structure at any time.\n\n \n\nThe\nVIE structure involves unique risks to investors in the ADSs. It may be less effective than direct ownership in providing us with operational\ncontrol over the VIE or its subsidiaries and we may incur substantial costs to enforce the terms of the arrangements. For example, the\nVIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct the operations\nof the VIE in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of the VIE\nin China, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn\ncould implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the\ncurrent contractual arrangements, we rely on the performance by the VIE and its shareholders of their obligations under the contracts\nto direct the VIE’s activities. The shareholders of the VIE may not act in the best interests of our company or may not perform\nits obligations under these contracts. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights\nunder these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings and therefore will be\nsubject to uncertainties in the PRC legal system.\n\n \n\nWe\nmay face challenges in enforcing the contractual arrangements due to jurisdictional and legal limitations. There are and will continue\nto be substantial uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations regarding\nthe status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the VIE and its shareholders\nthrough our WFOE. As of the date of this annual report, the agreements under the contractual arrangements among our WFOE, the VIE and\nits shareholders have not been tested in a court of law. It is uncertain whether any new PRC laws or regulations relating to VIE structures\nwill be adopted or, if adopted, what they would provide. If we or the VIE is found to be in violation of any existing or future PRC laws\nor regulations or fail to obtain or maintain any of the required licenses, permits, filings or approvals, the relevant PRC regulatory\nauthorities would have broad discretion to take action in dealing with such violations or failures. The PRC regulatory authorities could\ndisallow the VIE structure at any time in the future. If the PRC government deems that our contractual arrangements with the VIE do not\ncomply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation\nof existing regulations change or are interpreted differently in the future, we could be subject to severe penalties and may incur substantial\ncosts to enforce the terms of the arrangements, or be forced to relinquish our interests in those operations. Our Cayman Islands holding\ncompany, our subsidiaries, the affiliated entities, and investors in our securities (including the ADS) face uncertainty with respect\nto potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and,\nconsequently, significantly affect the financial performance of our company and the affiliated entities as a whole. For details, see\n“Risk Factors—Risks Related to Our Corporate Structure.”\n\n \n\nRevenues\ncontributed by the affiliated entities accounted for substantially all of our total revenues in 2023, 2024 and 2025. For a consolidation\nschedule depicting the results of operations, financial position and cash flows for us and the affiliated entities, see “Item 5.\nOperating and Financial Review and Prospects—B. Liquidity and Capital Resources —Financial Information Related to the VIE.”\n\n \n\n1\n\n \n\n \n\n**Cash\nand asset flows through our organization**\n\n \n\nIn\nlight of our holding company structure and the VIE structure, our ability to pay dividends to the shareholders, including the investors\nin the ADSs, and to service any debt we may incur may highly depend upon dividends paid by our WFOE to us and service fees paid by the\naffiliated entities to our WFOE, despite that we may obtain financing at the holding company level through other methods. For example,\nif any of our WFOE or the VIE incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability\nto pay dividends to us and the investors in the ADS as well as the ability to settle amounts owed under the contractual arrangements.\nAs of the date of this annual report, none of Cloopen Group Holding Limited, our WFOE and the VIE has paid any dividends or made any\ndistributions to their respective shareholders, including any U.S. investors. In 2023, 2024 and 2025, the VIE did not pay any service\nfees to our WFOE under the contractual arrangements. We expect to distribute earnings and settle the service fees owed under the contractual\narrangements at the request of our WFOE and based on our business needs, and do not expect to declare dividend in the foreseeable future.\nWe currently have not maintained any cash management policies that specifically dictate how funds shall be transferred among Cloopen\nGroup Holding Limited, the subsidiaries of Cloopen Group Holding Limited (including our WFOE), the affiliated entities and investors.\nWe will determine the payment of dividends and fund transfer based on our specific business needs in accordance with the applicable laws\nand regulations.\n\n \n\nUnder\nPRC laws and regulations, our WFOE is permitted to pay dividends only out of its retained earnings, if any, as determined in accordance\nwith PRC accounting standards and regulations. Furthermore, our WFOE and the affiliated entities are required to make appropriations\nto certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends\nexcept in the event of a solvent liquidation of the companies. Remittance of dividends by our WFOE out of China is also subject to certain\nprocedures with the banks designated by the State Administration of Foreign Exchange, or SAFE. These restrictions are benchmarked against\nthe paid-up capital and the statutory reserve funds of our WFOE and the net assets of the VIE in which we have no legal ownership. In\naddition, while there are currently no such restrictions on foreign exchange and our ability to transfer cash or assets between Cloopen\nGroup Holding Limited and our Hong Kong subsidiary, if certain PRC laws and regulations, including existing laws and regulations and\nthose enacted or promulgated in the future were to become applicable to our Hong Kong subsidiary in the future, and to the extent our\ncash or assets are in Hong Kong or a Hong Kong entity, such funds or assets may not be available due to interventions in or the imposition\nof restrictions and limitations on our ability to transfer funds or assets by the PRC government. Furthermore, we cannot assure you that\nthe PRC government will not intervene or impose restrictions on Cloopen Group Holding Limited, its subsidiaries and the affiliated entities\nto transfer or distribute cash within the organization, which could result in our inability of or prohibition on making transfers or\ndistributions to entities outside of mainland China and Hong Kong.\n\n \n\nUnder\nPRC laws and regulations, we, the Cayman Islands holding company, may fund our WFOE only through capital contributions or loans, and\nfund the affiliated entities only through loans, subject to satisfaction of applicable government registration and approval requirements.\nSee “—D. Risk Factors—Risks Related to Our Corporate Structure —We may rely on dividends paid by our PRC subsidiaries\nto fund cash and financing requirements. Any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material\nadverse effect on our ability to conduct our business and to pay dividends to holders of our ordinary shares, including those represented\nby the ADSs,” and “—D. Risk Factors—Risks Related to Doing Business in China—Governmental control of currency\nconversion may limit our ability to utilize our revenues effectively and affect the value of your investment.”\n\n \n\n**Our\nOperations in China and Permissions Required from the PRC Authorities for Our Operations**\n\n \n\nWe,\nthrough our WFOE and the affiliated entities, conduct our operations in China. We also control Anxun Shuzhi (Shenzhen) Technology Co.,\nLtd., our wholly-owned PRC subsidiary and a foreign-invested enterprise under PRC laws, which has no material business operations as\nof the date of this annual report. Our operations in China are governed by PRC laws and regulations. We and the affiliated entities are\nrequired to obtain certain licenses, permits, filings or approvals from relevant governmental authorities in China in order to operate\nour business. As of the date of this annual report, as advised by our PRC counsel, CM Law Firm, our PRC subsidiaries and the affiliated\nentities in China have obtained the material licenses, permits, filings and approvals from the PRC government authorities necessary for\nour business operations in China, including, among others, Value-Added Telecommunications Business Operating Licenses. Given the uncertainties\nof interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities,\nand the promulgation of new laws and regulations and amendment to the existing ones, we may be required to obtain additional licenses,\npermits, filings or approvals for our business operations in the future. We cannot assure you that we or the affiliated entities will\nbe able to obtain, in a timely manner or at all, or maintain such licenses, permits, filings or approvals, and we or the affiliated entities\nmay also inadvertently conclude that such permissions or approvals are not required. Any lack of or failure to maintain requisite licenses,\npermits, filings or approvals applicable to us or the affiliated entities may have a material adverse effect on our business, results\nof operations, financial condition and prospects and cause the value of any securities we offer to significantly decline or become worthless.\nFor details, see “—D. Risk Factors—Risks Related to Regulatory Compliance—Our business is subject to extensive\nregulation, and if we fail to obtain and maintain required licenses and permits, we could face government enforcement actions, fines\nand possibly restrictions on our ability to operate or offer certain of our solutions.”\n\n \n\n2\n\n \n\n \n\nOn\nDecember 28, 2021, the Cyberspace Administration of China, or the CAC, and other 12 PRC regulatory authorities jointly issued an amendment\nto the Measures for Cybersecurity Review, or the Cybersecurity Review Measures, which took effect on February 15, 2022. The Cybersecurity\nReview Measures stipulates that (1) critical information infrastructure operators purchasing network products and services and network\nplatform operators carrying out data processing activities, which affect or may affect national security, are subject to the cybersecurity\nreview by the Cybersecurity Review Office, and (2) network platform operators holding personal information of more than one million users\nseeking for listing in a foreign country must apply for the cybersecurity review. See “Item 4. Information on the Company—B.\nBusiness Overview—Regulations —Regulations relating to cybersecurity and privacy protection—Cybersecurity.” As\nof the date of this annual report, we have not been informed by any PRC governmental authority of any requirement that we file for a\ncybersecurity review. However, if we are not able to comply with the cybersecurity and data privacy requirements in a timely manner,\nor at all, we may be subject to government enforcement actions and investigations, fines, penalties, or suspension of our non-compliant\noperations, among other sanctions, which could materially and adversely affect our business and results of operations. See “—D.\nRisk Factors—Risks Related to Our Business and Industry—If we fail to comply with laws and contractual obligations related\nto data privacy and protection and cybersecurity, our business, results of operations and financial condition could be materially and\nadversely affected.”\n\n \n\nOn\nFebruary 17, 2023, Chinese Securities Regulatory Commission, or the CSRC, promulgated the Trial Measures of the Overseas Securities Offering\nand Listing by Domestic Companies, or the Overseas Listing Trial Measures, and the related guidelines, which became effective on March\n31, 2023. The Overseas Listing Trial Measures has comprehensively improved and reformed the existing regulatory regime for overseas offering\nand listing of securities by PRC domestic companies and regulates both direct and indirect overseas offering and listing of securities\nby PRC domestic companies by adopting a filing-based regulatory regime. According to the Overseas Listing Trial Measures, PRC domestic\ncompanies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the\nfiling procedure with the CSRC and report relevant information. The CSRC provided further notice related to the Overseas Listing Trial\nMeasures that companies that have already been listed on overseas stock exchanges prior to March 31, 2023 are not required to make immediate\nfilings for its listing, but are required to make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures,\ni.e., to file with the CSRC within three business days after the closing of such subsequent offerings. As we had been listed on an overseas\nstock exchange prior to March 31, 2023, we are not required to make such immediate filing with the CSRC in connection with such previous\nlisting. However, we could be subject to the filing requirements with the CSRC if we conduct subsequent offerings or seek to list our\nsecurities on a stock exchange. See “Item 4. Information on the Company —B. Business Overview—Regulations—Regulations\nrelating to M&A Rule and overseas listing in the PRC.”\n\n \n\nWe\ncannot assure you that we can complete the filing procedures, obtain the approvals or complete other compliance procedures in a timely\nmanner, or at all, or that any completion of filings or approvals or other compliance procedures would not be rescinded. Any such failure\nwould subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose restrictions and\npenalties on the operations in China, significantly limit or completely hinder our ability to launch any new offering of our securities,\nlimit our ability to pay dividends outside of China, delay or restrict the repatriation of the proceeds from future capital raising activities\ninto China, or take other actions that could materially and adversely affect our business, results of operations, financial condition\nand prospects, as well as the trading price of the ADSs. Furthermore, the PRC government authorities may further strengthen oversight\nand control over listings and offerings that are conducted overseas. Any such action may adversely affect our operations and significantly\nlimit or completely hinder our ability to offer ADSs and/or other securities to investors, and cause the value of such securities to\nsignificantly decline or be worthless. See “—D. Risk Factors—Risks Related to Doing Business in China—The approval\nof and the filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings\nunder PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”\n\n \n\n3\n\n \n\n \n\n**The\nHolding Foreign Companies Accountable Act**\n\n \n\nThe\nHolding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. Pursuant to the HFCAA and related regulations,\nif we have filed an audit report issued by a registered public accounting firm that the PCAOB has determined that it is unable to inspect\nand investigate completely, the SEC will identify us as a “Commission-Identified Issuer,” and the trading of our securities\non any U.S. national securities exchanges, as well as any over-the-counter, or OTC, trading in the United States, will be prohibited\nif we are identified as a Commission-Identified Issuer for two consecutive years. Our independent registered public accounting firm,\nARK Pro CPA & Co, is located in and organized under the laws of Hong Kong, a jurisdiction where, at the time of the adoption of the\nHFCAA, the PCAOB was unable to conduct inspections without the approval of the Chinese authorities. On August 26, 2022, the PCAOB, the\nCSRC and the Ministry of Finance of the PRC signed the Statement of Protocol, which establishes a specific and accountable framework\nfor the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and Hong Kong. On December\n15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting\nfirms headquartered in mainland China and Hong Kong in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB\nwas unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However,\nwhether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered\nin mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor’s control.\nThe PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans to resume regular inspections,\nas well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it\nwill act immediately to consider the need to issue new determinations with the HFCAA if needed. If the PCAOB is unable to inspect and\ninvestigate completely registered public accounting firms located in mainland China and Hong Kong, or if we fail to, among others, meet\nthe PCAOB’s requirements, including retaining a registered public accounting firm that the PCAOB determines it is able to inspect\nand investigate completely, and upon two consecutive years of non-inspection under the HFCAA, our shares and the ADSs will not be permitted\nfor trading on a national securities exchange or the OTC trading market in the United States under the HFCAA and related regulations.\nThe related risks and uncertainties could cause the value of the ADSs to decline significantly or become worthless. For details, see\n“—D. Risk Factors—Risks Related to Doing Business in China—The ADSs may be prohibited from being traded over\nthe counter in the United States under the HFCAA if the SEC subsequently determines our audit work is performed by auditors that the\nPCAOB is unable to inspect or investigate completely. The prohibition from trading of the ADSs, or the threat of their being prohibited\nfrom being traded, may materially and adversely affect the value of your investment.”\n\n \n\n**A.** **Reserved**\n\n** **\n\n**B.** **Capitalization and Indebtedness**\n\n \n\nNot\napplicable.\n\n \n\n**C.\nReasons for the Offer and Use of Proceeds**\n\n \n\nNot\napplicable.\n\n \n\n**D.\nRisk Factors**\n\n \n\n**Summary\nRisk Factors**\n\n \n\n*Our\nbusiness is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely\naffect our business, results of operations, financial condition, cash flows, and prospects. These risks are discussed more fully below\nand include, but are not limited to, risks related to:*\n\n \n\n**Risks\nrelated to the Independent Investigation and restatement of consolidated financial statements**\n\n \n\n \n●\nlegal\nproceedings, investigations and inquiries in connection with or arising from the previously disclosed employee misconduct and transaction\nirregularities, and other associated adverse effects;\n\n \n \n \n\n \n●\nadverse\npublicity and potential concerns from our customers and other business partners relating to or arising from the Independent Investigation\nand restatement of consolidated financial statements;\n\n \n \n \n\n \n●\nour\nability to implement and maintain an effective system of internal control over financial reporting to accurately report our results\nof operations, meet our reporting obligations and prevent fraud; and\n\n \n \n \n\n \n●\nour\nfailure to timely comply with our SEC reporting obligations.\n\n \n\n4\n\n \n\n \n\n**Risks\nrelated to our business and industry**\n\n \n\n \n●\nour\nability to attract new customers or retain existing ones;\n\n \n \n \n\n \n●\ncontinued\ndevelopment of our solutions and the markets our solutions target;\n\n \n \n \n\n \n●\nour\nlimited operating history;\n\n \n \n \n\n \n●\nour\nability to generate profits and positive cash flows;\n\n \n \n \n\n \n●\nour\nreliance on collaborations with China’s major mobile network operators;\n\n \n \n \n\n \n●\nour\nability to enhance or upgrade our existing solutions and introduce new ones;\n\n \n \n \n\n \n●\ncompatibility\nof our solutions across devices, business systems and applications and physical infrastructure;\n\n \n \n \n\n \n●\nour\nability to compete effectively in China’s cloud-based communications industry and internationally;\n\n \n \n \n\n \n●\nour\nability to collect accounts receivable from our customers in a timely manner;\n\n \n \n \n\n \n●\nour\nability to maintain and enhance our brand image and generate positive publicity;\n\n \n \n \n\n \n●\nour\nability to optimize the prices for our solutions;\n\n \n \n \n\n \n●\nour\nability to manage our sales cycle to large enterprises;\n\n \n \n \n\n \n●\nour\nability to comply with related laws and regulations associated with conducting business with state-owned enterprises;\n\n \n \n \n\n \n●\nreal\nor perceived errors, defects, failures, vulnerabilities, or bugs in our solutions;\n\n \n \n \n\n \n●\nour\nability to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions;\n\n \n \n \n\n \n●\nour\nability to support and resolve intellectual property rights claims and other litigation matters;\n\n \n \n \n\n \n●\nour\nability to protect or defend our intellectual property rights; and\n\n \n \n \n\n \n●\nour\nability to comply with laws and contractual obligations related to data privacy and protection and cybersecurity.\n\n \n\n**Risks\nrelated to regulatory compliance**\n\n \n\n \n●\ncompliance\nwith extensive and evolving laws and regulations in the PRC;\n\n \n \n \n\n \n●\nthird-party\nmisconduct and misuse of our solutions in violation of relevant laws and regulations; and\n\n \n \n \n\n \n●\nour\nlimited insurance coverage, which could expose us to significant costs and business disruption.\n\n \n\n5\n\n \n\n \n\n**Risks\nrelated to doing business in China**\n\n \n\n \n●\nchanges\nin China’s economic, political or social conditions or government policies;\n\n \n \n \n\n \n●\nevolving\nlegal development, non-compliance with which, or changes in which, may adversely affect our business and prospects;\n\n \n \n \n\n \n●\nChinese\ngovernment’s significant authority to intervene or influence our operations and to exert control over offerings conducted overseas\nand/or foreign investment in China-based issuers;\n\n \n \n \n\n \n●\nthe\napproval of and the filing with the CSRC or other PRC government authorities in connection with our future offshore offerings; and\n\n \n \n \n\n \n●\nthe\nthreat of the ADSs being prohibited from being traded over the counter in the United States under the HFCAA if the SEC subsequently\ndetermines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely.\n\n \n\n**Risks\nrelated to our corporate structure**\n\n \n\n \n●\ncompliance\nof the contractual arrangements that establish our corporate structure for operating our business;\n\n \n \n \n\n \n●\nfailure\nby the VIE or its shareholders to perform their obligations under our contractual arrangements with them; and\n\n \n \n \n\n \n●\nactual\nor potential conflicts of interest of shareholders of the VIE with us.\n\n \n\n**Risks\nrelated to corporate governance**\n\n \n\n \n●\nour\nstatus as a foreign private issuer;\n\n \n \n \n\n \n●\nour\nstatus as an emerging growth company; and\n\n \n \n \n\n \n●\nour\ndual-class voting structure and the concentration of ownership which provide Class B ordinary shareholder considerable influence\nover corporate matters, including the election of board of directors.\n\n \n\n**Risks\nrelated to the ADS**\n\n \n\n \n●\ndelisting\nof the ADSs from the New York Stock Exchange, which may continue to have a material adverse effect on the trading and price of the\nADSs;\n\n \n \n \n\n \n●\nuncertainty\nand potential business disruption associated with the preliminary non-binding going private proposal and its potential impact on\nthe trading price of the ADSs;\n\n \n \n \n\n \n●\nvolatility\nof the trading price of the ADSs;\n\n \n \n \n\n \n●\nthe\nsale or availability for sale of substantial amounts of the ADSs; and\n\n \n \n \n\n●our\nstatus as a passive foreign investment company for U.S. federal income tax purposes for our\ntaxable year ended December 31, 2025.\n\n \n\n**Risks\nRelated to the Independent Investigation and Restatement of Consolidated Financial Statements**\n\n \n\n**The\npreviously disclosed employee misconduct and transaction irregularities have exposed us to a number of legal proceedings, investigations\nand inquiries, resulted in significant legal and other expenses, required significant time and attention from our senior management,\namong other adverse effects.**\n\n \n\nAs\npreviously disclosed in press releases dated May 3, 2022 and September 6, 2022, the Special Committee undertook the Independent Investigation\nregarding certain employee misconduct and transaction irregularities with the assistance of independent advisors during 2022.\n\n \n\n6\n\n \n\n \n\nThe\nemployee misconduct and transaction irregularities had and could continue to have material adverse effects on us. On February 6, 2024,\nwe reached a settlement with the SEC regarding the employee misconduct and transaction irregularities, under which we shall cease and\ndesist from committing or causing any violations and any future violations of certain federal securities laws. Entering into the settlement\nwith the SEC also results in the loss of certain exemptions or protections that were available to us under federal securities laws. See\n“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Other Proceedings.”\nWe incurred significant costs, including legal expenses and cost associated with the restatement and adjustment of our financial statements.\nWe may also incur material costs associated with our indemnification arrangements with our current and former directors and certain of\nour officers, as well as other indemnitees. Moreover, an unfavorable outcome in any of these matters could result in significant damages,\nadditional penalties or other remedies imposed against us, and/or our current or former directors or officers, which could harm our reputation,\nbusiness, results of operations, financial condition, or liquidity. In addition, an unfavorable outcome in any of these matters could\nexceed coverage provided, if any, under potentially applicable insurance policies, which is limited. Following disclosure of the employee\nmisconduct and transaction irregularities, we have had difficulties in obtaining desirable insurance coverage, or any insurance coverage,\nregarding legal proceedings, investigations and inquiries, and we cannot assure you with any certainty that we will be able to obtain\nsuch coverage in the future. The employee misconduct and transaction irregularities also led to material adverse effects on our operations,\nour reputation and our relationships with business partners, as well as material adverse effects on our financial position, including\nincurred costs and expenses and our ability to raise new capital in the future. Furthermore, our senior management team devoted significant\ntime to facilitate the Independent Investigation and is expected to continue to devote significant time and efforts to address the impacts\nassociated with or arising from the employee misconduct and transaction irregularities.\n\n \n\nWe\ncannot predict all impacts on us in connection with or arising from the employee misconduct and transaction irregularities. Any unknown\nor new risks might result in a material adverse effect on us.\n\n \n\n**We\nwere named as a defendant in a number of lawsuits filed by purchasers of our securities, including class action lawsuits that could have\na material adverse effect on our business, results of operation, financial condition and cash flows, and our reputation. We may continue\nto be, the subject of a number of legal proceedings, investigations and inquiries by governmental agencies with respect to the employee\nmisconduct and transaction irregularities.**\n\n \n\nWe\nwere named as a defendant in a number of lawsuits filed by purchasers of our securities, including class action lawsuits described in\n“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Other Proceedings.”\nWe may continue to be, the subject of a number of legal proceedings, investigations and inquiries by governmental agencies with respect\nto the employee misconduct and transaction irregularities.\n\n \n\nThe\nmatters that led to the Independent Investigation and restatement of consolidated financial statements have exposed us to increased risks\nof litigation, regulatory proceedings and government enforcement actions. We and our current and former directors and officers may, in\nthe future, be subject to additional proceedings relating to such matters. Regardless of the outcome, any lawsuits or other proceedings\nthat may be brought against us or our current or former directors and officers, could be time-consuming, result in significant expense\nand divert the attention and resources of our management and other key employees. An unfavorable outcome in any of these matters could\nresult in significant damages, fines, additional penalties, administrative sanctions or other remedies imposed against us, our current\nor former directors or officers, which could harm our reputation, business, results of operations, financial condition or cash flows.\nSubject to certain limitations, we are obligated to indemnify, among others, our current and former directors and officers in connection\nwith such lawsuits and any related proceedings or settlements amounts. In addition, an unfavorable outcome in any of these matters could\nexceed coverage provided, if any, under potentially applicable insurance policies, which is limited.\n\n \n\n**Matters\nrelating to or arising from the Independent Investigation and restatement of consolidated financial statements, including adverse publicity\nand potential concerns from our customers and other business partners, have had and could continue to have a material adverse effect\non our business and financial condition.**\n\n \n\nWe\nhave been and could continue to be the subject of negative publicity focusing on the Independent Investigation and restatement of our\nfinancial statements, and we may be materially and adversely affected by negative reactions from our customers, suppliers or others with\nwhom we do business. Concerns include the perception of the efforts required to address our accounting and control environment, and the\nability for us to be a long-term provider to our customers. Continued adverse publicity and potential concerns from our customers and\nbusiness partners could harm our business and have an adverse effect on our financial condition.\n\n \n\n7\n\n \n\n \n\n**If\nwe fail to implement and maintain an effective system of internal control over financial reporting, we could be unable to accurately\nreport our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of the\nADSs may be materially and adversely affected.**\n\n \n\nIn\nthe course of preparing our consolidated financial statements as of and for the year ended December 31, 2025, we and our independent\nregistered public accounting firm identified certain material weaknesses in our internal control over financial reporting as of December\n31, 2025. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or a combination of\ndeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement\nof our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.\n\n \n\nThe\nmaterial weaknesses identified relate to: (1) insufficient accounting personnel with appropriate U.S. GAAP knowledge for accounting of\ncomplex transactions, presentation and disclosure of financial statements in accordance with U.S. GAAP and SEC reporting requirements,\n(2) inadequate rigorous implementation of controls over financial closing policies and procedures, (3) lack of sufficient procedures\non recognizing revenue on a gross basis or a net basis, (4) insufficient controls and reporting procedures on monitoring the past due\nstatus of customer to assess the revenue recognition and provision of accounts receivable, (5) insufficient due diligence, monitoring\nand review controls in the long-term investment procedures.\n\n \n\nThe\nimplementation of remedial measures, however, may not fully address the material weaknesses identified in our internal control over financial\nreporting, and we cannot conclude that they have been fully remedied. Our failure to correct the material weaknesses or our failure to\ndiscover and address any other material weaknesses or deficiencies could result in inaccuracies or material misstatements in our financial\nstatements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely\nbasis.\n\n \n\nWe\nare subject to reporting obligations under the U.S. securities laws. As a public company, we are also subject to the Sarbanes-Oxley Act\nof 2002. Commencing with our fiscal year ended December 31, 2021, we must perform system and process evaluation and testing of our internal\ncontrol over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting\nin our annual report on Form 20-F for such year, as required by Section 404 of the Sarbanes-Oxley Act, or Section 404. Our management\nhas concluded that our internal control over financial reporting was ineffective as of December 31, 2025. See “Item 15. Controls\nand Procedures.” In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS\nAct, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial\nreporting. Our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is\nqualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or\nreviewed, or if it interprets the relevant requirements differently from us. As a public company, our reporting obligations may also\nplace a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable\nto timely complete our evaluation testing and any required remediation.\n\n \n\nFurthermore,\nour internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well\ndesigned and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. In\nlight of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements\ndue to error or fraud will not occur or that all control issues and instances of fraud will be detected.\n\n \n\nDuring\nthe course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify\nother weaknesses and deficiencies in our internal control over financial reporting. If we fail to maintain the adequacy of our internal\ncontrol over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude\non an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally, if we\nfail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements\nand could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely\nbasis. As a result, our businesses, results of operations, financial condition and prospects, as well as the trading price of the ADSs,\nmay be materially and adversely affected. Additionally, ineffective internal control over financial reporting could expose us to increased\nrisk of fraud or misuse of corporate assets and subject us to regulatory investigations and civil or criminal sanctions. We may also\nbe required to restate our financial statements from prior periods.\n\n \n\n8\n\n \n\n \n\n**Our\nhistorical failure to timely file our annual reports and other SEC filings has had, and may continue to have, an adverse effect on our\nbusiness and the trading price of the ADSs.**\n\n \n\nOur\nhistorical inability to maintain a timely filing schedule with the SEC resulted in significant delays in providing the market with current\nfinancial information. While we became current in our SEC reporting obligations in September 2025 following the filing of our annual\nreport for the fiscal year ended December 31, 2025, the circumstances that led to our past filing delays have caused, and may continue\nto cause, substantial costs and diversion of management’s attention.\n\n \n\nOur\nability to remain timely in our future SEC reporting is subject to a number of contingencies, including our ability to effectively remediate\nidentified material weaknesses in our internal control over financial reporting. We cannot assure you that our efforts to strengthen\nour internal controls will be successful or that we will not experience similar filing delays in the future. Any future failure to timely\nfile our SEC reports could result in the loss of investor confidence and a decrease in the market price of the ADSs.\n\n \n\nIn\naddition, our past reporting delays resulted in specific restrictions on our ADR facility. In June 2022, the depositary bank closed its\nbooks to conversions of our ordinary shares into ADSs. Although the depositary bank reopened its books for conversions and the issuance\nof ADSs (including for equity awards under our Form S-8) in September 2025 after we became current in our reporting, certain broker platforms,\nincluding our primary designated broker, currently do not accept the deposit of new ADSs from the depositary bank due to their internal\ncompliance policies.\n\n \n\nAs\na result, even though the depositary bank’s books are technically open, the practical ability of shareholders and employees to\nconvert ordinary shares into ADSs and move them into the public market remains restricted. While these broker-imposed restrictions do\nnot affect the trading of previously issued ADSs, they limit the liquidity of our securities. We cannot assure you when or if these broker-level\nrestrictions will be lifted. The lack of practical fungibility between our ordinary shares and ADSs, combined with any lingering investor\nconcerns regarding our reporting history, may have an adverse effect on the market price of the ADSs and our ability to obtain financing\nin the public markets in the future.\n\n \n\n**Risks\nRelated to Our Business and Industry**\n\n \n\n**If\nwe fail to attract new customers or retain existing ones, our business, results of operations and financial condition could be materially\nand adversely affected.**\n\n \n\nIn\norder to increase our revenues and maintain future growth, we must attract new customers and encourage existing customers to continue\ntheir subscriptions, increase their usage, and purchase additional features and solutions from us.\n\n \n\nFor\ncustomer demand and the adoption of our solutions to grow, the quality, cost and features of these solutions must compare favorably to\nthose of competing products and services. To that end, we must continue to offer high-quality solutions and features at competitive prices.\nAs our target markets mature, or as competitors introduce more differentiated products or services at lower costs that compete or are\nperceived to compete with ours, we may be unable to attract new customers or retain existing ones on favorable terms or at all, which\ncould have an adverse effect on our revenues and future growth. The rate at which our existing customers purchase any new or enhanced\nfeature and solution we may offer also depends on a number of factors, including the importance of these additional features and solutions\nto our customers, their quality and performance, the prices at which we offer them, and the general economic condition and specific industry\nlandscape in relation to our customers. If our customers react negatively to our new and enhanced features and solutions, or our efforts\nto cross-sell and up-sell are otherwise not as successful as we anticipate, we may fail to maintain or grow our revenues and our customer\nbase.\n\n \n\nOur\nsales and marketing strategies must also continue to evolve and adapt, including through various online and offline channels and direct\nand indirect sales efforts. In addition, marketing and selling new and enhanced features and solutions may require increasingly sophisticated\nand costly marketing campaigns. If we fail to do so cost-effectively, we may be unable to attract new customers or sell additional features\nand solutions to existing customers in a cost-effective manner.\n\n \n\nWe\nmust also continue to offer high-quality training, implementation and other customer support services in order to attract new customers\nand retain existing ones. These services require customer support personnel with industry-specific technical knowledge and expertise\nwhich may be difficult and costly to locate and hire. We also need to provide our customer support personnel with extensive training\non our solutions and their features, which could make it difficult to scale up our operations rapidly or effectively, especially when\nwe expand our business across different geographical markets or industries. If we fail to provide effective ongoing support and help\nour customers promptly resolve product issues, our ability to attract new customers and retain existing ones could be negatively affected,\nwhich, in turn, could materially and adversely affect our business, results of operations and financial condition.\n\n \n\n9\n\n \n\n \n\n**Our\nfuture business growth and expansion is dependent on the continued development of our solutions and the markets our solutions target.**\n\n \n\nWe\noffer a comprehensive portfolio of cloud-based communications solutions to enterprises of all sizes, from which we generate most of our\nrevenues. The markets we target are rapidly evolving and subject to a number of risks and uncertainties. Our success will depend to a\nsubstantial extent on the growth of these markets, especially the widespread adoption of cloud-based communications solutions as a replacement\nfor legacy on-premises systems and other traditional forms of communications.\n\n \n\nThe\ngrowth of these addressable markets also depends on a number of other factors, including the refresh rate for legacy on-premises systems,\nthe cost, performance and perceived value associated with cloud-based communications solutions, as well as their ability to address security,\nstability, and privacy concerns. In order to grow our business and extend our market position, we intend to educate our existing and\nprospective customers about the benefits of our solutions and continuously enhance and innovate our solutions and features to increase\nmarket acceptance. However, if ever the cloud-based communications technologies fail to develop in a way that satisfies the growing demands\nof customers, or develop more slowly than we anticipate, it could significantly harm our business. In addition, the cloud-based communications\nindustry may fail to grow significantly or at all, or there could be a reduction in demand as a result of a lack of public acceptance,\ntechnological challenges, competing products and services, decreases in IT spending by current and prospective customers, weakening economic\nconditions and other causes. The occurrence of any of the foregoing could materially and adversely affect our business, results of operations\nand financial condition.\n\n \n\n**We\nhave a limited operating history, which could make it difficult to forecast our revenues and evaluate our business and prospects.**\n\n \n\nWe\nbegan offering cloud-based communications solutions in 2014. As a result of our limited operating history, however, our ability to forecast\nour future results of operations is limited and subject to a number of uncertainties. We have encountered, and expect to continue to\nencounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and\nuncertainties related to technological development and regulatory environment. We derive a significant portion of our revenues from project-based\nsolutions focusing primarily on large enterprises, and the continued availability of such projects and customers is uncertain, which\ncould materially affect the accuracy of our forecasts and our financial performance. For solutions that we offer on a recurring basis,\nour short operating history also limits our ability to predict our future pricing capabilities and sales volumes. If we do not successfully\naddress these risks and uncertainties, our results of operations and financial condition could differ materially from our estimates and\nforecasts, which could materially and adversely impact our business and the trading price of the ADSs.\n\n \n\n**We\nhave incurred significant net losses and negative operating cash flows since inception, and we may therefore not be able to achieve or\nsustain profitability in the future.**\n\n \n\nWe\nhave incurred substantial net losses since our inception. In 2023, 2024 and 2025, our net loss was RMB412.4 million, RMB146.8 million\nand RMB238.8 million (US$34.1 million), respectively, and our operating cash outflow was RMB516.2 million, RMB180.2 million and RMB231.0\nmillion (US$33.0 million), respectively. Over the past few years, we have spent considerable amounts of time and financial resources\nto develop new cloud-based communications solutions and enhance or upgrade our existing ones in order to position us favorably for future\ngrowth. In addition, we have expended significant resources upfront to market, promote and sell our solutions through various direct\nand indirect channels, and expect to continue to do so in the future. Our aggressive investments continue to drive our negative cash\nflows and we expect to continue to invest in business operations, technological improvements, marketing campaigns and international expansion.\nOur status as a public company could also incur significant additional accounting, legal and other expenses.\n\n \n\nAchieving\nprofitability will require us to increase revenues, manage our cost structure, and avoid significant liabilities. We cannot guarantee,\nhowever, that we can achieve any of these goals as we continue to aggressively invest in the aspiration of continued revenue growth.\nOur failure to generate increased revenues to cover the expected increase in these various expenditures could prevent us from ever achieving\nprofitability or positive cash flows from operating activities.\n\n \n\n10\n\n \n\n \n\n**Our\nbusiness relies on the communications infrastructure and telecommunications resources provided by China’s major mobile network\noperators. If we fail to maintain our collaborations with these mobile network operators, our ability to serve our customers could be\nmaterially and adversely affected.**\n\n \n\nWe\ninterconnect with mobile network operators in China and other countries to enable the use of our solutions by our customers. Specifically,\nwe obtain telecommunications resources from mobile network operators and offer our CPaaS and other solutions to allow our customers to\naccess and utilize these resources in a way that suits their specific communication needs. We currently collaborate with all three major\nmobile network operators in China. As all telecommunications resources in China are distributed among and managed by theses mobile network\noperators and their provincial branches, we expect that we will continue to rely heavily on our collaborations with them to offer our\nsolutions. Any termination of our collaborations with any major mobile network operator in China would negatively impact our business.\n\n \n\nOur\nreliance on mobile network operators has reduced our operating flexibility as well as our ability to control quality and make rectifications.\nIf our customers encounter errors or defective performance, whether or not caused by a mobile network operator or otherwise, we could\nfind it difficult to identify the source of the problems and fail to make timely or effective rectifications, which could have a negative\nimpact on customer satisfaction and lead to a loss of our existing customers or delay the adoption of our solutions by prospective customers.\n\n \n\nIn\naddition, the fees charged by mobile network operators may fluctuate more frequently than we could charge our customers to pass on the\nincreased cost, which may adversely affect our margins and business. Mobile network operators have also, at times, instituted additional\nfees due to regulatory, competitive or other reasons. We have historically responded to such fee increases by negotiating an agreed-upon\nfee arrangement with mobile network operators, passing on the increased cost to our customers, or accepting lower profit margins. Our\nability to respond to any increased fees charged by mobile network operators may be constrained if all mobile network operators in a\nparticular market implement similar fee increases, if the magnitude of the fees is disproportionately large when compared to the underlying\nprices we charge our customers, or if the market conditions and competitive landscape limit our ability to increase the price we charge\nour customers. If we are unable to respond to such fee increases in a way that preserves the competitiveness or profitability of our\nsolutions, our business, results of operations and financial condition could be materially and adversely affected.\n\n \n\nFurthermore,\nalthough we have historically collaborated closely with a number of China’s mobile network operators and their local branches,\nour contracts with them generally have fixed terms ranging from one to five years, and they may terminate our collaboration upon expiration.\nIn the past, we were generally able to renew our contracts with mobile network operators and their local branches. However, if a significant\nportion of such mobile network operators and their local branches cease to provide us with access to their telecommunications resources\nor fail to provide services to us on favorable terms, it could be costly and time-consuming to switch to other qualified mobile network\noperators in the affected regions on commercially reasonable terms or at all, which could materially and adversely affect our business,\nresults of operations and financial condition.\n\n \n\n**If\nwe fail to enhance or upgrade our existing solutions and introduce new ones that are broadly accepted by the market and meet our customers’\nevolving demands in a timely and cost-effective manner, our business, results of operations and financial condition could be materially\nand adversely affected.**\n\n \n\nOur\nability to attract new customers and increase revenues from existing customers depends in part on our ability to enhance and improve\nour existing solutions and introduce new ones. The success of any enhancement or new solution depends on a number of factors, including\ntimely completion, adequate quality testing, consistently high actual performance, market-accepted pricing levels and overall market\nacceptance. Enhancements and new solutions that we develop may not be introduced in a timely or cost-effective manner, may contain errors\nor defects, may have interoperability difficulties or may not achieve the broad market acceptance necessary to generate significant revenues.\nWe also have invested, and may continue to invest, in the acquisition of complementary businesses, technologies, services, products and\nother assets that benefit our innovation and overall business operations. Our investments may not result in enhancements or new solutions\nthat will be accepted by existing or prospective customers. If we are unable to enhance or upgrade our existing solutions to meet the\nevolving customer requirements or develop new ones in a timely or cost-effective manner, we may not be able to maintain or increase our\nrevenues or recoup our investments, and our business, results of operations and financial condition would be materially and adversely\naffected.\n\n \n\n11\n\n \n\n \n\n**If\nwe fail to maintain the compatibility of our solutions across devices, business systems and applications and physical infrastructure\nthat we do not control, it could lead to increased integration costs and lowered customer satisfaction.**\n\n \n\nOne\nof the most important value propositions of our solutions is the compatibility with a wide range of devices, business systems and applications\nand physical infrastructure. The experience of our customers depends, in part, on our ability to integrate with their existing business\nsystems and applications, many of which may have been developed by third-party providers. In addition, the functionality of our solutions\ndepends on the seamless integration with our customers’ legacy on-premises hardware and communications infrastructure, such as\nthird-party video-conferencing systems. Third-party services and products are constantly evolving, and we may not be able to modify our\nsolutions to assure the compatibility with that of other third parties following development changes. Furthermore, third-party providers\nor manufacturers may, without prior notice, change the configuration or features of their services and products, restrict our access,\nor adversely alter the terms and conditions of use. Any of these changes could functionally limit or terminate our ability to use these\nthird-party products and services in conjunction with ours, which could have a material negative impact on our business. If we fail to\nproperly integrate our solutions with our customers’ existing business systems and applications and physical infrastructure, whether\ndeveloped in-house or by third parties, we may be unable to offer the functionality that is expected by our customers and is essential\nto our solutions, which would materially and adversely affect our business, results of operations and financial condition.\n\n \n\nOur\ncustomers are also able to use and manage our solutions on multiple terminals, including PCs and mobile devices such as smartphones and\ntablets. As new smart devices and operating systems are released, we may encounter difficulties supporting these devices and operating\nsystems, and we may need to devote significant resources to the creation, support, and upgrade of our solutions. If we experience difficulties\nintegrating our solutions into PCs, smartphones, tablets or other devices, our reputation, results of operations and future growth could\nbe materially and adversely affected.\n\n \n\n**We\noperate in a highly competitive market. If we fail to compete effectively, our business, results of operations and financial condition\ncould be materially and adversely affected.**\n\n \n\nThe\ncloud-based communications industry in China is rapidly evolving and highly competitive. With the introduction of new technologies and\nmarket entrants, we expect competition to continue to intensify in the future. The principal competitive factors in our market include\ncomprehensiveness of business portfolio, innovation capabilities, brand awareness and reputation, strength of sales and marketing efforts\nas well as customer reach.\n\n \n\nSome\nof our competitors have greater financial, technological and other resources, greater brand recognitions, larger sales and marketing\nbudgets and larger intellectual property portfolios. As a result, certain of our competitors may be able to respond more quickly and\neffectively than we can to new or evolving opportunities, technologies, standards or customer requirements. In addition, some competitors\nmay offer products or services that address one or a limited number of functions at lower prices, with greater depth than our solutions\nor in geographies or industry verticals where we do not operate or are less established. Our current and potential competitors may develop\nand market new products or services with functionality comparable to ours, which could lead to increased pricing pressures. In addition,\nsome of our competitors have lower prices, which may be attractive to certain customers even if those products or services have different\nor lesser functionality. Moreover, as we expand the scope of our business, we may face additional competition. If one or more of our\ncompetitors were to merge or partner with another of our competitors, the change in the competitive landscape could also adversely affect\nour ability to compete effectively.\n\n \n\nIf\nwe are unable to compete effectively or maintain favorable pricing, it could lead to reduced revenues, reduced margins, increased losses\nor the failure of our solutions to achieve or maintain widespread market acceptance, any of which could materially and adversely affect\nour business, results of operations and financial condition.\n\n \n\n12\n\n \n\n \n\n**If\nwe fail to collect contract assets and accounts receivable from our customers in a timely manner, our business, results of operations\nand financial condition may be materially and adversely affected.**\n\n \n\nOur\ncontract assets represented our right to consideration for work performed but not invoiced. When our right to consideration becomes unconditional,\nwe reclassify the contract assets to accounts receivable. We had contract assets of RMB26.1 million, RMB27.8 million, and RMB57.3 million\n(US$8.2 million) as of December 31, 2023, 2024 and 2025, respectively. We recorded allowance for credit loss of contract assets of RMB10.4\nmillion, RMB21.7 million, and RMB16.8 million (US$2.4 million), respectively, as of December 31, 2023, 2024 and 2025. We typically extend\nto our customers payments terms ranging from 60 to 180 days after our customers have been billed, resulting in accounts receivable. We\nhad accounts receivable, net, including those due from third parties and related parties, of RMB144.1 million, RMB120.8 million, and\nRMB140.1 million (US$20.0 million) as of December 31, 2023, 2024 and 2025, respectively. We recorded allowance for doubtful accounts\nin relation to accounts receivable of RMB99.6 million, RMB84.4 million, and RMB92.2 million (US$13.2 million), respectively, as of December\n31, 2023, 2024 and 2025.\n\n \n\nWe\ncannot assure you that we will be able to receive the full amount of contract assets as our works may not be fully accepted by our customers.\nWe are also exposed to the risks that our customers may delay or even be unable to pay us in accordance with the payment terms included\nin our agreements with them. We make a credit assessment of our customers before entering into an agreement with them. Nevertheless,\nwe cannot assure you that we are or will be able to accurately assess the creditworthiness of each customer. In particular, customers\nthat are large enterprises generally have longer payment cycles, which may result in increased contract assets and accounts receivable.\nFurthermore, we also serve customers in certain rapidly evolving and competitive industries, some of which have also been highly regulated.\nSuch customers’ financial soundness is subject to changes in the industry trend or relevant laws and regulations, which are beyond\nour control. In particular, we experienced prolonged delivery process, extended payment cycles and delayed collection of accounts receivable\nas a result of the COVID-19 outbreak. Any change in our customers’ business and financial conditions may affect our reclassification\nof contract assets and collection of accounts receivable. Any delay in payment or failed payment may adversely affect our liquidity and\ncash flows, which in turn may have a material adverse effect on our business, results of operations and financial condition. In addition,\nas our business continues to scale up, our contract assets and accounts receivable may continue to grow, which may increase our credit\nrisk exposure.\n\n \n\nFurthermore,\nwe are exposed to concentration of credit risk. As of December 31, 2025, two of our customers represented 13.2% and 11.6% of our total\naccounts receivable, net including related party amounts and contract assets, respectively. Any substantial delay in or default of payments\nfrom these customers could materially and adversely affect our cash flows. We may also have to re-evaluate our relationship with these\ncustomers if we cannot timely obtain payment from them, which could have a negative impact on our customer base.\n\n \n\n**If\nwe fail to maintain and enhance our brand image and generate positive publicity, our business, results of operations and financial condition\ncould be materially and adversely affected.**\n\n \n\nWe\nbelieve that maintaining and enhancing our brands including “*Ronglian*,” “*7moor Cloud*” and “*RongVideo*”\nand increasing market awareness of our company and solutions play an important role in achieving widespread acceptance as well as strengthening\nour relationships with existing customers and our ability to attract new customers. The successful promotion of our brands will depend\nlargely on our continued marketing efforts, our ability to continue to offer high-quality solutions, our ability to successfully differentiate\nour solutions from competing products and services, and our ability to maintain market leadership. If we fail to maintain and enhance\nour brands, our pricing power may decline relative to competitors and we may lose existing or prospective customers, which could materially\nand adversely affect our business, results of operations and financial condition.\n\n \n\nWe\nhave conducted various online and offline branding and customer acquisition activities. These activities, however, may not be successful\nor yield increased revenues. The promotion of our brand also requires us to make substantial expenditures, and we anticipate these expenditures\nto increase as the markets we address become more competitive and as we expand into new markets. To the extent that these marketing activities\nlead to increased revenues, the additional revenues generated could nevertheless be insufficient to offset the increased expenses we\nincur.\n\n \n\n13\n\n \n\n \n\nIn\naddition, our customers may, from time to time, complain about our solutions, such as complaints about the quality of our solutions,\nour pricing and customer support. If we fail to handle customer complaints effectively, our brand and reputation may suffer, our customers\nmay lose confidence in us, and they may reduce or cease their use of our solutions. In addition, many of our customers post and discuss\non social media their experience with internet-based products and services, including ours. Our success depends, in part, on our ability\nto generate positive customer feedback and minimize negative feedback on social media channels where existing and potential customers\nseek and share information. If our customers are dissatisfied with any action we take or change we implement in our solutions, their\nonline commentary to this effect could negatively affect our brand and reputation. Complaints or negative publicity about us or our solutions\ncould materially and adversely affect our reputation and ability to attract and retain customers, and as a result, our business, results\nof operations and financial condition.\n\n \n\n**We\nmay fail to optimize the prices for our solutions, and any adverse trend in pricing will impact our revenues and results of operations.**\n\n \n\nWe\ncharge our customers on a combination of pricing methods, depending on the type of solutions they use. For example, for our CPaaS solutions,\nwe typically charge our customers usage-based fees for sending text messages and making voice calls. For our cloud-based CC solutions,\nwe typically charge our customers a combination of subscription and usage-based fees or project-based fees. We predominately offer our\ncloud-based UC&C solutions on a project basis. We may fail to optimize our pricing, which is predominantly determined by the competitive\nlandscape and market conditions. In the past, we have sometimes reduced our prices either for individual customers in connection with\nlong-term agreements or for a particular solution or project, and have also sometimes failed to increase our pricing levels to cover\nincreased costs and expenses or to reach desirable profit margins.\n\n \n\nOne\nof the challenges to our pricing is that the fees that we pay to mobile network operators over whose networks we transmit communications\ncan vary frequently and are affected by volume and other factors that may be beyond our control and difficult to predict. This can cause\nus to incur increased costs that we may be unable or unwilling to pass through to our customers, which could adversely affect our business,\nresults of operations and financial condition. Furthermore, as competitors introduce new products or services that compete with ours\nor reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. Moreover,\nlarge enterprises, which are a primary focus of our business, may demand substantial price concessions leveraging their significant bargaining\npower. In addition, if the mix of solutions sold changes, we may need to, or choose to, revise our pricing. As a result, in the future\nwe may fail to increase our pricing levels, or may even be required or choose to reduce our prices or change our pricing model, which\ncould materially and adversely affect our business, results of operations and financial condition.\n\n \n\n**Our\nsales cycle can be lengthy and unpredictable and requires considerable time and expense when we seek to serve large enterprises, and\nwe may encounter configuration, integration, implementation and customer support challenges that could cause delays in revenue recognition.**\n\n \n\nWe\ncurrently derive a significant portion of our revenues from sales of our solutions to large enterprises. We generated 67.0%, 68.7%,\nand 70.1%\nof our total revenues from large-enterprise customers in 2023, 2024 and 2025, respectively. We believe that increasing our sales to these\ncustomers is key to our future growth. The length of our sales cycle, which is the time between initial contact with a potential customer\nand the ultimate sale to that customer, is approximately four months on average and varies upon the size of potential customer and project.\nBased on our experience, the sales cycle for large enterprises, which generally ranges from four months to one year, is often lengthy\nand unpredictable, especially when we serve them with our project-based solutions. Many of our prospective customers do not have prior\nexperience with cloud-based communications and, therefore, typically spend significant time and resources evaluating our solutions before\nthey purchase from us. Similarly, we typically spend more time and effort determining their requirements and educating these customers\nabout the benefits and uses of our solutions. Large enterprises also tend to demand more customizations, integrations and additional\nfeatures than their smaller counterparts. As a result, we may be required to divert more sales and research and development resources\nto large enterprises and will have less personnel available to support other customers, or that we will need to hire additional personnel,\nwhich would increase our operating expenses. It is often difficult for us to forecast when a potential enterprise sale will close, the\nsize of the customer’s initial service order and the period over which the implementation will occur, any of which may impact the\namount of revenues we recognize or the timing of revenue recognition. Large enterprises may delay their purchases as they assess their\nbudget constraints, negotiate early contract terminations with their existing providers or wait for us to develop new features. Any delay\nin closing, or failure to close, a large-enterprise sales opportunity in a particular period or year could significantly harm our projected\ngrowth rates and cause the amount of new sales we book to vary significantly from period to period. We also may have to delay revenue\nrecognition on some of these transactions until the customer’s technical or implementation requirements have been met.\n\n \n\n14\n\n \n\n \n\nIn\naddition, we have experienced, and may continue to experience, challenges in configuring, integrating and implementing our solutions\nand providing ongoing support when serving large enterprises. Large enterprises’ networks and operational systems are often more\ncomplex than those of smaller customers, and the configuration, integration and implementation of our solutions for these customers generally\nrequire more efforts as well as participation from the customer’s IT team. There can be no assurance that the customer will make\navailable to us the necessary personnel and other resources for a successful configuration. The lack of local resources may prevent us\nfrom proper configurations, which can in turn adversely impact the quality of solutions that we deliver over our customers’ networks,\nand/or may result in delays in the implementation of our solutions. This may create a public perception that we are unable to deliver\nhigh-quality solutions to our customers, which could harm our reputation and make it more difficult to attract new customers and retain\nexisting customers. Moreover, large enterprises tend to require higher levels of customer support and individual attention, including\nperiodic business reviews and training sessions, which may increase our costs. If a customer is unsatisfied with the quality of solutions\nand customer support we provide, we may decide to incur costs beyond the scope of our contract with the customer in order to address\nthe situation and protect our reputation, which may in turn reduce or eliminate the profitability of our contract with the customer.\nIn addition, negative publicity related to our customer relationships, regardless of its accuracy, could harm our reputation and make\nit more difficult for us to compete for new business with current and prospective customers.\n\n \n\nIf\nwe fail to effectively execute the sale, configuration, integration, implementation and ongoing support of our solutions to large enterprises,\nour results of operations and our overall ability to grow our customer base could be materially and adversely affected.\n\n \n\n**We\nserve various levels and types of state-owned enterprises in China. Conducting business with state-owned enterprises can involve complexity\nthat requires extra outlay of financial and managerial resources in order to comply with related laws and regulations.**\n\n \n\nWe\nhave targeted and will continue to target more sales efforts on China’s state-owned enterprises. The procurement process for state-owned\nenterprises is in many ways more challenging than contracting in the private sector. We must comply with laws and regulations relating\nto the formation, administration, performance and pricing of contracts with state-owned enterprises. These laws and regulations may impose\nadditional costs on our business or prolong or complicate our sales efforts, and failure to comply with these laws and regulations or\nother applicable requirements could lead to claims for damages from our customers, penalties, termination of contracts and other adverse\nconsequences. Any such damages, penalties, disruptions or limitations in our ability to do business with state-owned enterprises could\nhave a material adverse effect on our business, results of operations and financial condition. In addition, sales to China’s state-owned\nenterprise often involve open tendering processes, where we face intense competition and pricing pressure and may thus suffer increased\noperating expenses and lowered profit margins. If we cannot succeed in our competitive tenders, our customer base may decrease, and our\nbrand image and reputation may be adversely affected.\n\n \n\nState-owned\nenterprises often require highly specialized contract terms that may differ from our standard arrangements, and often impose compliance\nrequirements that are complicated, require preferential pricing, terms and conditions, or are otherwise time-consuming and expensive\nto satisfy. Compliance with these special standards or satisfaction of such requirements could complicate our efforts to obtain business\nor increase the costs of doing so. Even if we do meet these special standards or requirements, the increased costs associated with providing\nour solutions to state-owned enterprises could harm our margins.\n\n \n\n**Real\nor perceived errors, defects, failures, vulnerabilities, or bugs in our solutions could diminish customer demand, harm our business and\nresults of operations and subject us to liability.**\n\n \n\nOur\ncustomers use our solutions to manage important aspects of their businesses, and any errors, defects, failures, vulnerabilities, bugs\nor other performance problems of our solutions could hurt our reputation and may damage our customers’ businesses. Our solutions\nand the underlying infrastructure are highly technical and complex. There can be no assurance that our solutions will not now or in the\nfuture contain undetected errors, defects, bugs, or vulnerabilities, which may cause temporary service outages for some customers. Certain\nerrors in our software code may not be discovered until after the code has been released. Any error, defect, bug, or vulnerability discovered\nin our code after release could result in damage to our reputation, loss of customers, loss of revenues, or liability for damages, any\nof which could adversely affect our business and financial results. We implement bug fixes and upgrades as part of our regularly scheduled\noperation maintenance, which may lead to system downtime. Even if we are able to implement the bug fixes and upgrades in a timely manner,\nany history of defects, or the loss, damage or inadvertent release of confidential customer data, could cause our reputation to be harmed,\nand customers may elect not to purchase or renew their agreements with us and subject us to warranty claims or other liabilities. The\ncosts associated with any material defect or error in our solutions or other performance problems may be substantial and could materially\nand adversely affect our results of operations.\n\n \n\n15\n\n \n\n \n\n**We\nmay be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions. We\nmay acquire or invest in companies in the future, which may divert our management’s attention and result in debt or dilution to\nour shareholders.**\n\n \n\nWe\nhave acquired several businesses in recent years, such as Beijing Ronglian Qimo Technology Co., Ltd., or Ronglian Qimo. In addition,\nin March 2021, we acquired Shanghai GuoHeBing Software Technology Co., Ltd., or EliteCRM, a leading customer relationship management\nsoftware provider, and issued 2,411,177 Class A ordinary shares in the form of restricted shares as equity awards to certain management\nmembers of EliteCRM. In December 2021, we acquired Zhuge Inc., or Zhuge, a user-centric intelligent data solution provider. In connection\nwith the acquisition, we issued 468,455 Class A ordinary shares in the form of restricted shares as equity awards to certain management\nmembers of Zhuge (excluding those repurchased pursuant to performance target adjustments). These restricted shares were issued under\nprivate placements pursuant to exemption or exclusion from the registration requirements under the Securities Act, subject to certain\nvesting schedule and forfeiture to the extent any share remains unvested in case of early termination of employment. We may make additional\nacquisitions in the future.\n\n \n\nAlthough\nwe have not experienced any difficulty in integrating acquired businesses, there can be no assurance that we will be able to successfully\nintegrate acquired businesses and, where desired, their business portfolios into ours, to realize the intended benefits in the future.\nIf we fail to successfully integrate acquired businesses or their business portfolios, or if they fail to perform as we anticipate, our\nexisting business and our revenues and results of operations could be adversely affected. If the due diligence of the operations and\ncustomer arrangements of acquired businesses performed by us and by third parties on our behalf is inadequate or flawed, or if we later\ndiscover unforeseen financial or business liabilities, acquired businesses and their assets may not perform as expected or we may come\nto realize that our initial investment was too large or unwarranted. Additionally, acquisitions could result in difficulties integrating\nacquired operations and, where deemed desirable, transitioning overlapping products and services into a single business line, thereby\nresulting in the diversion of capital and the attention of management and other key personnel away from other business issues and opportunities.\nWe may fail to retain employees acquired through acquisitions, which may negatively impact our integration efforts. Consequently, the\nfailure to integrate acquired businesses effectively may adversely impact our business, results of operations and financial condition.\n\n \n\nWe\nmay make additional acquisitions or investments or enter into joint ventures or strategic alliances with other companies. Such plans\nmay divert our management’s attention, result in debt or dilution to our shareholders, or subject us to other adverse consequences.\n\n \n\n**We\nhave been, and may be in the future, party to intellectual property rights claims and other litigation matters, which are expensive to\nsupport, and if resolved adversely, could harm our business.**\n\n \n\nThere\nhas been substantial litigation in the cloud-based communications and related industries regarding intellectual property rights. Third\nparties may, from time to time, claim that we are infringing, misappropriating or otherwise violating their intellectual property rights,\nincluding patents, software copyrights and other intellectual property rights. Third parties may also claim that our employees have misappropriated\nor divulged their former employers’ trade secrets or confidential information. We have been found, and may be found in the future,\nto have infringed upon third party’s proprietary rights. For example, due to a dispute between the former chief executive officer\nof the affiliated entity, Ronglian Qimo, and his former employer on non-competition matters, Ronglian Qimo and such officer were sued\nin 2016 for unauthorized application of a source code in a call center software previously sold by Ronglian Qimo. We believe such source\ncode was legally possessed and used by such officer according to his agreement with the former employer; however, a local court held\nus liable for infringement of software copyright in 2019. We ceased to deploy such source code in our solutions since 2016 and have fully\nfulfilled our obligations under the court judgment.\n\n \n\n16\n\n \n\n \n\nOur\nbroad range of proprietary technologies increases the likelihood that third parties may claim infringement by us of their intellectual\nproperty rights. Certain technologies necessary for our business may, in fact, be patented by other parties either now or in the future.\nIf such technologies were held under a valid patent by a third party, we would have to negotiate a license for the use of that technology,\nwhich we may not be able to negotiate on commercially reasonable terms or at all. The existence of such a patent, or our inability to\nnegotiate a license for any such technology on reasonable terms, could force us to cease using such technology and offering solutions\nincorporating such technology. In addition, even if we succeed in obtaining a license to continue using the relevant technology, we may\nincur substantial license fees, which could materially and adversely affect our business, results of operations and financial condition.\n\n \n\nIf\nwe are found to have infringed upon the intellectual property rights of any third party in legal or other proceedings that may be asserted\nagainst us, we could be subject to material monetary liabilities for such infringement. We could also be required to refrain from using,\ndeveloping or selling certain solutions incorporating the affected intellectual property rights, which could materially and adversely\naffect our business and results of operations. We may continue to receive, in the future, notices of claims of infringement, misappropriation\nor misuse of other parties’ proprietary rights. There can be no assurance that we will prevail in contesting these claims or that\nactions alleging infringement by us of third-party intellectual property rights will not be asserted or prosecuted against us. Furthermore,\nlegal or other proceedings involving infringement of intellectual property rights may require significant time and expense to defend,\nmay divert management’s attention away from other aspects of our operations and, upon resolution, may have a material adverse effect\non our business, results of operations, financial condition and cash flows. Any negative publicity about our claimed infringement of\na third party’s proprietary rights could also harm our business.\n\n \n\n**We\ncould incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual\nproperty could adversely affect our business, results of operations and financial condition.**\n\n \n\nWe\nrely, in part, on patent, trademark, copyright, and trade secret law to protect our intellectual property in China and abroad. The intellectual\nproperty rights we have obtained may not be sufficient to provide us with a competitive advantage, and could be challenged, invalidated,\ninfringed upon or misappropriated. In addition, we cannot assure you that any of our ongoing intellectual property registration applications\nwill ultimately be successful or will result in registrations with adequate scope for our business, or at all. If our applications are\nnot successful, we may have to use different intellectual property rights for affected technologies or solutions, or seek to enter into\narrangements with any third party who may have prior registrations, applications or rights, which might not be available on commercially\nreasonable terms. We may not be able to protect our proprietary rights in China or internationally, and competitors may independently\ndevelop technologies that are similar or superior to our technology, duplicate our technology or design around any patent of ours.\n\n \n\nWe\nfurther protect our proprietary technologies and solutions by requiring our employees to enter into confidentiality agreements and business\npartners to enter into agreements with confidentiality clauses. These agreements and clauses may not effectively prevent unauthorized\nuse or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in the\nevent of unauthorized use or disclosure.\n\n \n\nLitigation\nmay be necessary in the future to enforce our intellectual property rights, to determine the validity and scope of our proprietary rights\nor the rights of others, or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs\nand diversion of managerial time and resources and could have a material adverse effect on our business, results of operations and financial\ncondition. Any settlement or adverse determination in such litigation would also subject us to significant liability.\n\n \n\nAs\nwe expand our business internationally, we also may be required to protect our proprietary technologies and solutions in an increasing\nnumber of jurisdictions, a process that is expensive and may not be successful, or which we may not pursue in every location. In addition,\neffective intellectual property protection may not be available to us in every country, and the laws of some foreign countries may be\ndifferent from those in China. Additional uncertainty may result from changes to intellectual property legislation enacted in China and\nelsewhere, and from interpretations of intellectual property laws by applicable courts and agencies. Accordingly, despite our efforts,\nwe may be unable to obtain and maintain the intellectual property rights necessary to provide us with a competitive advantage.\n\n \n\n17\n\n \n\n \n\n**If\nwe fail to comply with laws and contractual obligations related to data privacy and protection and cybersecurity, our business, results\nof operations and financial condition could be materially and adversely affected.**\n\n \n\nWe\nhave access to certain data and information of enterprises which use our solutions. We may also have access to certain personal data\nand information of our customers’ end-users. We face risks inherent in handling and protecting such large volumes of data. In particular,\nwe face a number of challenges relating to data protection, including:\n\n \n\n \n●\nprotecting\nthe data in and hosted on our solutions or infrastructure, including against attacks by third parties or fraudulent behaviors by\nour employees;\n\n \n \n \n\n \n●\naddressing\nconcerns related to privacy and sharing, safety, security and other factors; and\n\n \n \n \n\n \n●\ncomplying\nwith applicable laws, rules, regulations and contractual obligations relating to the collection, use, disclosure or security of personal\ninformation, including any request from regulatory and government authorities relating to such data.\n\n \n\nAny\nsystem failure or security breach or lapse that results in the release of data of our customers or their end-users could harm our reputation\nand brand and, consequently, our business, in addition to exposing us to potential legal liability. In addition, our customers and business\npartners as well as their employees may improperly use or disclose the data we disclose to them for our operations, and we have limited\ncontrol over such actions. Any failure, or perceived failure, by us, our employees, our customers and business partners, or their employees\nto comply with privacy policies or with any regulatory requirements or privacy protection-related laws, rules, regulations and contractual\nobligations owed to our customers and other third parties could result in proceedings or actions against us by regulatory agencies or\nprivate parties. These proceedings or actions may subject us to significant penalties and negative publicity, require us to change our\nbusiness practices, increase our costs and severely disrupt our business.\n\n \n\nOur\npractices regarding the use, retention, transfer, disclosure and security of confidential data could become the subject of enhanced regulations\nand increased public scrutiny in the future. The regulatory frameworks regarding privacy issues in many jurisdictions are constantly\nevolving and can be subject to significant changes from time to time. For instance, a growing number of legislative and regulatory bodies\nhave adopted user notification requirements in the event of unauthorized access to or acquisition of certain types of data. The PRC regulators,\nincluding the Ministry of Industry and Information Technology, or the MIIT, and the CAC have been increasingly focused on regulation\nin the areas of cybersecurity and data protection and governmental authorities have enacted a series of laws and regulations to enhance\nthe protection of privacy and data, which require certain authorization or consent from users prior to collection, use or disclosure\nof their personal data and also protection of the security of the personal data of such users. The MIIT issued the Order for the Protection\nof Telecommunications and Internet User Personal Information on July 16, 2013, requiring internet service providers to establish and\npublish protocols relating to the collection or use of personal information, keep any collected information strictly confidential and\ntake technological and other measures to maintain the security of such information. Institutions and their employees are prohibited from\nselling or otherwise illegally disclosing a person’s personal information obtained during the course of performing duties or providing\nservices. Pursuant to the PRC Cybersecurity Law, effective on June 1, 2017, network operators are required to fulfill certain obligations\nto safeguard cybersecurity and enhance network information management.\n\n \n\nMoreover,\nexisting PRC privacy, cybersecurity and data protection-related laws and regulations are evolving and subject to potentially differing\ninterpretations, and various legislative and regulatory bodies may expand current or enact new laws and regulations regarding privacy,\ncybersecurity and data protection-related matters. Furthermore, the PRC Civil Code, the PRC Cybersecurity Law, the Personal Information\nProtection Law and the PRC Data Security Law set general requirement on internet service providers to protect individual privacy and\npersonal data security. Internet service providers are required to collect data in accordance with the laws and in proper manner, and\nobtain consent from internet users prior to the collection, use or disclosure of internet users’ personal data. These developments\ncould adversely affect our business, operating results and financial condition. Any failure or perceived failure by us, our products\nor our platform to comply with new or existing PRC privacy, cybersecurity or data protection laws, regulations, policies, industry standards\nor legal obligations, any failure to bind our suppliers and contractors to appropriate agreements or to manage their practices or any\nsystems failure or security incident that results in the unauthorized access to, or acquisition, release or transfer of, personally identifiable\ninformation or other data relating to customers or individuals may result in governmental investigations, inquiries, enforcement actions\nand prosecutions, private claims and litigation, fines and penalties, adverse publicity or potential loss of business. See “Item\n4. Information on the Company—B. Business Overview—Regulations—Regulations relating to cybersecurity and privacy protection.”\nFor example, on June 10, 2021, the Standing Committee of the National People’s Congress, or the SCNPC, promulgated the PRC Data\nSecurity Law, which took effect on September 1, 2021. The PRC Data Security Law provides for data security and privacy obligations on\nentities and individuals carrying out data activities and introduces a data classification and tiered protection system based on the\nimportance of data and the degree of impact on national security, public interests or legitimate rights and interests of individuals\nor organizations when such data is manipulated, destroyed, leaked or illegally acquired or used. The PRC Data Security Law also introduces\na national security review procedure for those data activities which may affect national security and imposes export restrictions on\ncertain data information. Furthermore, along with the promulgation of the Opinions on Strictly Cracking Down Illegal Securities Activities\nin Accordance with the Law, overseas-listed China-based companies are experiencing a heightened scrutiny over their compliance with laws\nand regulations regarding data security, cross-border data flow and management of confidential information from PRC regulatory authorities.\n\n \n\n18\n\n \n\n \n\nOn\nAugust 20, 2021, the SCNPC issued the Personal Information Protection Law, which has been effective from November 1, 2021 and reiterates\nthe circumstances under which a personal information processor could process personal information and the requirements for such circumstances.\nThe Personal Information Protection Law clarifies the scope of application, the definition of personal information and sensitive personal\ninformation, the legal basis of personal information processing, and the basic requirements of notice and consent.\n\n \n\nOn\nSeptember 24, 2024, the CAC published the Cyber Data Security Regulations, which came into force on January 1, 2025. It provides that\nthe data processors shall be subject to national security review if their network data handling activities affect or may affect national\nsecurity, with no further explanation or interpretation as to how to determine what constitutes “affecting national security.”\nThe Cyber Data Security Regulations outline the requirements for establishing an important data catalog and stipulate the responsibilities\nof network data processors to identify and report important data. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations\nrelating to cybersecurity and privacy protection—Cybersecurity.”\n\n \n\nOn\nDecember 28, 2021, the CAC and other 12 government authorities jointly issued the Cybersecurity Review Measures, which took effect on\nFebruary 15, 2022. The Cybersecurity Review Measures provides that certain operators of critical information infrastructure purchasing\nnetwork products and services or network platform operators carrying out data processing activities, which affect or may affect national\nsecurity, must apply with the Cybersecurity Review Office for a cybersecurity review, and that network platform operators holding personal\ninformation of more than one million users seeking for listing in a foreign country must apply for the cybersecurity review. However,\nthe scope of operators of “critical information infrastructure” and the interpretation for “affect or may affect national\nsecurity” under the current regulatory regime remain unclear and are subject to the decisions of competent PRC regulatory authorities.\nAs of the date of this annual report, we have not been informed by any PRC governmental authority of any requirement that we file for\na cybersecurity review. If we are identified as an operator of “critical information infrastructure,” we would be required\nto fulfill various obligations as required under PRC cybersecurity laws and other applicable laws for such operators of “critical\ninformation infrastructure” thus currently not applicable to us, including, among others, setting up a special security management\norganization, organizing regular cybersecurity education and training, formulating emergency plans for cybersecurity incidents and conducting\nregular emergency drills, and we may need to follow cybersecurity review procedure and apply with Cybersecurity Review Office before\nmaking certain purchases of network products and services. During cybersecurity review, we may be required to make significant changes\nto our business practices, suspend certain business, or even be prohibited from providing certain service offerings in jurisdictions\nin which we currently operate or in which we may operate in the future. Failure to pass the cybersecurity review could also lead to negative\npublicity and a diversion of time and attention of our management and our other resources. It could be costly and time-consuming for\nus to prepare application materials and make the applications. Furthermore, there can be no assurance that we will obtain the clearance\nor approval for these applications from the Cybersecurity Review Office and the relevant regulatory authorities in a timely manner, or\nat all. If we are found to be in violation of applicable cybersecurity requirements, the relevant governmental authorities may, at their\ndiscretion, conduct investigations, levy fines, or require us to change our business practices in a manner materially adverse to our\nbusiness. Any of these actions may disrupt our operations and adversely affect our business, results of operations and financial condition.\n\n \n\n19\n\n \n\n \n\nOn\nJuly 7, 2022, the CAC promulgated the Measures on Data Export Security Assessment, which came into effect on September 1, 2022. Such\nMeasures on Data Export Security Assessment requires data processors to apply for a security assessment on data export. On February 24,\n2023, the CSRC, the Ministry of Finance, the National Administration of State Secrets Protection and the National Archives Administration\nreleased the revised Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Offering and\nListing by Domestic Companies, or the Provision on Confidentiality, which became effective on March 31, 2023.\n\n \n\nThe\nCAC published the Provisional Administrative Measures for AIGC services, or the AIGC Administrative Measures, on July 10, 2023 and became\neffective on August 15, 2023. Pursuant to the AIGC Administrative Measures, AIGC service providers must comply with a number of rules\nand filing in relation to AIGC content, personal data, privacy protection and intellectual property rights. In case of a breach of the\nrules or non-compliance with the filing requirements, the regulatory authorities will impose warning, fine and other penalties. Failure\nto rectify the breach or non-compliance may lead to suspension in operations. We may incur substantial costs to comply with the AIGC\nAdministrative Measures and to establish and maintain relevant internal compliance policies.\n\n \n\nGiven\nthat the above-mentioned laws, regulations and policies were recently promulgated or issued, their interpretation, application and enforcement\nare subject to substantial uncertainties. We may be required to make further adjustments to our business practices to comply with the\nenacted form of the laws, which may increase our compliance cost and adversely affect our business performance. We expect that there\nwill continue to be new proposed laws, rules of self-regulatory bodies, regulations and industry standards concerning privacy, data protection\nand information security in the PRC, and we cannot yet determine the impact such future laws, rules, regulations and standards may have\non our business. Despite our efforts to comply with applicable laws, regulations and policies relating to cybersecurity, privacy, data\nprotection and information security, we cannot assure you that our practices, offerings, services or platform will meet all of the requirements\nimposed on us by such laws, regulations or policies. Any failure or perceived failure to comply with applicable laws, regulations or\npolicies may result in inquiries or other proceedings being instituted against, or other lawsuits, decisions or sanctions being imposed\non us by governmental authorities, users, consumers or other parties, including but not limited to warnings, fines, directions for rectifications,\nsuspension of the related business and termination of our applications, as well as in negative publicity on us and damage to our reputation,\nany of which could have a material adverse effect on our business, results of operations, financial condition and prospects.\n\n \n\nMoreover,\nwe may not disclose any personal data or information, unless required by the competent PRC authorities through certain procedures required\nby the laws, for the purpose of, among others, safeguarding the national security, investigating crimes, investigating infringement of\ninformation network communications rights, or cooperating with the supervision and inspection of telecommunications regulatory authorities.\nFailure to comply with these requirements could subject us to fines and penalties.\n\n \n\nWe\nalso may be bound by contractual obligations relating to our collection, use and disclosure of personal, financial and other data or\nmay find it necessary or desirable to join industry or other self-regulatory bodies or other privacy, cybersecurity or data protection-related\norganizations that require compliance with their rules pertaining to privacy and data protection.\n\n \n\nFurther,\nin many cases we rely on the data processing, privacy, data protection and cybersecurity practices of our suppliers and contractors,\nincluding with regard to maintaining the confidentiality, security and integrity of data. If we fail to manage our suppliers or contractors\nor their relevant practices, or if our suppliers or contractors fail to meet any requirements with regard to data processing, privacy,\ndata protection or cybersecurity required by applicable legal or contractual obligations that we face (including any applicable requirements\nof our clients), we may be liable in certain cases. Legal obligations relating to privacy, cybersecurity and data protection may require\nus to manage our suppliers and their practices and to enter into agreements with them in certain cases. We may face difficulties in binding\nour suppliers and contractors to these agreements and otherwise managing their relevant practices, which may subject us to claims, proceedings,\nand liabilities.\n\n \n\n20\n\n \n\n \n\n**Security\nbreaches and improper access to or disclosure of our data or our customers’ data or other cyberattacks on our systems could result\nin litigation and regulatory risk and harm our reputation and our business.**\n\n \n\nOur\nbusiness operations involve the storage and transmission of our customers’ and their end-users’ proprietary and other sensitive\ndata, including financial information and personally identifiable information. While we have security measures in place to protect our\ncustomers and their end-users’ data, our solutions and underlying infrastructure may in the future be materially breached or compromised\nas a result of the following:\n\n \n\n \n●\nthird-party\nattempts to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other\ninformation to gain access to our customers’ data, our data or our IT systems;\n\n \n \n \n\n \n●\nefforts\nby individuals or groups of hackers and sophisticated organizations;\n\n \n \n \n\n \n●\ncyberattacks\non our internally built infrastructure;\n\n \n \n \n\n \n●\nvulnerabilities\nresulting from enhancements and upgrades to our existing solutions;\n\n \n \n \n\n \n●\nvulnerabilities\nin third-party infrastructure and systems and applications that our solutions operate in conjunction with or are dependent on;\n\n \n \n \n\n \n●\nvulnerabilities\nexisting within newly acquired or integrated technologies and infrastructure;\n\n \n \n \n\n \n●\nattacks\non, or vulnerabilities in, the many different underlying networks and services that power the internet that our solutions depend\non, most of which are not under our control; and\n\n \n \n \n\n \n●\nemployee\nor contractor errors or intentional acts that compromise our security systems.\n\n \n\nThese\nrisks are mitigated, to the extent possible, by our ability to maintain and improve business and data governance policies, enhanced processes\nand internal security controls, including our ability to escalate and respond to known and potential risks. Although we have developed\nsystems and processes designed to protect our customers’ and their end-users’ proprietary and other sensitive data, we can\nprovide no assurance that such measures will provide absolute security. For example, our ability to mitigate these risks may be affected\nby the following:\n\n \n\n \n●\nfrequent\nchanges to, and growth in complexity of, the techniques used to breach, obtain unauthorized access to, or sabotage IT systems and\ninfrastructure, which are generally not recognized until launched against a target, possibly resulting in our being unable to anticipate\nor implement adequate measures to prevent such techniques;\n\n \n \n \n\n \n●\nthe\ncontinued evolution of our internal IT systems as we early adopt new technologies and new ways of sharing data and communicating\ninternally and with customers, which increases the complexity of our IT systems;\n\n \n \n \n\n \n●\nauthorization\nby our customers to third-party technology providers to access their data, which may lead to our customers’ inability to protect\ntheir data that is stored on our servers; and\n\n \n \n \n\n \n●\nour\nlimited control over our customers or third-party technology providers, or the transmissions or processing of data by third-party\ntechnology providers, which may not allow us to maintain the integrity or security of such transmissions or processing.\n\n \n\nIn\nthe ordinary course of business, we have been the target of malicious cyberattack attempts such as distributed denial-of-service attacks.\nTo date, such identified security events have not been material or significant to us, including to our reputation or business operations,\nor had a material financial impact. We have implemented procedures designed to shield us against potential cyberattacks. However, there\ncan be no assurance that future cyberattacks would not have a material adverse effect on our business operations.\n\n \n\n21\n\n \n\n \n\n**Any\ncatastrophe, including outbreaks of health pandemics and other extraordinary events, could have a negative impact on our business operations.**\n\n \n\nWe\nare vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures,\nwars, riots, terrorist attacks or similar events could cause severe disruption to our daily operations and may even require a temporary\nclosure of our facilities. Our business could also be adversely affected by the effects of Ebola virus diseases, H1N1 flu, H7N9 flu,\navian flu, Severe Acute Respiratory Syndrome (SARS), 2019 Coronavirus Disease (COVID-19) or other epidemics. We cannot assure you that\nour backup systems or other mitigating measures will be adequate to protect us from the effects of any of these events, which may give\nrise to server interruptions, system breakdowns or network failures, and could cause the inability to provide our services. The continuance\nof any of these events could increase the costs associated with our operations and reduce our ability to operate our business at intended\ncapacities, thereby reducing revenue and profitability.\n\n \n\nFor\nexample, the outbreak of COVID-19 has materially and adversely affected the Chinese and global economy. In response to the pandemic,\nthe governments implemented mitigation measures from time to time to contain the spread of the pandemic. During the COVID-19\npandemic, we experienced an increase in demand for our solutions following the COVID-19 outbreak due to the nationwide quarantine\nmeasures which have resulted in many businesses requiring their employees to work from home and collaborate remotely via cloud-based\ncommunications channels. However, we nonetheless experienced significant business disruptions as a result of the outbreak.\nSpecifically, we experienced customer loss during the outbreak, primarily due to a decrease in the number of enterprise customers of\nsmaller sizes that were less equipped to withstand the impact of COVID-19. We also experienced delayed service delivery, extended\npayment cycles and delayed collection of accounts receivable. In addition, we experienced delays in establishing cooperative\nrelationships with our customers, especially large-enterprise customers, caused by the disruptions to offline sales and marketing\nactivities during the outbreak. To the extent that future waves of COVID-19 infections or the outbreak of any other severe\ninfectious disease disrupts normal business operations and traveling in countries around the world, we may face disrupted market\ndemand and operational challenges.\n\n \n\n**We\ndepend largely on the continued services of our senior management, core technical personnel, and qualified staff. Our inability to retain\ntheir services could adversely affect our business, results of operations and financial condition.**\n\n \n\nOur\nfuture success heavily depends upon the continuing services of our senior management and other key employees. In particular, we rely\non the expertise, experience and vision of Mr. Changxun Sun, our founder and chief executive officer, as well as other members of our\nsenior management team. We also rely on the technical know-how and skills of our core research and development personnel. If any of our\nsenior management or core technical personnel becomes unable or unwilling to continue to contribute their services to us, we may not\nbe able to replace them easily or at all. As a result, our business may be severely disrupted, our results of operations and financial\ncondition may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain key employees.\n\n \n\nOur\nexisting operations and future growth require a sizeable and qualified workforce. For example, the effective operation of our solutions\nand the underlying infrastructure depends in part on our professional employees. We also rely on experienced personnel for our business\naspects of technology and solution design and development to anticipate and effectively respond to the changing customer preferences\nand market trends. However, our industry is characterized by high demand and intense competition for talents. In order to attract and\nretain talents, we may need to offer higher compensation, better trainings, more attractive career trajectory and other benefits to our\nemployees, which may be costly and burdensome. We cannot assure you that we will be able to attract or retain qualified workforce necessary\nto support our future growth. We may fail to manage our relationship with our employees, and any disputes between us and our employees,\nor any labor-related regulatory or legal proceedings may divert managerial and financial resources, negatively impact staff morale, reduce\nour productivity, or harm our reputation and future recruiting efforts. In addition, as our business grows, our ability to train and\nintegrate new employees into our operations may not meet the increasing demands of our business. Any of the above issues related to our\nworkforce may materially and adversely affect our results of operations and future growth.\n\n \n\n22\n\n \n\n \n\n**Our\nrevenue growth depends on a number of factors, many of which are beyond our control.**\n\n \n\nWe\noperate in a new and rapidly changing industry, widespread acceptance and use of our solutions are critical to our future growth and\nsuccess. We believe our revenue growth depends on a number of factors, including our ability to:\n\n \n\n \n●\nattract\nnew customers;\n\n \n \n \n\n \n●\nprovide\nexcellent customer experience;\n\n \n \n \n\n \n●\nretain\nour existing customers, expand usage of our solutions, and cross-sell and up-sell to our existing customers;\n\n \n \n \n\n \n●\nintroduce\nand grow adoption of enhancements and new solutions we develop;\n\n \n \n \n\n \n●\nachieve\nwidespread acceptance and use of our solutions;\n\n \n \n \n\n \n●\nadequately\nexpand our sales and marketing force and other sales channels;\n\n \n \n \n\n \n●\nmaintain\nthe security and reliability of our solutions;\n\n \n \n \n\n \n●\ncomply\nwith existing and new applicable laws and regulations;\n\n \n \n \n\n \n●\nprice\nour solutions effectively so that we are able to attract and retain customers without compromising our profitability; and\n\n \n \n \n\n \n●\nsuccessfully\ncompete against established companies and new market entrants; and increase awareness of our brand on a global basis and expand internationally.\n\n \n\nIf\nwe are unable to accomplish any of these tasks, our revenue growth will be harmed. We also expect our operating expenses to increase\nin absolute terms as we scale, and if our revenue growth does not increase to offset these anticipated increases in our operating expenses,\nour business, results of operations and financial condition could be harmed, and we may not be able to achieve or maintain profitability.\nWe have also encountered in the past, and expect to encounter in the future, risks and uncertainties frequently experienced by growing\ncompanies in rapidly evolving industries. If our assumptions regarding our projected growth and the associated risks and uncertainties,\nwhich we use to plan and operate our business, are incorrect or change, or if we do not address these risks and uncertainties successfully,\nour costs may rise, growth rates may slow, and our business would suffer.\n\n \n\n**If\nwe fail to effectively manage our growth, our business, results of operations and financial condition could be materially and adversely\naffected.**\n\n \n\nOur\ngrowth has placed and may continue to place significant demands on our management and our operational and financial resources. For example,\nour solutions have supported a large number of customers and data. Our headcount had grown from 806 employees as of January 1, 2018 to\n1,008 employees as of December 31, 2025. Additionally, our organizational structure is becoming more complex as we scale our operational,\nfinancial and managerial controls as well as our reporting systems and procedures. In particular, we have acquired several businesses,\nand have expanded our international operations into certain regions and areas outside China such as Japan, Philippines, Malaysia and\nSingapore.\n\n \n\nTo\nmanage growth in our operations and personnel, we will need to continue to grow and improve our operational, financial, and managerial\ncontrols and our reporting systems and procedures, which will require significant investments and allocation of valuable managerial resources.\nOur expansion has placed, and our expected future growth will continue to place, a significant strain on our management, customer experience,\nresearch and development, sales and marketing, administrative, financial, and other resources. If we fail to manage our anticipated growth\nand change, the quality of our solutions may suffer, which could negatively affect our brand and reputation and results of operations.\n\n \n\n23\n\n \n\n \n\nIn\naddition, as we expand our business, it is important that we continue to maintain a high level of customer support and satisfaction.\nWe currently derive a significant portion of our revenues from sales of our solutions to large enterprises. As our customer base continues\nto grow and we focus more on serving large enterprises, we will need to expand our customer support and other personnel and innovate\nour solutions to provide personalized services as well as personalized features, integrations and capabilities. If we are not able to\ncontinue to provide high levels of customer support, our reputation, as well as our business, results of operations, and financial condition,\ncould be harmed.\n\n \n\n**If\nwe fail to maintain and expand sales channels, it could limit the number of customers we serve and materially and adversely affect our\nability to grow and expand.**\n\n \n\nA\nportion of our revenues is generated through our sales and marketing team. Our future success requires continuing to develop and maintain\na successful sales and marketing team that identifies and closes a significant portion of new sales opportunities. We also need to enhance\nour ability to cross-sell and up-sell additional features and solutions to existing customers. If our direct sales efforts are as not\nsuccessful as anticipated, or any of our promotion or marketing activities violate certain applicable laws or regulations, we may be\nunable to meet our revenue growth targets.\n\n \n\nA\nportion of our revenues is generated through indirect sales channels. Channel partners we cooperate with mainly consist of mobile network\noperators, distributors and system integrators. We typically have arrangements with them to distribute our solutions to their own customers,\nwith which we do not contract or contract only to a limited extent. We expect these channels to continue to generate a considerable portion\nof our revenues in the future. Our sustained success requires continued efforts to develop and maintain successful relationships with\nthese channel partners so as to increase the portion of sales opportunities that they refer to us. If we fail to do so, or if our channel\npartners are not successful in their sales efforts, we may be unable to grow and expand our business, and our results of operations and\nfinancial condition could be materially and adversely affected.\n\n \n\n**If\nwe fail to offer high-quality customer support, it could adversely affect our relationships with our current and prospective customers\nand materially and adversely affect our business, results of operations and financial condition.**\n\n \n\nWe\nhave developed a customer support and success system designed to drive customer satisfaction and expand cross-selling and up-selling\nopportunities. Many of our customers depend on our customer support team to assist them in deploying or using our solutions effectively,\nhelp them resolve post-deployment issues quickly, and provide ongoing support. If we do not devote sufficient resources or are otherwise\nunsuccessful in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent\nprospective customers from adopting our solutions. We may be unable to respond quickly enough to accommodate short-term increases in\ndemand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes\nin the support services provided by our competitors. Increased demand for customer support, without corresponding revenues, could increase\ncosts and adversely affect our business, results of operations and financial condition. Our business is highly dependent on our reputation\nand on positive recommendations from existing customers. Any failure to deliver and maintain high-quality customer support, or a market\nperception that we do not maintain high-quality customer support, could adversely affect our ability to attract new customers, and therefore\nour business, results of operations and financial condition.\n\n \n\n**We\nprovide service level commitments under our agreements with customers. If we fail to meet these contractual commitments, we could be\nobligated to provide credits for future service, or face contract termination with refunds of prepaid amounts, which could harm our business\nand reputation.**\n\n \n\nMost\nof our agreements with customers contain service level commitments. If we are unable to meet the stated service level commitments, including\nfailure to meet the uptime and other requirements under the agreements, we may be contractually obligated to provide the affected customers\nwith service credits which could significantly affect revenue of the periods in which the uptime or delivery failure occurs and the credits\nare applied. We could also face customer terminations, which could significantly affect both our current and future revenue. Any service\nlevel failures could harm our business and reputation.\n\n \n\n24\n\n \n\n \n\n**Our\nrevenues are concentrated in a limited number of enterprise customers.**\n\n \n\nIn\n2023, 2024 and 2025, our ten largest customers in terms of revenues contributed an aggregate of 29.3%, 27.3% and 32.8% of our total revenues\nfor the same years, respectively. The high quality of our services and the time and expenses required for switching to other qualified\ncloud-based communications solution providers help us retain our customers. As we typically do not have long-term contracts with our\ncustomers, they may reduce their usage at any time or terminate their adoption of our solutions upon expiration of original terms. Although\nwe have made considerable efforts to diversify our customer base and attract new customers, if any of our large customers cease or reduce\ntheir use of our solutions, or use our solutions on less favorable terms, our business, results of operations and financial condition\ncould be materially and adversely affected.\n\n \n\n**Our\nphysical infrastructure which supports our ability to offer our solutions is concentrated in a few facilities. Any disruptions or system\nfailures in these facilities could adversely affect our ability to offer reliable communications solutions.**\n\n \n\nOur\nphysical infrastructure is subject to various points of failure. Problems with servers, routers, switches, cooling equipment, generators,\nuninterruptible power supply or other equipment, whether or not within our control, could result in service interruptions for our customers\nas well as equipment damages. Because our solutions leveraging cloud infrastructure do not require geographic proximity of our physical\ninfrastructure to our customers, they are consolidated into a few facilities. Any failure or downtime in one of such facilities could\naffect a significant percentage of our customers. The total destruction or severe impairment of any of our facilities could result in\nsignificant downtime of our solutions and the loss of customer data. Because our ability to attract and retain customers depends on our\nability to provide customers with highly reliable solutions, even minor interruptions could harm our reputation. Additionally, in connection\nwith the expansion or consolidation of our existing facilities from time to time, there is an increased risk that service interruptions\nmay occur as a result of server relocation or other unforeseen construction-related issues.\n\n \n\nWe\nhave taken and continue to take steps to improve our infrastructure to prevent business interruptions, including on-going maintenance\nand upgrade. However, business interruptions continue to be a significant risk for us and could have a material adverse impact on our\nbusiness. Any future interruptions could:\n\n \n\n \n●\ncause\nour customers to seek damages for losses incurred;\n\n \n \n \n\n \n●\nrequire\nus to replace existing equipment or add redundant facilities;\n\n \n \n \n\n \n●\naffect\nour reputation as a reliable provider of communications solutions;\n\n \n \n \n\n \n●\ncause\nexisting customers to cancel or elect to not renew their contracts; or\n\n \n \n \n\n \n●\nmake\nit more difficult for us to attract new customers.\n\n \n\nAny\nof these events could materially increase our expenses or reduce our revenues, which would have a material adverse effect on our results\nof operations.\n\n \n\nWe\nmay be required to transfer our servers to new facilities if we are unable to renew our leases on acceptable terms, or at all, or the\nowners of the facilities decide to close their facilities or refuse to enter into lease agreements with us, and we may incur significant\ncosts and possible service interruption in connection with doing so. In addition, any financial difficulties, such as bankruptcy or foreclosure,\nfaced by our third-party facility operators, or any of the service providers with which we or they contract, may have negative effects\non our business, the nature and extent of which are difficult to predict.\n\n \n\n25\n\n \n\n \n\n**We\ndepend on cloud infrastructure operated by third parties and any disruption of or interference with our use of such third-party services\nwould adversely affect our business, results of operations and financial condition.**\n\n \n\nWe\ncooperate with third-party cloud service providers to host our communications solutions. We are, therefore, vulnerable to problems experienced\nby these providers. We expect to experience interruptions, delays or outages with respect to our third-party cloud infrastructure in\nthe future due to a variety of factors, including infrastructure changes, human, hardware or software errors, hosting disruptions and\ncapacity constraints. Such issues could arise from a number of causes such as technical failures, natural disasters, fraud or security\nattacks. The level of service provided by these providers, or regular or prolonged interruptions in that service, could also affect the\nuse of and our customers’ satisfaction with our solutions and could harm our business and reputation. In addition, hosting costs\nwill increase as our customer base grows, which could harm our business if we are unable to grow our revenues sufficiently to offset\nsuch increase.\n\n \n\nFurthermore,\nour providers have broad discretion to change and interpret the terms of service and other policies with respect to us, and those actions\nmay be unfavorable to our business operations. Our providers may also take actions beyond our control that could seriously harm our business,\nincluding discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate\nour contractual relationship altogether, or altering how we are able to process data in a way that is unfavorable or costly to us. Although\nwe expect that we could obtain similar services from other third parties, if our arrangements with our current providers were terminated,\nwe could experience interruptions in our ability to make our solutions available to customers, as well as delays and additional expenses\nin arranging for alternative cloud infrastructure services.\n\n \n\nAs\na result, we may incur additional costs, fail to attract or retain customers, or be subject to potential liability, any of which could\nhave an adverse effect on our business, results of operations and financial condition.\n\n \n\n**We\nmay have insufficient transmission bandwidth, which could result in disruptions to our solutions and loss of revenue.**\n\n \n\nOur\noperations are dependent in part upon transmission bandwidth provided by third-party network or cloud providers. There can be no assurance\nthat we are adequately prepared for unexpected increases in bandwidth demands by our customers. Enterprises are increasingly inclined\nto adopt cloud-based communications solutions, especially as a result of residing demand for remote collaboration caused by the COVID-19\noutbreak, and we may experience spikes in usage from time to time. Although we believe we are able to scale our network infrastructure\nin response, if we fail to cost-effectively maintain and expand our network infrastructure, our business and operations could be severely\ndisrupted, and our results of operations and financial condition could be adversely affected.\n\n \n\nThe\nbandwidth we have contracted to purchase may become unavailable for a variety of reasons, including service outages, payment disputes,\nnetwork providers going out of business, natural disasters, pandemics, networks imposing traffic limits, or governments adopting regulations\nthat impact network operations. We also may be unable to move quickly enough to augment capacity to reflect growing traffic or security\ndemands. Failure to put in place the capacity we require could result in a reduction in, or disruption of, service to our customers,\nrequire us to issue credits and ultimately a loss of those customers. Such a failure could also result in our inability to acquire new\ncustomers demanding capacity not available.\n\n \n\n**For\nsome of our solutions, we recognize revenues over the subscription term, and thus downturns or upturns in new sales and renewals are\nnot immediately reflected in full in our results of operations.**\n\n \n\nWe\noffer some of our solutions, such as cloud-based CC solutions deployed primarily on public cloud, on a subscription basis, and we recognize\nthe related revenues ratably over the subscription period beginning on the date our solutions are made available to our customers. As\na result, much of the revenues we report each period are the recognition of revenues generated from subscriptions entered into during\nprevious periods. Consequently, a decline in new or renewed subscriptions in any single period may have a small impact on the revenues\nthat we recognize for that period. However, such a decline will negatively affect our revenues in future periods. Accordingly, the effect\nof significant downturns in sales and potential changes in our pricing policies or rate of customer expansion or retention may not be\nfully reflected in our results of operations until future periods. In addition, a significant portion of our costs are expensed as incurred,\nwhile revenues are recognized over the term of the subscription. As a result, growth in the number of new customers could continue to\nresult in our recognition of higher costs and lower revenues in the earlier periods of our subscriptions.\n\n \n\n26\n\n \n\n \n\n**Our\nbusiness may be subject to seasonal effects, and any disruption of business during any particular seasons could adversely affect our\nliquidity and results of operations.**\n\n \n\nWe\nhave experienced, and expect to continue to experience in the future, seasonality in our business, results of operations and financial\ncondition. We believe that our quarterly sales are affected by industry buying patterns. Our customers, especially large enterprises,\ntend to enter into contracts with us in the second half of each year in accordance with their budget cycles. As such, we generally record\nhigher revenues during such periods. In addition, we typically generate lower revenues in the first quarter during or around Chinese\nNew Year holiday. Our revenues may also fluctuate due to other factors such as the general economic environment. The seasonality changes\nmay cause fluctuations in our financial results and any occurrence that disrupts our business during any particular seasons could have\na disproportionately material adverse effect on our liquidity and results of operations.\n\n \n\n**We\noutsource certain non-core software development activities. Any failures by outsourcing service providers to meet our standards may adversely\naffect our business, reputation and relationship with customers.**\n\n \n\nWhile\nwe independently developed all the core features of and technologies underlying our cloud-based communications solutions, we outsource\ncertain non-core software development activities in relation to our cloud-based UC&C solutions in order to enhance productivity and\nreduce labor costs. Typically, we enter into agreements with these outsourcing service providers on a project basis, pursuant to which\nthey deliver software according to our specifications. We may experience operational difficulties because of our outsourcing service\nproviders, including their failure to comply with software specifications, reduced capacity, insufficient quality control and failure\nto meet deadlines. As a result, we may fail to deliver our communications solutions to the satisfaction of our customers and in a timely\nmanner, which may adversely affect our reputation and relationship with customers. In addition, if one or more of our outsourcing service\nproviders experience business interruptions or are otherwise unable or unwilling to fulfill their agreements with us, we may suffer delays\nand additional expenses in arranging for alternative service providers meeting our requirements, and our business, results of operations\nand financial condition may be adversely affected.\n\n \n\n**We\nhave incurred and may continue to incur substantial share-based compensation expenses.**\n\n \n\nWe have adopted the 2016 share incentive plan, or the 2016 Plan, which permits\nthe grant of a number of equity-linked awards, including share options and restricted shares, to directors, officers, employees and external\nconsultants. The 2016 Plan is intended to promote our success and shareholder value by attracting, motivating and retaining selected employees\nand other eligible participants through the awards. The maximum aggregate number of ordinary shares which may be issued pursuant to all\nawards under the 2016 Plan is 29,525,465. As of the date of this annual report, options to purchase an aggregate of 25,967,793 Class\nA ordinary shares have been granted under the 2016 Plan, excluding those repurchased, among which (1) options to purchase 18,839,902 Class\nA ordinary shares granted to certain employees were exercised in January 2021, and such shares were issued in February 2021 subject to\ncertain transfer and repurchase restrictions, (2) options to purchase 3,641,438 Class A ordinary shares granted to certain employees were\nsubsequently exercised, and (3) options to purchase 3,486,453 Class A ordinary shares under the 2016 Plan are still outstanding.\n\n \n\nIn\nJanuary 2021, we adopted the 2021 share incentive plan, or the 2021 Plan, under which the maximum aggregate number of Class A ordinary\nshares that may be issued pursuant to all awards under such plan is 15,144,221. As of the date of this annual report, restricted share\nunits to purchase an aggregate of 12,271,840 Class A ordinary shares have been granted under the 2021 Plan, excluding those repurchased,\namong which (1) restricted share units to purchase 190,656 Class A ordinary shares were exercised, and (2) restricted share units to\npurchase 12,081,184 Class A ordinary shares are still outstanding. See “Item 6. Directors, Senior Management and Employees—B.\nCompensation— Share Incentive Plans” for more information.\n\n \n\nIn\n2023, 2024 and 2025, we recorded share-based compensation expenses of RMB22.2 million, RMB14.3 million and RMB13.2 million (US$1.9 million),\nrespectively. For details on the measurements of our share-based compensation, See “Item 5. Operating and Financial Review and\nProspects—A. Operating Results—Critical Accounting Policies and Estimates—Share-based compensation.” As of December\n31, 2025, there were RMB0.4 million (US$0.06 million) and RMB11.1 million (US$1.6 million) of total unrecognized share-based compensation\nexpenses related to share options and restricted shares, respectively. The related share options and restricted shares are expected to\nbe recognized over a weighted average period of 2.08 years and 2.63 years, respectively. We expect to further recognize a substantial\namount of share-based compensation expenses going forward, which we expect to have a significant impact on our results of operations.\nMoreover, if we grant additional share options or other equity-linked awards in the future, such as those under our share incentive plans\nor in connection with future acquisitions, our expenses associated with share-based compensation may increase significantly, which may\nmaterially and adversely affect our business, results of operations and financial condition.\n\n \n\n27\n\n \n\n \n\n**We\nare expanding internationally, which could expose us to significant risks.**\n\n \n\nWe\nestablished our first overseas subsidiary, Cloopen Japan Co., Ltd., in Japan in 2016 and have recently begun to generate revenues from\nour international operations. As of the date of this annual report, we also have overseas subsidiaries in Philippines, Malaysia and Singapore.\nAny new markets or countries into which we attempt to sell our solutions may not be receptive. For example, we may not be able to expand\ninto certain markets if we are not able to satisfy certain government- and industry-specific requirements. In addition, our ability to\nmanage our business and conduct our operations internationally in the future may require considerable management’s attention and\nresources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages,\ncultures, customs, legal and regulatory systems, alternative dispute systems and commercial markets. Future international expansion will\nrequire investment of significant funds and other resources. Operating internationally subjects us to new risks and may increase risks\nthat we currently face, including risks associated with:\n\n \n\n \n●\nrecruiting\nand retaining talented and capable employees outside China and maintaining our company culture across all of our offices;\n\n \n \n \n\n \n●\nproviding\nour solutions and operating our business across a significant distance, in different languages and among different cultures, including\nthe potential need to modify our solutions and features to ensure that they are culturally appropriate and relevant in different\ncountries;\n\n \n \n \n\n \n●\ncomplying\nwith laws and regulations of the jurisdictions in which we operate, especially those in relation to our cloud-based communications\nsolutions and business operations;\n\n \n \n \n\n \n●\ncomplying\nwith applicable international laws and regulations, including laws and regulations with respect to privacy, telecommunications requirements,\ndata protection, consumer protection and unsolicited messages and calls, and the risk of penalties to us and individual members of\nmanagement or employees if our practices are deemed to be out of compliance;\n\n \n \n \n\n \n●\noperating\nin jurisdictions that have laws on the protection of intellectual property rights different from those in China, and the practical\nenforcement of our intellectual property rights globally;\n\n \n \n \n\n \n●\ncollaborating\nwith partners outside China;\n\n \n \n \n\n \n●\ncompliance\nby us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions\nand other regulatory limitations or perceptions on our ability to provide our solutions in certain international markets;\n\n \n \n \n\n \n●\nforeign\nexchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent\nus from repatriating cash earned outside China;\n\n \n \n \n\n \n●\npolitical\nand economic instability;\n\n \n \n \n\n \n●\nchanges\nin diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export\nrequirements, trade embargoes and other trade barriers;\n\n \n \n \n\n \n●\ngenerally\nlonger payment cycles and greater difficulty in collecting accounts receivable;\n\n \n \n \n\n \n●\ndouble\ntaxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of\nChina and the international jurisdictions in which we operate; and\n\n \n \n \n\n \n●\nhigher\ncosts of doing business internationally, including increased accounting, travel, infrastructure and legal compliance costs.\n\n \n\n28\n\n \n\n \n\nCompliance\nwith laws and regulations applicable to our international operations substantially increases our cost of doing business in international\njurisdictions. We may be unable to keep current with changes in laws and regulations as they occur. Although we have included relevant\nclauses in our business contracts to support compliance with laws and regulations of the jurisdictions in which we operate, there can\nbe no assurance that we will always maintain compliance or that all of our employees and business partners will comply. Any violations\ncould result in enforcement actions, fines, civil and criminal penalties, damages, injunctions or reputational harm. If we are unable\nto comply with these laws and regulations or manage the complexity of our international operations successfully, we may need to cease\noperations in certain foreign jurisdictions.\n\n \n\n**Negative\npublicity and allegations involving us, our shareholders, directors, officers and employees may affect our reputation, and as a result,\nour business, results of operations and financial condition may be negatively affected.**\n\n \n\nWe,\nour shareholders, directors, officers and employees may be subject to negative media coverage and publicity from time to time in our\nordinary course of business, which could threaten the perception of our reputation as a trustworthy cloud-based communications solution\nprovider.\n\n \n\nIn\naddition, to the extent we, our shareholders, directors, officers and employees were involved in any legal or administrative proceedings\nor violate or allegedly violate any laws or regulations, our reputation could be materially and adversely affected, which may, in turn,\nadversely affect our business and results of operations. For example, an employee, who is a former member of our senior management team\nwas sued, prior to joining us, for theft of source code by one of his prior employers and was convicted of theft of trade secrets by\na local Chinese court in 2010. He had disclosed his conviction to us before joining us, and has undertaken to keep confidential all the\ninformation that he obtains during his employment with us and, in the event of his termination, to return or permanently destroy all\nthe documentation and materials he obtains during his employment with us. He also agreed that we retain the ownership over all the rights\nattached to the work products, designs, inventions or other intellectual properties developed or possessed individually or jointly by\nhim during and until one year after termination of his employment with us. We have adopted internal policies and a code of ethics to\nhelp protect our intellectual properties. Nevertheless, negative publicity associated with our employees may adversely impact our business\nand reputation. In addition, Mr. Yipeng Li, our chief financial officer, was named as one of the defendants in an ongoing securities\nclass action lawsuit against Sunlands Technology Group in his capacity as its then chief financial officer, together with certain then\ndirectors and executive officers of that company, originally filed on June 27, 2019 in the United States District Court for the Eastern\nDistrict of New York (case number 1:19-cv-03744-FB-SMG). This class action lawsuit alleged misrepresentation contained in the registration\nstatement in connection with such company’s initial public offering. The Sunlands matter has been concluded without any determination\nmade regarding the liability of any defendant, including Mr. Yipeng Li.\n\n \n\nAny\nnegative publicity or allegations may cause us to spend significant time and incur substantial costs, and we may not be able to diffuse\nthem to the satisfaction of our customers and investors, which could materially and adversely affect our reputation, business, results\nof operations and financial condition and the trading price of the ADSs.\n\n \n\n**We\nmay need additional capital, and we may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.**\n\n \n\nWe\nmay require additional capital beyond those generated by our initial public offering from time to time to grow our business, including\nto better serve our customers, develop new features and solutions, improve our operating and technology infrastructure or conduct acquisition\nof complementary businesses and technologies. Accordingly, we may need to sell additional equity or debt securities or obtain a credit\nfacility. Future issuances of equity or equity-linked securities could significantly dilute our existing shareholders, and any new equity\nsecurities we issue could have rights, preferences and privileges superior to those of holders of our ordinary shares. For example, we\nmay issue equity securities as consideration in acquisition transactions. Such issuances will be dilutive to our then existing shareholders,\nand more so if the equity securities are issued at such negotiated prices lower than the investment consideration paid by our then existing\nshareholders. The incurrence of debt financing would result in increased debt service obligations and could result in operating and financing\ncovenants that would restrict our operations or our ability to pay dividends to our shareholders.\n\n \n\n29\n\n \n\n \n\nOur\nability to obtain additional capital is subject to a variety of uncertainties, including:\n\n \n\n \n●\nour\nmarket position and competitiveness in China’s cloud communications industry;\n\n \n \n \n\n \n●\nour\nfuture profitability, overall results of operations, financial condition and cash flows;\n\n \n \n \n\n \n●\ngeneral\nmarket conditions for capital raising activities in China and globally; and\n\n \n \n \n\n \n●\neconomic,\npolitical and other conditions in China and globally.\n\n \n\nWe\nmay be unable to obtain additional capital in a timely manner or on acceptable terms or at all, and our financing may also be subject\nto regulatory requirements. If we are unable to obtain adequate financing on terms satisfactory to us when we require it in the future,\nour ability to continue to support our business growth could be significantly impaired, and our business and prospects could be adversely\naffected.\n\n \n\n**Certain\nsoftware we use leverages open-source codes, which, under certain circumstances, may lead to unintended consequences and, therefore,\ncould materially adversely affect our business, results of operations and financial condition.**\n\n \n\nOur\nsolutions incorporate open-source software, and we expect to continue to incorporate open-source software in the future. Few of the licenses\napplicable to open-source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner\nthat could impose unanticipated conditions or restrictions on our ability to commercialize our solutions. Moreover, although we have\nimplemented policies to regulate the use and incorporation of open-source software into our solutions, we cannot be certain that we have\nnot incorporated open-source software in a manner that is inconsistent with such policies. If we fail to comply with open-source licenses,\nwe may be subject to certain requirements, including requirements that we offer our solutions that incorporate the open source software\nfor no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the\nopen source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If\nan author or other third party that distributes such open source software were to allege that we had not complied with the conditions\nof one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could\nbe subject to significant damages, enjoined from generating revenues from customers using solutions that contained the open source software\nand required to comply with onerous conditions or restrictions on these solutions. In any of these events, we and our customers could\nbe required to seek licenses from third parties in order to continue offering our solutions and to re-engineer or even discontinue offering\nour solutions in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require us to devote additional\nresearch and development resources, could result in customer dissatisfaction and may adversely affect our business, results of operations\nand financial condition.\n\n \n\n**Certain\nof our customers, such as internet finance companies, may be subject to more stringent laws and regulations, which could adversely affect\ntheir operations and therefore their IT spending levels, and in turn could cause our customer base to shrink.**\n\n \n\nCertain\nenterprises which deploy our solutions in their business operations are internet finance companies, which accounted for approximately\n4% of our total revenues in 2023, 2024 and 2025, respectively. Due to the relatively short history of the online consumer finance industry\nin China, a comprehensive regulatory framework is under development by the PRC government. Since mid-2015, the PRC government and relevant\nregulatory authorities have issued a number of laws and regulations, including the Interim Measure on the Internet Micro-credit Business\n(Draft for Comments) announced in November 2020, seeking to tighten the online consumer finance industry. These laws and regulations\nhave imposed stringent requirements on the operation of peer-to-peer (P2P) online lending platforms. Although how these requirements\nwill be interpreted and implemented is still unclear, it is likely that more stringent laws and regulations will be issued and adopted\nto further regulate related businesses. As a result of the stringent and evolving regulatory environment, online consumer finance industry\nis facing great challenges and shrinking in size, which has adversely affected and could continue to adversely affect our business. For\nexample, relevant PRC authorities took stringent government measures in 2019 to regulate the operation of P2P online lending platforms,\nand we, after assessing potential risks, chose to voluntarily terminate certain transactions with existing customers in the online consumer\nfinance industry to ensure compliance with relevant laws and regulations, which led to a decrease in our existing customer base and our\nrevenues primarily related to cloud-based CC solutions that we offer on a recurring basis in such year. Furthermore, if the practice\nof our customers in the online consumer finance industry is deemed to violate any rules, laws or regulations, they could be forced to\nsubstantially modify their business model, face injunctions, including orders to cease illegal activities, discontinuation of operations\nand correction orders, fines and criminal liability, and may be exposed to other penalties as determined by the relevant government authorities,\nwhich could significantly harm their business operations and IT spending levels. As a result, our customer base may shrink, and our business,\nresults of operations and financial condition may be adversely affected.\n\n \n\n30\n\n \n\n \n\n**The\nestimates of market opportunity, forecasts of market growth included in this annual report may prove to be inaccurate, and any real or\nperceived inaccuracies may harm our reputation and negatively affect our business. Even if the market in which we compete achieves the\nforecasted growth, our business could fail to grow at similar rates, if at all.**\n\n \n\nMarket\nopportunity estimates and growth forecasts included in this annual report is subject to significant uncertainty and are based on assumptions\nand estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to\nchange over time, and there is no guarantee that any particular number or percentage of addressable companies or markets covered by our\nmarket opportunity estimates will deploy our solutions at all or generate any particular level of revenue for us. Even if the market\nin which we compete meets the size estimates and growth forecasted in this annual report, our business could fail to grow for a variety\nof reasons, including reasons outside of our control, such as competition in our industry.\n\n \n\n**Risks\nRelated to Regulatory Compliance**\n\n \n\n**Our\nbusiness is subject to extensive regulation, and if we fail to obtain and maintain required licenses and permits, we could face government\nenforcement actions, fines and possibly restrictions on our ability to operate or offer certain of our solutions.**\n\n \n\nThe\ncloud-based communications industry in China is subject to extensive regulation. Related laws and regulations are relatively new and\nevolving, and their interpretation and enforcement involve significant uncertainties. We are required to obtain and maintain all necessary\noperating licenses and permits applicable to our cloud-based communications solutions and our business operations in China. We may be\nrequired to apply for and obtain additional licenses and permits, as the interpretation and enforcement of the applicable current laws\nand regulations are evolving, and new laws and regulations may continue to be promulgated.\n\n \n\nCertain\nof the affiliated entities have obtained licenses from the MIIT and/or its local authorities to use telecommunications network code resources\nand provide internet content, and the Value-Added Telecommunications Business Operating Licenses to provide domestic multi-party communications\nservices, domestic call center services, non-internet information services and internet information services. Certain of our telecommunications\nnetwork code practices may be found to be not in full compliance with relevant laws and regulations, and as a result, we may be subject\nto administrative measures including confiscation of pertinent revenues, penalties and withdrawal of the telecommunications network code\nresources. For instance, the affiliated entities may be deemed to be using the telecommunications network code resources registered under\nthe names of other affiliated entities. As of the date of this annual report, the affiliated entities have not been subject to any legal\nor regulatory sanction for failure to obtain, renew or update such licenses. However, we cannot assure you that the affiliated entities\ncan successfully obtain or maintain required licenses and permits in a timely manner or at all, and we may be subject to fines, confiscation\nof income and discontinuation of or restrictions on certain of our operations as a result. Moreover, if we fail to renew or update any\nof our current licenses and permits in a timely manner and on commercially reasonable terms or at all, our business, results of operations\nand financial condition could be materially and adversely affected.\n\n \n\n31\n\n \n\n \n\nAs\nthe regulatory regime for the industry in which we operate continues to evolve and the government authorities may continue to implement\nnew laws and regulations or interpretations and applications of existing laws and regulations as applicable to us in the course of our\nexpansion to new business operations, we may be required to obtain additional licenses and permits. For example, we do not believe our\ncurrent operations of interactive voice response fall under the licensing requirements for instant information interaction services and,\ntherefore, we do not believe we are required to obtain the related license. However, we cannot assure you that the regulators will not\ntake a contrary position or that the regulatory regime will not evolve in a way to expand the licensing requirements. As a result, we\nmay incur increased costs of compliance, and there can be no assurance that we will be able to obtain the related license of instant\ninformation interaction services or any additional requisite license and permit or that we will not be found in violation of any existing\nor new law. If our operations are no longer in compliance with existing or new laws and regulations, or if we fail to obtain any license\nrequired under such laws and regulations, we could be subject to various penalties, including fines and discontinuation of or restrictions\non our operations, which could materially and adversely affect our business, results of operations and financial condition.\n\n \n\n**Our\nbrand image, business and results of operations may be adversely affected by third-party misconduct and misuse of our solutions, many\nof which are beyond our control.**\n\n \n\nWe\nstore, process and transmit a large amount of data and communications in the ordinary course of business, which may be subject to improper\ndisclosure and misappropriation by our employees, business partners and other third parties. As a result, our business may suffer and\nour brand image, business, results of operations and financial condition may be materially and adversely affected. We are exposed to\nthe risk of other types of employee misconduct, including intentionally failing to comply with government regulations, engaging in unauthorized\nactivities and misrepresentation during marketing activities, which could harm our reputation. It is not always possible to deter third-party\nmisconduct, and the precautions we take to prevent and detect misconduct may not be effective in controlling unknown or unmanaged risks\nor losses, which could harm our business, results of operations and financial condition.\n\n \n\nIn\naddition, our customers which deploy our solutions in their business communications may misuse them to make unauthorized calls and\nsend unauthorized text messages and other content. For example, certain customers utilized our *7moor Cloud* to make\nunauthorized calls in telemarketing settings, which had subjected us to negative media coverage and publicity. Such misuses may also\nsubject us to potential risks, including liabilities or claims relating to consumer rights protection laws. As a provider of short\nmessage services, we are required to comply with relevant laws and regulations relating to internet information protections. For\nexample, on May 19, 2015, the MIIT published the Provisions on the Administration of Short Message Services, which took effect on\nJune 30, 2015 and was then amended on February 9, 2026, prohibiting the use of text messages in telemarketing or other commercial\nsettings without consumers’ proper request and consent. In addition, the CAC published the AIGC Administrative Measures\npursuant to which AIGC service providers must comply with a number of rules and filing requirements in relation to AIGC content,\npersonal data, privacy protection and intellectual property rights. In case of a breach of the rules or non-compliance with the\nfiling requirements, the regulatory authorities will impose warning, fine and other penalties. Failure to rectify the breach or\nnon-compliance may lead to suspension in operations. Moreover, we could also be required to comply with relevant laws and\nregulations regarding the control and management of unauthorized calls, including, among others, establishing forbidden call lists\nto prevent telemarketing calls from reaching end-users who have formerly explicitly refused to be reached by telemarketing calls of\na particular industry or business, and improving technological capability and risk precautions regarding the prevention and\nmonitoring of unauthorized calls. The scope and interpretation of relevant laws and regulations that are or may be applicable to the\ndelivery of text messages, calls and other content are continuously evolving. See “Item 4. Information on the Company—B.\nBusiness Overview—Regulations—Regulations relating to cybersecurity and privacy protection—Unauthorized calls and\ntext messages.” We have taken certain acts to reduce unauthorized text messages and calls, such as contract restrictions in\nour agreements with customers. In response to the past misuses by certain of our customers, we have also been more proactive in\nscreening business partners, prohibiting non-compliant behaviors, and conducting rigorous real-time quality inspections. However, as\nin practice we have little control over text messages, calls and other content delivered by our customers to their end-users, we\ncannot assure you that our current systems and acts will be sufficient or effective under applicable laws and regulations. If we do\nnot comply with relevant laws and regulations or if we become liable under these laws and regulations, we could face direct\nliability and loss of customer confidence, which could materially harm our reputation, business, results of operations and financial\ncondition.\n\n \n\n32\n\n \n\n \n\n**The\ndiscontinuation of any of the preferential tax treatments available to us could materially and adversely affect our results of operations\nand financial condition.**\n\n \n\nUnder\nPRC tax laws and regulations, enterprises are generally subject to enterprise income tax at the statutory rate of 25%, and revenues from\ncloud-based communications services and communications devices are generally subject to value-added tax at the rates of 6% and 13%. Preferential\ntax treatments are available to certain enterprises, industries and regions. For example, certain of the affiliated entities were recognized\nas “high and new technology enterprises,” or HNTEs, and were entitled to a preferential enterprise income tax rate of 15%.\nThe HNTE status must be reapplied every three years. During the three-year period, HNTEs must conduct a self-review each year to ensure\nthey meet the HNTE criteria. We have renewed and intend to continue to renew our HNTE certificates upon the expiration of the three-year\nperiod. In addition, if the value-added taxes we actually paid for the sales of our qualified proprietary software exceed an amount equivalent\nto 3% of our revenues from such software, we are eligible to receive a refund of the excessive amount. However, if PRC government changes\nits tax policy of supporting new technology and software development, or if we cease to be eligible for any of these preferential tax\ntreatments, we must pay tax at the standard rates, which would adversely affect our profitability.\n\n \n\n**Most\nof the lease agreements for our leased properties in China have not been registered with the relevant PRC government authorities as required\nby PRC law, which may expose us to potential fines.**\n\n \n\nUnder\nPRC law, all property lease agreements are required to be registered with the local land and real estate administration bureau. Although\nfailure to do so does not in itself invalidate the leases, the lessees may not be able to defend these leases against bona fide third\nparties and may also be exposed to potential fines if they fail to rectify such non-compliance within the prescribed time frame after\nreceiving notice from the relevant PRC government authorities. The penalty ranges from RMB1,000 to RMB10,000 for each unregistered lease,\nat the discretion of the relevant authority. As of the date of this annual report, most of the lease agreements for our leased properties\nin China have not been registered with the relevant PRC government authorities. As of the same date, we have not been subject to any\nadministrative fines or sanctions in this regard, nor have we received any rectification orders. However, there can be no assurance that\nrelevant authorities will not in future implement measures to request us to register our leases. In the event that any fine is imposed\non us for our failure to register our lease agreements, we may not be able to recover such losses from the lessors.\n\n \n\n**Our\nrights to use our leased properties could be challenged by property owners or other third parties, which may disrupt our operations and\ncause us to incur relocation costs.**\n\n \n\nWe\nlease properties as our office premises in the ordinary course of our business. If any lessor of our leased properties in China does\nnot have the relevant property ownership certificates or the right to lease or sublease such properties to us, the relevant lease agreements\nmay be deemed invalid and we may be forced to vacate these properties, which could interrupt our business operations and cause us to\nincur relocation costs. Moreover, if third parties challenge our lease agreements, it could result in a diversion of managerial attention\nand cause us to incur costs associated with defending such actions, even if such challenges are ultimately determined in our favor.\n\n \n\n**Failure\nto make adequate contributions to social insurance and housing fund as required by PRC regulations may subject us to penalties**\n\n \n\nIn\naccordance with PRC Social Insurance Law and Regulations on the Administration of Housing Fund and other relevant laws and regulations,\nan employer is required to pay various statutory employee benefits, including pension insurance, unemployment insurance, maternity insurance,\nwork-related injury insurance, medical insurance and housing fund to designated government agencies in accordance with the rates provided\nunder relevant regulations and withhold the employee benefits that should be assumed by the employees.\n\n \n\nWe\ndid not make adequate social insurance and housing fund contributions for some employees in accordance with PRC laws and regulations.\nWe may be subject to late fees, fines and/or other penalties as a result. As of the date of this annual report, we have not received\nany notice from the relevant government authorities or any claim or request from these employees in this regard. We have also made adequate\nprovision in relation to the insufficient contribution of the social insurance and housing fund in our financial statements. However,\nwe cannot assure you that the relevant government authorities will not require us to pay the outstanding amount and impose late fees,\nfines and/or other penalties on us, in which case our business, results of operations and financial condition may be adversely affected.\n\n \n\n33\n\n \n\n \n\n**We\nmay be held liable for the information and content displayed on, retrieved from or linked to our websites or posted by us on third-party\nplatforms, which could have a material and adverse effect on our business, results of operations and financial condition.**\n\n \n\nThe\nPRC government has adopted laws and regulations governing the distribution of information over the internet. Given the broad scope of\nthese laws and regulations and the uncertainties regarding their interpretation, there can be no assurance that all the information and\ncontent displayed on, retrieved from or linked to our websites or posted by us on third-party platforms comply or will comply with the\nrequirements of these laws and regulations at all times. Under applicable PRC laws and regulations, the marketing of our solutions on\nour websites or third-party platforms may be deemed as internet advertisement, which may subject us to legal or regulatory liabilities.\nIf we were found to violate laws or regulations governing the information and content displayed on, retrieved from or linked to our websites\nor posted by us on other platforms, including but not limited to the PRC Advertisement Law and the PRC Anti-unfair Competition Law, we\nmay be subject to fines and penalties and may be required to remove the non-compliant content from our websites or refrain from distributing\nthe non-compliant content on third-party platforms, which may materially and adversely affect our reputation, business and results of\noperations. For example, we were ordered to remove the non-compliant advertisement and were imposed a fine of RMB10,000 in 2018 due to\nthe use of certain inaccurate and unclear phrases regarding our solutions in violation of the PRC Advertisement Law.\n\n \n\nMoreover,\nwe may also be sued by private parties for defamation, copyright or trademark infringement, invasion of privacy, personal injury or under\nother legal theories relating to the information or content that we create or distribute. We could incur significant costs in investigating\nand defending such claims, even if we are ultimately not held liable. If any of these events occurs, we could incur significant expenses\nand our revenues could be adversely affected.\n\n \n\n**We\nare subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance\nwith such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and\nlegal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.**\n\n \n\nWe\nare subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations\nin various jurisdictions in which we conduct our business or sell our solutions, including the PRC anti-corruption laws and regulations,\nthe U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations. The FCPA prohibit us and our officers,\ndirectors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or\nproviding anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining\nbusiness or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that\naccurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The PRC\nanti-corruption laws and regulations prohibit bribery to government agencies, state or government owned or controlled enterprises or\nentities, to government officials or officials that work for state or government owned enterprises or entities, as well as bribery to\nnon-government entities or individuals. There is uncertainty in connection with the implementation of PRC anti-corruption laws and regulations.\nA violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation.\n\n \n\nWe\nhave direct or indirect interactions with officials and employees of China’s government agencies and state-owned enterprises in\nthe ordinary course of business. These interactions subject us to an increased level of compliance-related concerns. We have implemented\npolicies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants, agents\nand business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar\nlaws and regulations. However, our policies and procedures may not be sufficient, and our directors, officers, employees, representatives,\nconsultants, agents, and business partners could engage in improper conduct for which we may be held responsible.\n\n \n\nNon-compliance\nwith anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower\ncomplaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences,\nremedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial\ncondition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments\nin the ADSs.\n\n \n\n34\n\n \n\n \n\n**We\nhave limited insurance coverage, which could expose us to significant costs and business disruption.**\n\n \n\nWe\nprovide social security insurance, including pension insurance, unemployment insurance, maternity insurance, work-related injury insurance\nand medical insurance, as well as housing fund for our employees. We also purchased additional commercial health insurance to increase\ninsurance coverage of our employees. However, as the insurance industry in China is still in an early stage of development, insurance\ncompanies in China currently offer limited business-related insurance products. We do not maintain property insurance policies covering\nour equipment, systems and other property that are essential to our business operations. We do not maintain business interruption insurance\nor general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider our insurance\ncoverage to be in line with that of other companies in the same industry of similar size in China, but we cannot assure you that our\ninsurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current\ninsurance policies on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated\namount is significantly less than our actual loss, our business, results of operations and financial condition could be materially and\nadversely affected.\n\n \n\n**Risks\nRelated to Doing Business in China**\n\n \n\n**Changes\nin China’s economic, political or social conditions or government policies could have a material adverse effect on our business\nand operations.**\n\n \n\nWe\ngenerate substantially all of our revenues from our operations in China. Accordingly, our business, financial condition, results of operations and prospects are influenced by economic, political and legal developments in China. Economic\nreforms begun in the late 1970s have resulted in significant economic growth. However, any economic reform policies or measures in\nChina may from time to time be modified or revised. China’s economy differs from many other jurisdictions in\nmany respects.\n\n \n\nThe\nPRC government plays a significant role in China’s economic growth through strategically allocating resources, controlling the\npayment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular\nindustries or companies, Some of these measures may benefit the overall PRC economy, but may have a negative effect on us. For\nexample, our financial condition and results of operations may be adversely affected by government control over capital investments\nor changes in tax regulations. In addition, in the past, the PRC government has implemented certain measures, including interest\nrate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may\nadversely affect our business and results of operations. In addition, the increased global focus on social, ethical and\nenvironmental issues may lead to China’s adoption of more stringent standards in these areas, which may adversely impact the\noperations of China-based companies including us. Any prolonged slowdown in the Chinese economy could adversely affect our business,\nfinancial condition and results of operations, lead to reduction in demand for our solutions and adversely affect our competitive\nposition.\n\n \n\nFurthermore,\nwe, the VIE and its subsidiaries, and our investors may face uncertainty about future actions by the government of China that could significantly\naffect the VIE and its subsidiaries’ financial performance and operations, including the enforceability of the contractual arrangements.\nAs of the date of this annual report, neither we nor the VIE have received or have been denied permission from Chinese authorities to\nlist on U.S. exchanges. However, there is no guarantee that we or the VIE will receive or not be denied permission from relevant authorities\nto list on U.S. exchanges in the future.\n\n \n\n**We\nare subject to extensive and evolving legal development, non-compliance with which, or changes in which, may materially and adversely\naffect our business and prospects, and may result in a material change in our operations.**\n\n \n\nThe\nPRC legal system is based on written statutes and court decisions that have limited precedential value. The PRC legal system is evolving\nrapidly, and therefore the interpretations and enforcement of many laws, regulations and rules may be subject to further developments\nand changes.\n\n \n\n35\n\n \n\n \n\nFrom\ntime to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC judicial\nand administrative authorities have discretion in interpreting and implementing statutory and contractual terms, and prior court decisions\nhave limited precedential value, it may be more difficult to predict the outcome of a judicial or administrative proceeding. Furthermore,\nthe PRC legal system is based, in part, on government policies, some of which are not published in a timely manner, or at all. As a result,\nwe may not always be aware of any potential violation of these policies and rules. These uncertainties may impede our contractual, property\nand procedural rights, which could adversely affect our business, results of operations and financial condition.\n\n \n\n**Any\nactions by the Chinese government, including any decision to intervene or influence the operations of our PRC subsidiaries or the affiliated\nentities or to exert oversight and control over any offering of securities conducted overseas and/or foreign investment in China-based\nissuers, may cause us to make material changes to the operations of our PRC subsidiaries or the affiliated entities, limit or completely\nhinder our ability to offer or continue to offer ADSs and/or other securities to investors, and may cause the value of such securities\nto significantly decline or be worthless.**\n\n \n\nThe\nChinese government continues to exercise significant oversight and control over virtually every sector of the Chinese economy through\nregulation and state ownership. The ability of our PRC subsidiaries and the affiliated entities to operate in China may be impaired by\nchanges in its laws and regulations, including those relating to value-added telecommunications service industry, taxation, land use\nrights, foreign investment limitations, and other matters.\n\n \n\nThe\ncentral or local governments of China may impose new, stricter regulations or interpretations of existing regulations that would require\nadditional expenditures and efforts on our part to ensure our PRC subsidiaries and the affiliated entities’ compliance with such\nregulations or interpretations. As such, our PRC subsidiaries and the affiliated entities may be subject to various government actions\nand regulatory interference in the provinces in which they operate. They could be subject to regulation by various political and regulatory\nentities, including various local and municipal agencies and government sub-divisions. They may incur increased costs necessary to comply\nwith existing and newly adopted laws and regulations or penalties for any failure to comply. Furthermore, it is uncertain when and whether\nwe will be required to obtain permission from the PRC government in connection with our listing on a U.S. exchange in the future, and\neven when such permission is obtained, whether it will be later denied or rescinded.\n\n \n\nGovernment\nactions in the future, including any decision to intervene or influence the operations of our PRC subsidiaries or the affiliated entities\nat any time, or to exert oversight and control over an offering of securities conducted overseas and/or foreign investment in China-based\nissuers, may cause us to make material changes to the operations of our PRC subsidiaries or the affiliated entities, may limit or completely\nhinder our ability to offer or continue to offer securities to investors, and/or may cause the value of such securities to significantly\ndecline or be worthless. See “—The approval of and the filing with the CSRC or other PRC government authorities may be required\nin connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be\nable to obtain such approval or complete such filing.”\n\n \n\n**The\napproval of and the filing with the CSRC or other PRC government authorities may be required under PRC law in connection with our future\noffshore offerings or listing, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or\ncomplete such filing.**\n\n \n\nThe\nRegulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory\nagencies in 2006 and amended in 2009, include, among other things, provisions that purport to require that an offshore special purpose\nvehicle, formed for the purpose of an overseas listing of securities through acquisitions of PRC domestic enterprises or assets and controlled\nby PRC enterprises or individuals, to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s\nsecurities on an overseas stock exchange. On September 21, 2006, pursuant to the M&A Rules and other PRC laws, the CSRC published\non its official website relevant guidance regarding its approval of the listing and trading of special purpose vehicles’ securities\non overseas stock exchanges, including a list of application materials. However, the M&A Rules may be subject to further interpretation\nand application. If the CSRC approval is required for our future offshore offerings or listing, it is uncertain whether we can or how\nlong it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be lawfully rescinded. Any\nfailure to obtain or delay in obtaining the CSRC approval for any of our future offshore offerings or listing, or a rescission of such\napproval if obtained, would subject us to penalties imposed by the CSRC or other PRC regulatory authorities, which could include fines\nand penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms\nof sanctions that may materially and adversely affect our business, financial condition, and results of operations.\n\n \n\n36\n\n \n\n \n\nOn\nJuly 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance\nwith the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision\non overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant\nregulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. These opinions and any related\nimplementation rules to be enacted may subject us to additional compliance requirement in the future. We cannot assure that we will remain\nfully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all.\n\n \n\nOn\nFebruary 17, 2023, the CSRC promulgated the Overseas Listing Trial Measures and five supporting guidelines, which took effect on March\n31, 2023. Pursuant to the Overseas Listing Trial Measures, PRC domestic companies that directly or indirectly seek to offer or list their\nsecurities overseas are required to fulfill the filing procedure with the CSRC and report relevant information to the CSRC. At the press\nconference held for the Overseas Listing Trial Measures on February 17, 2023, officials from the CSRC clarified that the PRC domestic\ncompanies that had already been listed overseas on or before the effective date of the Overseas Listing Trial Measures, i.e., March 31,\n2023, shall be deemed as existing issuers, or the Existing Issuers. Existing Issuers are not required to complete the filing procedures\nimmediately but shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that\nrequire filing with the CSRC. The officials from the CSRC also confirmed that for the PRC domestic companies that seek to list overseas\nwith VIE structure, the CSRC would solicit opinions from relevant regulatory authorities and supplement the filing requirements for the\noverseas listing of companies with VIE structure which meet the compliance requirements. See “Item 4. Information on the Company—B.\nBusiness Overview— Regulations—Regulations relating to M&A Rule and overseas listing in the PRC.” As we had been\nlisted on an overseas stock exchange prior to March 31, 2023, we are not required to make immediate filing with the CSRC in connection\nwith such previous listing. However, we could be subject to the filing requirements with the CSRC if we conduct subsequent offerings\nor seek to list our securities on a stock exchange. Given that the Overseas Listing Trial Measures were recently promulgated, uncertainties\nremain as to the implementation and interpretation, and how they will affect our future financing. If we fail to complete the filing\nwith the CSRC in a timely manner or at all, for any future offering or any other financing activities which are subject to the filing\nrequirements under the Overseas Listing Trial Measures, our ability to raise or utilize funds and our operations could be materially\nand adversely affected.\n\n \n\nWe\ncannot assure you that we can complete the filing procedures, obtain the approvals or complete other compliance procedures in a timely\nmanner, or at all, or that any completion of filings or approvals or other compliance procedures would not be rescinded. Any such failure\nwould subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose restrictions and\npenalties on the operations in China, significantly limit or completely hinder our ability to launch any new offering of our securities,\nlimit our ability to pay dividends outside of China, delay or restrict the repatriation of the proceeds from future capital raising activities\ninto China, or take other actions that could materially and adversely affect our business, results of operations, financial condition\nand prospects, as well as the trading price of the ADSs.\n\n \n\nIn\naddition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on\nus. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including\nthe cybersecurity review under the Cybersecurity Review Measures and the CSRC filing under the Overseas Listing Trial Measures, are required\nfor our future offering or other financing activities, it is uncertain whether we can or how long it will take us to obtain such approval\nor complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in\nobtaining such approval or completing such filing procedures for our future offering or other financing activities, or a rescission of\nany such approval or filing if obtained by us, may subject us to sanctions by the CSRC or other PRC regulatory authorities, which could\nmaterially and adversely affect our business, results of operations, financial condition and prospects, as well as the trading price\nof our securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to\nhalt our future offering or other financing activities before consummation. In addition, if the CSRC or other regulatory authorities\nlater promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory\nprocedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures\nare established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially\nand adversely affect our business, prospects, financial condition, reputation, and the trading price of our securities.\n\n \n\n37\n\n \n\n \n\n**The\nADSs may be prohibited from being traded over the counter in the United States under the HFCAA if the SEC subsequently determines our\naudit work is performed by auditors that the PCAOB is unable to inspect or investigate completely. The prohibition from trading of the\nADSs, or the threat of their being prohibited from being traded, may materially and adversely affect the value of your investment.**\n\n \n\nThe\nHFCAA was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered\npublic accounting firm that has not been subject to inspection by the PCAOB for two consecutive years beginning in 2021, the SEC shall\nprohibit our shares or the ADSs from being traded on a national securities exchange or in the OTC trading market in the United States.\nOur independent registered public accounting firm, ARK Pro CPA & Co is located in and organized under the laws of Hong Kong, a jurisdiction\nwhere, at the time of the adoption of the HFCAA, the PCAOB was unable to conduct inspections without the approval of the Chinese authorities.\n\n \n\nOn\nAugust 26, 2022, the PCAOB, the CSRC and the Ministry of Finance of the PRC signed the Statement of Protocol, which establishes a specific\nand accountable framework for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China\nand Hong Kong. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered\npublic accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB Board vacated its previous 2021 determinations\nthat the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and\nHong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting\nfirms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our\nauditor’s control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans\nto resume regular inspections, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The\nPCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. If the\nPCAOB is unable to inspect and investigate completely registered public accounting firms located in mainland China and Hong Kong, or\nif we fail to, among others, meet the PCAOB’s requirements, including retaining a registered public accounting firm that the PCAOB\ndetermines it is able to inspect and investigate completely, and upon two consecutive years of non-inspection under the HFCAA, our shares\nand the ADSs will not be permitted for trading on a national securities exchange or the OTC trading market in the United States under\nthe HFCAA and related regulations. In that case, we cannot assure you that we will be able to list on a non-U.S. exchange or that a market\nfor our shares will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase\nthe ADSs when you wish to do so and have a negative impact on the price of the ADSs. Moreover, the HFCAA or other efforts to increase\nU.S. regulatory access to audit information could cause investor uncertainty for affected issuers, including us, and the market price\nof the ADSs could be adversely affected. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable\nto us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.\n\n \n\n**It\nmay be difficult for overseas regulators to conduct investigation or collect evidence within China.**\n\n \n\nShareholder\nclaims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality\nin China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations\nor litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities\nregulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the\nsecurities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.\nFurthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator\nis allowed to directly conduct investigation or evidence collection activities within the PRC territory. In addition, the Provision on\nConfidentiality specifies that requests made by overseas regulators to conduct investigations, including collecting evidence for investigation\npurpose, and inspections in the Chinese mainland shall be carried out through cross-border regulatory cooperation mechanisms. While the\ndetailed interpretation of or implementation rules under Article 177 or the Provision on Confidentiality have yet to be promulgated,\nthe inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may\nfurther increase the difficulties you face in protecting your interests. See also “—Risks Related to the ADSs—You may\nface difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we\nare incorporated under Cayman Islands law and conduct our operations primarily in emerging markets.”\n\n \n\n38\n\n \n\n \n\n**The\ncustodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities,\nor misappropriate or misuse these assets.**\n\n \n\nUnder\nthe PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the\nsigning entity or with the signature of a legal representative whose designation is registered and filed with relevant PRC market regulation\nadministrative authorities.\n\n \n\nIn\norder to secure the use of our chops and seals, we have established internal control procedures and rules for using these chops and seals.\nIn any event that the chops and seals are intended to be used, the responsible personnel will submit a formal application, which will\nbe verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order\nto maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees.\nAlthough we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence.\nThere is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or seeking\nto gain control of our PRC subsidiaries or the affiliated entities. If any employee obtains, misuses or misappropriates our chops and\nseals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business operations.\nWe may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from\nour operations, and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies on the apparent\nauthority of such employees and acts in good faith.\n\n \n\n**Fluctuations\nin exchange rates could have a material adverse effect on our results of operations and the value of your investment.**\n\n \n\nThe\nvalue of the Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions\nand relevant foreign exchange policies, among other things. In 2005, the PRC government changed its decades-old policy of pegging the\nvalue of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three\nyears. Between July 2008 and June 2010, this appreciation halted and the exchange rate between Renminbi and the U.S. dollar remained\nwithin a narrow band. Since June 2010, Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. On\nNovember 30, 2015, the Executive Board of IMF completed the regular five-year review of the basket of currencies that make up the Special\nDrawing Right, or SDR, and decided that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will\nbe included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the\nfourth quarter of 2016, the Renminbi has depreciated significantly against the backdrop of a surging U.S. dollar and persistent capital\noutflows from China. This depreciation halted in 2017, and the Renminbi appreciated approximately 7% against the U.S. dollar during this\none-year period. In 2018, a new round of Renminbi depreciation emerged under the influence of a strong U.S. dollar and the Sino-U.S.\ntrade friction. In August 2019, Renminbi once plunged to the weakest level against the U.S. dollar in more than a decade, which raised\nfears of further escalation in the Sino-U.S. trade friction. With the development of the foreign exchange market and progress towards\ninterest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the\nexchange rate system and we cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S.\ndollar in the future. It is difficult to predict how market forces or relevant government policy may impact the exchange rate between\nRenminbi and the U.S. dollar in the future.\n\n \n\nSignificant\nrevaluation of the Renminbi may have a material adverse effect on your investment. For example, to the extent that we need to convert\nU.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the\nRenminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose\nof making payments for dividends on our ordinary shares or the ADSs or for other business purposes, appreciation of the U.S. dollar against\nthe Renminbi would have a negative effect on the U.S. dollar amount available to us.\n\n \n\n39\n\n \n\n \n\nVery\nlimited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into\nany hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging\ntransactions in the future, the availability and effectiveness of these hedges may be limited, and we may not be able to adequately hedge\nour exposure or at all. In addition, our currency exchange losses may be magnified by relevant exchange control regulations that restrict\nour ability to convert Renminbi into foreign currency.\n\n \n\n**Governmental\ncontrol of currency conversion may limit our ability to utilize our revenues in foreign currencies effectively and fluctuations in exchange\nrates may affect the value of your investment.**\n\n \n\nThe\nPRC government established specific laws and regulations on the convertibility of the Renminbi into foreign currencies and, in certain\ncases, the remittance of foreign currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate\nstructure, our Cayman Islands holding company may rely on dividend payments from our PRC subsidiaries to fund any cash and financing\nrequirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions,\ninterest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval\nof the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Specifically, under the\nexisting exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries and affiliated\nentities in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities\nis required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment\nof loans denominated in foreign currencies.\n\n \n\nAs\na result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries and affiliated entities to\npay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure\npayments outside China in a currency other than Renminbi.\n\n \n\nMore\nrestrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital\naccount. If any of our shareholders regulated by such policies fails to satisfy the applicable overseas direct investment filing or approval\nrequirement timely or at all, it may be subject to penalties from the relevant PRC authorities. The PRC government may at its discretion\nfurther restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system\nprevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, or if our access to foreign currencies\nfor current account transactions is subject to oversight, we may not be able to pay dividends in foreign currencies to our shareholders,\nincluding holders of the ADSs.\n\n \n\n**Certain\nPRC laws and regulations establish complex procedures for certain types of acquisitions of Chinese companies by foreign investors, which\ncould make it more difficult for us to pursue growth through acquisitions in China.**\n\n \n\nA\nnumber of PRC laws and regulations have established additional procedures and requirements that could make merger and acquisition activities\nin China by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in\nadvance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly\nLaw requires that the MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In\naddition, the security review rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions\nby foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign\ninvestors may acquire *de facto* control over domestic enterprises that raise “national security” concerns are subject\nto strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring\nthe transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary\nbusinesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions\ncould be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts\nmay delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our\nmarket share.\n\n \n\n40\n\n \n\n \n\n**PRC\nregulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion\nmay affect our ability to capitalize or otherwise fund our PRC operations.**\n\n \n\nWe\nare an offshore holding company conducting our operations in China through our PRC subsidiaries and affiliated entities. We may make\nloans to our PRC subsidiaries and affiliated entities, or we may make additional capital contributions to our PRC subsidiary, or we may\nestablish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or we may acquire offshore entities with\nbusiness operations in China in an offshore transaction.\n\n \n\nMost\nof these activities are subject to PRC regulations and approvals. For example, loans by us to our wholly owned PRC subsidiaries to finance\ntheir activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our\nwholly owned PRC subsidiaries by means of capital contributions, these capital contributions are subject to the requirement of making\nnecessary filings in the foreign investment comprehensive administrative system and registration with other governmental authorities\nin China. Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely to make\nsuch loans to the affiliated entities as PRC domestic companies. Further, we are not likely to finance the activities of the affiliated\nentities by means of capital contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises\nengaged in value-added telecommunications services and certain other businesses.\n\n \n\nSAFE\npromulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise,\nor SAFE Circular 19, effective June 2015, in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement\nof the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign Invested Enterprises, the Notice from the\nState Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses,\nand the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign\nExchange Businesses. According to SAFE Circular 19, the flow and use of the Renminbi capital converted from foreign currency-denominated\nregistered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for the issuance of Renminbi\nentrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred to a third-party.\nAlthough SAFE Circular 19 allows Renminbi capital converted from foreign currency-denominated registered capital of a foreign-invested\nenterprise to be used for equity investments within China, it also reiterates the principle that Renminbi converted from the foreign\ncurrency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope.\nAlthough SAFE promulgated in October 2019 the Circular on Further Promoting the Cross-border Trade and Investment Facilitation, or SAFE\nCircular 28, pursuant to which non-investment foreign-invested companies are allowed to conduct domestic equity investment with settled\ncapital from foreign exchange if such investment projects are true and compliant and do not otherwise violate the existing Special Management\nMeasures (Negative List) for Foreign Investment Access, or the Negative List, it is unclear whether SAFE will permit such capital to\nbe used for equity investments in China in actual practice. SAFE promulgated the Circular on Reforming and Regulating Policies on the\nControl over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of\nthe rules set forth in SAFE Circular 19, but changes the prohibition against using Renminbi capital converted from foreign currency denominated\nregistered capital of a foreign-invested company to issue Renminbi entrusted loans to a prohibition against using such capital to issue\nloans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE\nCircular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds\nfrom our initial public offering, to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand\nour business in China.\n\n \n\nIn\nlight of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,\nwe cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals\non a timely basis, or at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions\nby us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we\nreceived from initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could\nmaterially and adversely affect our liquidity and our ability to fund and expand our business.\n\n \n\n41\n\n \n\n \n\n**PRC\nregulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial\nowners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC\nsubsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.**\n\n \n\nSAFE\npromulgated the Circular of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration over\nthe Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or SAFE Circular\n37, in July 2014, which replaced the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging\nin Financing and Roundtrip Investments via Overseas Special Purpose Vehicles promulgated by SAFE in October, 2005. SAFE Circular 37 requires\nPRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore\nentity established for the purpose of overseas investment or financing with such PRC residents or entities’ legally owned assets\nor equity interests in domestic enterprises or offshore assets or interests. On February 13, 2015, SAFE issued Circular on Further Simplifying\nand Improving the Foreign Currency Management Policy on Direct Investment, or SAFE Circular 13, effective on June 1, 2015, pursuant to\nwhich the power to accept SAFE registration was delegated from local SAFE to local qualified banks where the assets or interest in the\ndomestic entity was located. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special\npurpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents,\nname and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.\n\n \n\nIf\nour shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiaries\nmay be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and\nwe may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE\nregistration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. In addition,\nour shareholders who are PRC entities shall complete their overseas direct investment filings according to applicable laws and regulations\nregarding the overseas direct investment by PRC entities, including filings with the MOFCOM, the NDRC, or the local branch of the MOFCOM\nand the NDRC based on the investment amount, invested industry or other factors thereof.\n\n \n\nWe\nhave used our best efforts to notify PRC residents or entities who directly or indirectly hold shares in our Cayman Islands holding company\nand who are known to us as being PRC residents or entities to complete the foreign exchange registrations or overseas direct investment\nfilings. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that\nare required to make or update such registration or filings, and we cannot compel them to comply with SAFE registration requirements\nand filing requirements as set forth in SAFE, MOFCOM and NDRC regulations. As a result, we cannot assure you that all other shareholders\nor beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain or update any\napplicable registrations, filings or approvals required by SAFE, MOFCOM and NDRC regulations. Failure by such shareholders or beneficial\nowners to comply with SAFE, MOFCOM and NDRC regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries,\ncould subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’\nability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and\nprospects.\n\n \n\nMoreover,\nunder existing foreign exchange regulations, circulation of foreign currencies within the territory of the PRC shall be prohibited, and\nno pricing and settlement shall be made in foreign currencies within the territory of the PRC, unless otherwise stipulated by the state\nauthority. For instance, using foreign exchange to make payments that shall be made with Renminbi violates various foreign exchange regulation\nrequirements, which may result in liabilities under PRC law for circumventing applicable foreign exchange restrictions and be construed\nas arbitrage of exchange. As a result, relevant foreign exchange regulatory authorities may order the violating entity to convert the\nforeign exchange and impose a fine of up to 30% of the illegal arbitrage amount; in serious cases, the regulatory authorities may impose\na fine in excess of 30% but no more than the illegal arbitrage amount. The violating entity may also be subject to criminal liability\nif its act constitutes a criminal offence. We have made some acquisitions in China, and as a consideration, we have issued new shares\noverseas to acquired entities’ direct or indirect shareholders who are PRC residents, which may subject such shareholders and us\nto the above-mentioned fines or criminal liability in serious cases. In addition, we cannot assure you that such shareholders have completed\nthe necessary registrations as required by SAFE Circular 37 and other relevant SAFE regulations and rules, failure of which may subject\nsuch shareholders to fines and sanctions and adversely affect our business, results of operations and financial condition.\n\n \n\n42\n\n \n\n \n\n**If\nwe fail to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans,\nthe PRC plan participants or we could be subject to fines and other legal or administrative sanctions.**\n\n \n\nIn\nFebruary 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating\nin Stock Incentive Plans of Overseas Publicly-Listed Companies, or SAFE Circular 7. Under SAFE Circular 7 and other relevant rules and\nregulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with\nSAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain\na qualified PRC agent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected\nby such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its\nparticipants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise\nof share-based awards, the purchase and sale of corresponding shares or interests and fund transfers. In addition, the PRC agent is required\nto amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan,\nthe PRC agent or the overseas entrusted institution, or any other material changes. We and our employees who are PRC resident and have\nbeen granted share-based awards will be subject to SAFE Circular 7 and other relevant rules and regulations. Failure of our PRC share-based\naward holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our\nability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends\nto us, or otherwise materially adversely affect our business.\n\n \n\n**If\nwe are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences\nto us and our non-PRC shareholders or the ADSs holders.**\n\n \n\nUnder\nthe PRC Enterprise Income Tax Law, or EIT Law, and its implementation rules, an enterprise established outside of the PRC with its “*de\nfacto* management body” within the PRC is considered a “resident enterprise” and will be subject to PRC enterprise\nincome tax on its global income at the rate of 25%. The implementation rules define the term “*de facto* management body”\nas the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and\nproperties of an enterprise. In 2009, the State Administration of Taxation, or SAT, issued the Circular of the State Administration of\nTaxation on Issues Relating to Identification of PRC-controlled Overseas Registered Enterprises as Resident Enterprises in Accordance\nwith the De Facto Standards of Organizational Management, or SAT Circular 82, which provides certain specific criteria for determining\nwhether the “*de facto* management body” of a PRC-controlled enterprise that is incorporated offshore is located in\nChina. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, but not to\nthose controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s\ngeneral position on how the “*de facto* management body” test should be applied in determining the tax resident status\nof all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC\nenterprise group will be regarded as a PRC tax resident by virtue of having its “*de facto* management body” in China\nand will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (1) the primary\nlocation of the day-to-day operational management is in the PRC; (2) decisions relating to the enterprise’s financial and human\nresource matters are made or are subject to approval by organizations or personnel in the PRC; (3) the enterprise’s primary assets,\naccounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (4) at\nleast 50% of voting board members or senior executives habitually reside in the PRC.\n\n \n\nWe\nbelieve none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of\nan enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the\nterm “*de facto* management body.” If the PRC tax authorities determine that any of our entities outside of China is\na PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we\npay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders\n(including the ADSs holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or\nordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if PRC tax authorities determine that we are\na PRC resident enterprise for enterprise income tax purposes, dividends paid to our non-PRC individual shareholders (including the ADSs\nholders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of\n20% (which, in the case of dividends, may be withheld at source by us), if such gains are deemed to be from PRC sources. These rates\nmay be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of Cloopen Group Holding Limited would be\nable to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that Cloopen Group Holding\nLimited is treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs.\n\n \n\n43\n\n \n\n \n\n**We\nface uncertainties with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.**\n\n \n\nWe\nface uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer\nand exchange of shares in our company by non-resident investors. In February 2015, SAT issued the Bulletin on Issues of Enterprise Income\nTax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or SAT Bulletin 7. Pursuant to SAT Bulletin 7, an “indirect\ntransfer” of PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company of a PRC resident enterprise,\nby non-PRC resident enterprises may be re-characterized and treated as a direct transfer of the underlying PRC assets, if such arrangement\ndoes not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As\na result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who\nis obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity\ninterests in a PRC resident enterprise. On October 17, 2017, SAT issued the Bulletin on Issues Concerning the Withholding of Non-PRC\nResident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. SAT Bulletin 37 further clarifies\nthe practice and procedure of the withholding of nonresident enterprise income tax.\n\n \n\nThere\nis uncertainty as to the application of SAT Bulletin 37 or previous rules under SAT Bulletin 7. We face uncertainties on the reporting\nand consequences of private equity financing transactions, share exchanges or other transactions involving the transfer of shares in\nour company by investors that are non-PRC resident enterprises. Under SAT Bulletin 37 and SAT Bulletin 7, our company may be subject\nto filing obligations or taxes if our company is the transferor in such transactions, and may be subject to withholding obligations if\nour company is the transferee in such transactions.\n\n \n\n**Increases\nin labor costs in the PRC may adversely affect our business, results of operations and financial condition.**\n\n \n\nThe\nPRC Labor Contract Law has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others,\nto have written employment contracts, to enter into employment contracts with no fixed term under certain circumstances, to receive overtime\nwages and to terminate or alter terms in labor contracts. Furthermore, the PRC Labor Contract Law sets forth additional restrictions\nand increases the costs involved with dismissing employees. To the extent that we need to significantly reduce our workforce, the PRC\nLabor Contract Law could adversely affect our ability to do so in a timely and cost-effective manner, and we could be subject to penalties\nor incur significant liabilities in connection with labor disputes or investigations.\n\n \n\nIn\naddition, we are required by PRC laws and regulations to make social insurance registration and open housing fund account with relevant\ngovernmental authorities and pay various statutory employee benefits, including pension insurance, unemployment insurance, maternity\ninsurance, work-related injury insurance, medical insurance and housing fund to designated government agencies for the benefit of our\nemployees. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee\nbenefits, and those employers who fail to make adequate payments may be subject to late fees, fines and/or other penalties. Our social\ninsurance and/or housing fund policies and practices may be found to have violated the relevant laws and regulations. See “—Risks\nRelated to Regulatory Compliance—Failure to make adequate contributions to social insurance and housing fund as required by PRC\nregulations may subject us to penalties.” For example, some of the affiliated entities did not make adequate social insurance and\nhousing fund contributions or did not make social insurance registration and open housing fund account in accordance with PRC laws and\nregulations. As a result, we may be subject to late fees, fines and/or other penalties, and our business, results of operations and financial\ncondition may be adversely affected.\n\n \n\n44\n\n \n\n \n\n**Recent\nlitigation and negative publicity surrounding China-based companies listed in the United States may result in increased regulatory scrutiny\nof us and negatively impact the trading price of the ADSs.**\n\n \n\nWe\nbelieve that litigation and negative publicity surrounding companies with operations in China that are listed in the United States have\nnegatively impacted stock prices for such companies. Certain politicians in the United States have publicly warned investors to shun\nChina-based companies listed in the United States. The SEC and the PCAOB also issued a joint statement on April 21, 2020, reiterating\nthe disclosure, financial reporting and other risks involved in the investments in companies that are based in emerging markets as well\nas the limited remedies available to investors who might take legal action against such companies. Furthermore, various equity-based\nresearch organizations have published reports on China-based companies after examining, among other things, their corporate governance\npractices, related party transactions, sales practices and financial statements that have led to special investigations and stock suspensions\non national exchanges. Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion of managerial resources,\npotential costs to defend ourselves against rumors, decreases and volatility in the ADS trading price, and increased directors and officers\ninsurance premiums, and could have a material adverse effect upon our business, results of operations and financial condition.\n\n \n\n**A\nsevere or prolonged downturn in the global economic recession and the slowdown in the Chinese economy could materially and adversely\naffect our business, results of operations, financial condition and prospects.**\n\n \n\nIn\nrecent years, the global macroeconomic environment was facing challenges, including the end of quantitative easing by the U.S.\nFederal Reserve, the economic slowdown in the Eurozone since 2014 and uncertainties over the impact of Brexit and the ongoing trade\nand tariffs disputes between China and the United States. The Chinese economy has shown slower growth compared to the previous\ndecade since 2012 and the trend may continue. There is considerable uncertainty over the long-term effects of the monetary and\nfiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the\nUnited States and China. In addition, the tension caused by trade friction, the drastic drop in oil prices and the U.S. Federal\nReserve’s fiscal policies to strengthen the market in early 2020 also create uncertainty and challenges to the development of\nglobal economic condition. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic\neconomic and political policies, and the expected or perceived overall economic growth rate. Any prolonged slowdown in the global or\nChinese economy may have a negative impact on individual disposable income and in turn our business, results of operations and\nfinancial condition, and continued turbulence in the international capital markets may adversely affect our access to capital\nmarkets to meet liquidity needs.\n\n \n\n**The\ntension in international trade and rising political tension, particularly between the United States and China, may adversely impact our\nbusiness, results of operations and financial condition.**\n\n \n\nOur\nbusiness could be materially and adversely affected by the tensions in international trade in recent years. Changes to international\ntrade policies could adversely affect the global economic conditions. In addition, geopolitical tensions have escalated due to,\namong other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S. government, and the executive orders issued\nby the U.S. government that may prohibit transactions with certain selected Chinese companies as well as their products and\nservices. Additionally, there have also been concerns over unrest in Ukraine, the Middle East and Africa, which have resulted in\nvolatility in financial and other markets, concerns over the significant potential changes to United States trade policies, treaties\nand tariffs, including trade policies and tariffs regarding China, concerns about the economic effect of the relationship between\nChina and surrounding Asian countries, and concerns over the rising level of inflation and worries that efforts to curb inflation\nmay result in recession. As a result, rising political tensions could reduce levels of trades, investments, technological exchanges,\nand other economic activities between the two major economies, and any such tensions or any escalation of such tensions, may\nnegatively affect trading and business environments, which may, in turn, adversely impacting our business, results of operations and\nfinancial condition.\n\n \n\nIn particular,\npolitical tensions between the United States and China have escalated due to various incidents relating to trade dispute, sovereign integrity,\nand sanctions, among others. For example, on October 28, 2024, the U.S. Department of the Treasury (the “Treasury”) issued\na final rule on outbound investment (the “Final Rule”) to implement the executive order of August 9, 2023. The Final Rule\nbecame effective on January 2, 2025, and restricts direct and indirect investment by U.S. persons into companies with specified connections\nto China that use specific technologies of concern related to three sectors: (1) semiconductors and microelectronics, (2) quantum information\ntechnologies, and (3) artificial intelligence systems. On December 18, 2025, U.S. President Trump signed into law the National Defense\nAuthorization Act for Fiscal Year 2026, which includes the Comprehensive Outbound Investment National Security Act of 2025 (the “COINS\nAct”). The Final Rule remains in effect, but the COINS Act requires Treasury to propose certain revisions to the Final Rule within\n450 days of December 18, 2025. Those revisions ultimately will include, among other changes to the Final Rule, an expansion of the countries\nof concern, an expansion of the technologies covered to include hypersonic systems, revisions to key defined terms, and the establishment\nof a formal advisory opinion process. Against this backdrop, China has implemented, and may further implement, measures in response to\nthe changing trade policies, treaties, tariffs and sanctions and restrictions against Chinese companies initiated by the U.S. government.\nIf the political tension between the United States and China intensifies and further regulations affecting our business or customers\nare passed, our business may be materially and adversely affected.\n\n \n\n**Risks\nRelated to Our Corporate Structure**\n\n \n\n**The\nPRC government may find that the contractual arrangements that establish our corporate structure for operating our business do not comply\nwith applicable PRC laws and regulations.**\n\n \n\nCurrent\nPRC laws and regulations impose certain restrictions on foreign ownership of companies that engage in certain business operations, such\nas value-added telecommunications services. In June 2019, the MOFCOM and the NDRC promulgated the Negative List, which became effective\non July 30, 2019, in order to amend the Guidance Catalogue of Industries for Foreign Investment. The Negative List was further amended,\nand the version of the Negative List currently in force was amended on April 8, 2024 and became effective on November 1, 2024. Pursuant\nto the Negative List (2024 Version), foreign investment in value-added telecommunications services (except for e-commerce, domestic multi-party\ncommunications services, store-and-forward services and domestic call center services) falls within the Negative List. As a result, foreign\ninvestors can only conduct investment activities through equity or contractual joint ventures with certain shareholding requirements\nand approvals from competent authorities. PRC partners are required to hold the majority interests in the joint ventures and approval\nfrom MOFCOM and the MIIT, for the incorporation of the joint ventures and the business operations. The primary foreign investors must\nalso have operating experience and a good track record in providing value-added telecommunications services overseas.\n\n \n\n45\n\n \n\n \n\nCurrent\nPRC laws and regulations impose restrictions on foreign ownership and investment in companies that engage in value-added telecommunications\nservices. We are an exempted company incorporated in the Cayman Islands. Anxun Guantong is our wholly-owned PRC subsidiary and a foreign-invested\nenterprise under PRC laws. We conduct our business in China through Ronglian Yitong and its subsidiaries, or collectively the affiliated\nentities, in China, based on a series of contractual arrangements by and among Anxun Guantong, Ronglian Yitong and its shareholders.\nOur contractual arrangements allow us to (1) exercise effective control over the affiliated entities, (2) receive substantially all of\nthe economic benefits of the affiliated entities, and (3) have an exclusive option to purchase all or part of the equity interests in\nthe affiliated entities when and to the extent permitted by PRC law. We have been and expect to continue to be dependent on the affiliated\nentities to operate our business in China. As a result of these contractual arrangements, we have control over and are the primary beneficiary\nof the affiliated entities and consolidate their financial results under U.S. GAAP. See “Item 4. Information on the Company—Corporate\nHistory and Structure—C. Organizational Structure—Contractual Arrangements” for details.\n\n \n\nIn\nthe opinion of our PRC counsel, CM Law Firm, (1) the ownership structures of WFOE and the VIE in China currently are not in any violation\nof the applicable PRC laws or regulations currently in effect; and (2) the contractual arrangements by and among WFOE, the VIE and its\nshareholders governed by PRC laws and regulations are currently valid, binding and enforceable, and will not result in any violation\nof the applicable PRC laws or regulations currently in effect. However, we have been further advised by our PRC counsel that there are\nsubstantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Thus, the PRC government\nmay ultimately take a view contrary to or otherwise different from the opinion of our PRC counsel. If the PRC government otherwise find\nthat we are in violation of any existing or future PRC laws or regulations or lack the necessary permits or licenses to operate our business,\nthe relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation:\n\n \n\n●revoking\nthe business and operating licenses of our company;\n\n   \n\n●discontinuing\nor restricting any related-party transactions between our group and the affiliated entities;\n\n   \n\n●imposing\nfines and penalties, confiscating the income from our company, or imposing additional requirements\nfor our operations which we may not be able to comply with;\n\n   \n\n●requiring\nus to restructure our ownership structure or operations, including terminating the contractual\narrangements and deregistering the share pledges of the VIE, which in turn would affect our\nability to consolidate, derive economic interests from, or exercise effective control over\nthe affiliated entities;\n\n   \n\n●restricting\nor prohibiting our use of the proceeds of our initial public offering to finance our business\nand operations in China, particularly the expansion of our business through strategic acquisitions;\nor\n\n   \n\n●restricting\nthe use of financing sources by us or the affiliated entities or otherwise restricting our\nor their ability to conduct business.\n\n \n\nAny\nof these events could cause significant disruption to our business operations and severely damage our reputation, which would in turn\nmaterially and adversely affect our business, results of operations and financial condition. If occurrences of any of these events results\nin our inability to direct the activities of the affiliated entities in China, and/or our failure to receive the economic benefits from\nthe affiliated entities, we may not be able to consolidate their financial results in our consolidated financial statements in accordance\nwith U.S. GAAP.\n\n \n\n46\n\n \n\n \n\n**Any\nfailure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material\nadverse effect on our business.**\n\n \n\nWe\nhave relied and expect to continue to rely on the contractual arrangements with the VIE and its shareholders to operate our business\nin China. For a description of these contractual arrangements, See “Item 4. Information on the Company—Corporate History\nand Structure—C. Organizational Structure—Contractual Arrangements.”\n\n \n\nHowever,\nthese contractual arrangements may not be as effective as direct ownership in providing us with control over the affiliated entities.\nAny of the affiliated entities, including the VIE, and its shareholders, could breach their contractual arrangements with us by, among\nother things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.\nIn the event that the shareholders of the VIE breach the terms of these contractual arrangements and voluntarily liquidate the VIE, or\nthe VIE declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise\ndisposed of without our consent, we may be unable to conduct some or all of our business operations or otherwise benefit from the assets\nheld by the affiliated entities, which could have a material adverse effect on our business, results of operations and financial condition.\n\n \n\nFurthermore,\nwe are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we conduct\nsubstantially all of our operations through our WFOE, the VIE, and its subsidiaries in China. We control and receive the economic benefits\nof the VIE and its subsidiaries’ business operations through certain contractual arrangements. The ADSs listed on the OTC market\nrepresents shares of our offshore holding company instead of shares of the VIE or its subsidiaries in China. We may not be able to continue\nto satisfy the applicable requirements and rules with respect to such structure.\n\n \n\nIf\nthe VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial\ncosts and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including\nseeking specific performance or injunctive relief, and contractual remedies, which we cannot assure you will be sufficient or effective\nunder PRC law. Our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in\nChina. Accordingly, these agreements would be interpreted in accordance with PRC law and any disputes would be resolved in accordance\nwith relevant legal procedures, which could be time-consuming and costly and could operate to limit our abilities to enforce these contractual\narrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of\na consolidated variable interest entity should be interpreted or enforced under PRC law. There remain significant uncertainties regarding\nthe ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are\nfinal, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within\na prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition\nproceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements,\nor if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to\nexert effective control over the affiliated entities, and our ability to conduct our business may be negatively affected. See “—\nRisks Related to Doing Business in China—We are subject to extensive and evolving legal development, non-compliance with which,\nor changes in which, may materially and adversely affect our business and prospects, and may result in a material change in our operations.”\n\n \n\n**The\nshareholders of the VIE may have actual or potential conflicts of interest with us, which may materially and adversely affect our business,\nresults of operations and financial condition.**\n\n \n\nThe\nshareholders of the VIE may have actual or potential conflicts of interest with us. These shareholders may breach, or cause the VIE to\nbreach, or refuse to renew, the existing contractual arrangements we have with them and the VIE, which would have a material adverse\neffect on our ability to effectively control the affiliated entities and receive economic benefits from them. For example, the shareholders\nmay be able to cause our agreements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments\ndue under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all\nof these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do\nnot have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve\nany conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result\nin disruption of our business and subject us to substantial uncertainties as to the outcome of any such legal proceedings.\n\n \n\n47\n\n \n\n \n\n**Our\ncontractual arrangements may be subject to scrutiny by the PRC tax authorities and they may determine that we or the affiliated entities\nowe additional taxes, which could materially and adversely affect our business, results of operations and financial condition.**\n\n \n\nUnder\napplicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the\nPRC tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions\nthat are inconsistent with arm’s length principles. We could face material and adverse tax consequences if the PRC tax authorities\ndetermine that our contractual arrangements were not entered into on an arm’s length basis in such a way as to result in an impermissible\nreduction in taxes under applicable PRC laws, rules and regulations, and adjust income of the affiliated entities in the form of a transfer\npricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by\nthe affiliated entities for PRC tax purposes, which could in turn increase their tax liabilities without reducing our WFOE’s tax\nexpenses. In addition, if our WFOE requests the shareholders of the affiliated entities to transfer their equity interests at nominal\nor no value pursuant to the contractual arrangements, such transfer could be viewed as a gift and subject WFOE to PRC income tax. Furthermore,\nthe PRC tax authorities may impose late payment fees and other penalties on the affiliated entities for the adjusted but unpaid taxes\naccording to the applicable regulations. Our financial position could be materially and adversely affected if the affiliated entities’\ntax liabilities increase or if they are required to pay late payment fees and other penalties.\n\n \n\n**Uncertainties\nexist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law and how it may impact the viability\nof our current corporate structure, corporate governance, business, results of operations, financial condition and prospects.**\n\n \n\nOn\nMarch 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, which came into effect on January 1, 2020\nand replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise\nLaw, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation\nrules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment\nregulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements\nfor both foreign and domestic investments. The current Foreign Investment Law does not mention concepts such as “actual control”\nand “controlling PRC companies by contracts or trusts” that were included in the previous drafts, nor does it specify regulations\non controlling through contractual arrangements. As a result, this regulatory topic remains uncertain under the Foreign Investment Law.\nHowever, since the Foreign Investment Law is relatively new, uncertainties still exist in relation to its interpretation and implementation,\nand failure to take timely and appropriate measures to cope with the regulatory-compliance challenges could result in a material adverse\neffect on us. For instance, though the Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign\ninvestment, it contains a catch-all provision under the definition of “foreign investment,” which includes investments made\nby foreign investors in China through means stipulated in laws or administrative regulations or other methods prescribed by the State\nCouncil. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council\nto provide for contractual arrangements as a form of foreign investment, at which time it will be uncertain whether our contractual arrangements\nwill be deemed to be in violation of the market access requirements for foreign investment in the PRC and if yes, how our contractual\narrangements should be dealt with. In addition, if future laws, administrative regulations or provisions prescribed by the State Council\nmandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties\nas to whether we can complete such actions in a timely manner, or at all. In the worst-case scenario, we may be required to unwind our\nexisting contractual arrangements and/or dispose of the relevant business operations, which could have a material adverse effect on our\ncurrent corporate structure, corporate governance, business, results of operations, financial condition and prospects.\n\n \n\n48\n\n \n\n \n\n**We\nmay rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements. Any limitation on the ability of our PRC\nsubsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends\nto holders of our ordinary shares, including those represented by the ADSs.**\n\n \n\nWe\nare a holding company, and we may rely on dividends to be paid by our PRC subsidiaries for our cash and financing requirements, including\nthe funds necessary to pay dividends and other cash distributions to holders of our ordinary shares, including those represented by the\nADSs, and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing\nthe debt may restrict its ability to pay dividends or make other distributions to us.\n\n \n\nUnder\nPRC laws and regulations, wholly foreign-owned enterprises in the PRC, such as WFOE, may pay dividends only out of their accumulated\nprofits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is\nrequired to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any,\nto fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. These reserve\nfunds are not distributable as cash dividends. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions\nto us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business,\npay dividends, or otherwise fund and conduct our business.\n\n \n\n**Risks\nRelated to Corporate Governance**\n\n \n\n**We\nare a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions\napplicable to U.S. domestic public companies.**\n\n \n\nBecause\nwe are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations\nin the United States that are applicable to U.S. domestic issuers, including:\n\n \n\n●the\nrules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current\nreports on Form 8-K with the SEC;\n\n   \n\n●the\nsections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations\nin respect of a security registered under the Exchange Act;\n\n   \n\n●the\nsections of the Exchange Act requiring insiders to file public reports of their stock ownership\nand trading activities and liability for insiders who profit from trades made in a short\nperiod of time; and\n\n   \n\n●the\nselective disclosure rules by issuers of material nonpublic information under Regulation\nFD.\n\n \n\nWe\nare required to file an annual report on Form 20-F within four months of the end of each fiscal year. Press releases relating to financial\nresults and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish\nto the SEC will be less extensive and less timely than that required to be filed with the SEC by U.S. domestic issuers. As a result,\nyou may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic\nissuer.\n\n \n\n**We\nare an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.**\n\n \n\nWe\nare an “emerging growth company” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements\napplicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply\nwith the auditor attestation requirements of Section 404 for so long as we remain an emerging growth company. As a result, if we elect\nnot to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.\nThe JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards\nuntil such date that a private company is otherwise required to comply with such new or revised accounting standards. Further, as an\nemerging growth company, we have elected to use the extended transition period for complying with new or revised financial accounting\nstandards. As such, our financial statements may not be comparable to companies that comply with public company effective dates because\nof the potential differences in accounting standard used. We cannot predict if investors will find the ADSs less attractive because we\nmay rely on these provisions. If some investors find the ADSs less attractive as a result, there may be a less active trading market\nfor the ADSs and the trading price of the ADSs may be more volatile.\n\n \n\n49\n\n \n\n** **\n\n**We\nincur significant costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”**\n\n \n\nWe\nincur significant legal, accounting and other expenses as a result of being a public company. The Sarbanes-Oxley Act of 2002, as well\nas rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies.\nWe expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more\ntime-consuming and costly. As a company with less than US$ 1.235 billion in revenues for our last fiscal year, we qualify as an “emerging\ngrowth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other\nrequirements that are otherwise applicable generally to public companies. After we are no longer an emerging growth company, we expect\nto incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404\nand the other rules and regulations of the SEC.\n\n \n\nAs\na result of becoming a public company, we have increased the number of independent directors and adopted policies regarding internal\ncontrols and disclosure controls and procedures. Operating as a public company has also made it more difficult and more expensive for\nus to obtain and maintain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage\nor incur substantially higher costs to obtain the same or similar coverage. In addition, we incur additional costs associated with our\npublic company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors\nor as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we\ncannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.\n\n \n\nIn\nthe past, shareholders of a public company often brought securities class action lawsuits against the company following periods of instability\nin the market price of that company’s securities. If we were involved in a class action lawsuit, it could divert a significant\namount of our management’s attention and other resources from our business and operations, which could harm our results of operations\nand require us to incur significant expenses to defend the lawsuit. Any such class action lawsuit, whether or not successful, could harm\nour reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may\nbe required to pay significant damages, which could have a material adverse effect on our results of operations and financial condition.\n\n \n\n**Our\ndual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change\nof control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.**\n\n \n\nOur\nauthorized and issued ordinary shares have been divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A\nordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to ten votes per share.\nEach Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary\nshares are not convertible into Class B ordinary shares under any circumstances. As of the date of this annual report, Mr. Changxun Sun\nbeneficially owns 2,000,000 Class A ordinary shares and all of our 25,649,839 Class B ordinary shares, representing approximately 8.08%\nof our then total issued and outstanding share capital and 45.11% of our then aggregate voting power.\n\n \n\nAs\na result of the dual-class voting structure and the concentration of ownership, Mr. Changxun Sun has considerable influence over matters\nsuch as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and\nother significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our company,\nwhich could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a\nsale of our company and may reduce the price of the ADSs. This concentrated control will limit your ability to influence corporate matters\nand could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class\nA ordinary shares and ADSs may view as beneficial.\n\n \n\n50\n\n \n\n \n\n**The\ndual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.**\n\n \n\nCertain\nshareholder advisory firms have announced changes to their eligibility criteria for inclusion of shares of public companies on certain\nindices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold\nno more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced\ntheir opposition to the use of multiple class structures. As a result, the dual-class structure of our ordinary shares may prevent the\ninclusion of the ADSs representing Class A ordinary shares in such indices and may cause shareholder advisory firms to publish negative\ncommentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion\nfrom indices could result in a less active trading market for the ADSs. Any actions or publications by shareholder advisory firms critical\nof our corporate governance practices or capital structure could also adversely affect the value of the ADSs.\n\n \n\n**Our\nmemorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders\nof our ordinary shares and the ADSs.**\n\n \n\nOur\nmemorandum and articles of association contain provisions which could limit the ability of others to acquire control of our company or\ncause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity\nto sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company\nin a tender offer or similar transaction. Our board of directors has the authority, without further action by our shareholders, to issue\npreferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional\nor special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms\nof redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, represented\nby the ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our\ncompany or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of the ADSs\nmay fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.\n\n \n\n**Risks\nRelated to the ADSs**\n\n \n\n**The\ndelisting of the ADSs from the New York Stock Exchange may continue to have a material adverse effect on the trading and price of the\nADSs.**\n\n \n\nOn\nOctober 25, 2023, we were delisted from the New York Stock Exchange, or the NYSE, when the NYSE staff filed a Form 25 Notification of\nDelisting. The delisting of the\n\n \n\nADSs\nfrom the NYSE has had and may continue to have a material adverse effect on us by, among other things, causing investors to dispose of\nthe ADSs and limiting:\n\n \n\n●the\nliquidity of the ADSs;\n\n   \n\n●the\nmarket price of the ADSs;\n\n   \n\n●the\nnumber of institutional and other investors that will consider investing in the ADSs;\n\n   \n\n●the\navailability of information concerning the trading prices and volume of the ADSs;\n\n   \n\n●the\nnumber of broker-dealers willing to execute trades in the ADSs; and\n\n   \n\n●our\nability to obtain equity or debt financing for the continuation of our operations.\n\n \n\nThe\nlack of an active trading market may limit the liquidity of an investment in the ADSs, meaning you may not be able to sell the ADSs you\nown at times, or at prices, attractive to you. Any of these factors may materially and adversely affect the price of the ADSs.\n\n \n\n51\n\n \n\n \n\n**We\nhave received a preliminary non-binding going private proposal, and the evaluation of this proposal and any potential transaction may\ncause disruption to our business, distract our management, and result in volatility in the price of the ADSs.**\n\n \n\nOn\nDecember 22, 2025, our board of directors received a preliminary non-binding proposal letter from a buyer group, including our founder\nand chief executive officer, Mr. Changxun Sun, to acquire all of our outstanding ordinary shares (including shares represented by ADSs)\nnot already beneficially owned by the buyer group in a going private transaction. Our board of directors has formed a special committee\nconsisting of independent directors to evaluate the proposal.\n\n \n\nThe\nevaluation of the proposal, and the negotiation and potential consummation of any resulting transaction, could cause significant disruptions\nto our business operations. This process may divert the attention of our management and board of directors from our day-to-day operations\nand the execution of our business strategy. Furthermore, the pendency of the proposal could create uncertainty among our employees, clients,\nand business partners, which could harm our business relationships and ability to retain key personnel. The market price of the ADSs\nmay experience increased volatility as a result of the proposal or any market rumors regarding the potential transaction.\n\n \n\nThere\ncan be no assurance that a definitive offer will be made, that any agreement will be executed, or that the proposed transaction or any\nother transaction will be approved or consummated. If the proposed transaction is not completed, we will be subject to a number of risks,\nincluding a potential decline in the price of the ADSs to the extent that the current market price reflects an assumption that the transaction\nwill be completed, and the fact that we will have incurred significant costs, including legal and financial advisory fees, without realizing\nthe anticipated benefits of the transaction.\n\n** **\n\n**The\ntrading price of the ADSs has been and is likely to continue to be volatile, which could result in substantial losses to investors.**\n\n \n\nThe\nADSs had been listed for trading on the NYSE under the symbol “RAAS” since February 8, 2021. On May 17, 2023, the NYSE suspended\nthe trading in the ADSs and commenced delisting proceedings. Following the trading suspension, the ADSs have been quoted on the OTC market\nin the United States under the symbol “RAASY.” On October 25, 2023, we were delisted from NYSE when the NYSE staff filed\na Form 25 Notification of Delisting. The OTC market is a significantly more limited market than the NYSE. The quotation of the ADSs on\nthe OTC market may result in a less liquid market available for existing and potential stockholders to trade the ADSs, could depress\nthe trading price of the ADSs and could have a long-term adverse impact on our ability to raise capital in the future.\n\n \n\nThe\ntrading price of the ADSs has been and is likely to continue to be volatile and could fluctuate widely due to factors beyond our control.\nThis may happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies\nwith business operations located mainly in China that have listed their securities in the United States. A number of Chinese companies\nhave listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced\nsignificant volatility, including price declines in connection with their initial public offerings. The trading performances of these\nChinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the\nUnited States in general and consequently may impact the trading performance of the ADSs, regardless of our actual operating performance.\nIn addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure\nor matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including\nus, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience\nsignificant price and volume fluctuations that are not related to our operating performance, which may have a material and adverse effect\non the trading price of the ADSs.\n\n \n\nIn\naddition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our\nown operations, including the following:\n\n \n\n●variations\nin our revenues, earnings and cash flow;\n\n   \n\n●announcements\nof new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;\n\n   \n\n●announcements\nof new solutions and expansions by us or our competitors;\n\n   \n\n●announcements\nof applicable new policies, rules or regulations relating to the communications industry;\n\n   \n\n●changes\nin financial estimates by securities analysts;\n\n   \n\n●detrimental\nadverse publicity about us, our solutions, our competitors or our industry;\n\n   \n\n●additions\nor departures of key personnel;\n\n   \n\n●fluctuations\nof exchange rates between the Renminbi and the U.S. dollar;\n\n   \n\n●release\nof lock-up or other transfer restrictions on our outstanding equity securities or sales of\nadditional equity securities; and\n\n   \n\n●potential\nlitigation or regulatory investigations.\n\n \n\nAny\nof these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.\n\n \n\nMoreover,\nthere have been recent instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with\na number of recent initial public offerings, particularly among companies with relatively smaller public floats. As we currently have\na relatively small public float, we may experience greater stock price volatility, including aggressive price run-ups and declines, lower\ntrading volume and less liquidity, compared with companies with larger public floats. In particular, the ADSs may be subject to rapid\nand substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock\nrun-up, may be unrelated to our actual or expected operating performance, financial condition or prospects, and industry, market or economic\nfactors, which makes it difficult for prospective investors to assess such rapidly changing value of the ADSs. In addition, if the trading\nvolumes of the ADSs are low, persons buying or selling in relatively small quantities may easily influence prices of the ADSs. This low\nvolume of trades could also cause the price of the ADSs to fluctuate significantly, with large percentage changes in price occurring\nin any trading day session. Holders of the ADSs may also not be able to readily liquidate their investment or may be forced to sell at\ndepressed prices due to such low-volume trading. As a result of such volatility, investors may experience losses on their investment\nin the ADSs. Such volatility also could adversely affect our ability to issue additional ADSs or other securities and our ability to\nobtain additional financing in the future, as well as our ability to retain key employees, many of whom have been granted equity incentives.\nFurthermore, the potential extreme volatility may confuse the public investors of the value of the ADSs, distort the market perception\nof the price of the ADSs, and our financial performance and public image, and negatively affect the long-term liquidity of the ADSs,\nregardless of our actual or expected operating performance.\n\n \n\n52\n\n \n\n \n\nIn\nthe past, shareholders of public companies have often brought securities class action lawsuits against those companies following periods\nof instability in the market price of their securities. If we were involved in a class action lawsuit, it could divert a significant\namount of our management’s attention and other resources from our business and operations and require us to incur significant expenses\nto defend the lawsuit, which could harm our results of operations. Any such class action lawsuit, whether or not successful, could harm\nour reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may\nbe required to pay significant damages, which could have a material adverse effect on our results of operations and financial condition.\n\n \n\n**The\nsale or availability for sale of substantial amounts of the ADSs could adversely affect their market price.**\n\n \n\nSales\nof substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market\nprice of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs are freely\ntradable without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act, and shares\nheld by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule\n701 under the Securities Act and the applicable lock-up agreements. There are 22,729,312 ADSs, equivalent to 136,375,872 Class A\nordinary shares, outstanding as of the date of this annual report. The lock-up agreements that our directors, executive officers and\nthen-existing shareholders signed with the underwriters of our initial public offering have expired, and these shareholders, and the\nremaining Class A ordinary shares are available for sale subject to volume and other restrictions under Rule 144 and Rule 701 under the\nSecurities Act. To date, the trading volume of the ADSs has been relatively low and, therefore, sales of even relatively small amounts\nof the ADSs in the public market could adversely affect the market price of the ADSs. We cannot predict what effect, if any, market sales\nof securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will\nhave on the market price of the ADSs.\n\n \n\n**Techniques\nemployed by short sellers may drive down the market price of the ADSs.**\n\n \n\nShort\nselling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention\nof buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value\nof the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects\nto pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security\nto decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business\nprospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short\nattacks have, in the past, led to selling of shares in the market.\n\n \n\nPublic\ncompanies listed in the United States that have a substantial majority of their operations in China have been the subject of short selling.\nMuch of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting\nresulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto\nand, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations\ninto the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.\n\n \n\nWe\nmay be the subject of unfavorable allegations made by short sellers in the future. Any such allegations may be followed by periods of\ninstability in the market price of our ordinary shares and ADSs and negative publicity. If and when we become the subject of any unfavorable\nallegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate\nsuch allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained\nin the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable federal or state\nlaw or issues of commercial confidentiality. Such a situation could be costly and time-consuming and could distract our management from\ngrowing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our\nbusiness operations and shareholders’ equity, and the value of any investment in the ADSs could be greatly reduced or rendered\nworthless.\n\n \n\n53\n\n \n\n \n\n**If\nsecurities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations\nregarding the ADSs, the market price for the ADSs and trading volume could decline.**\n\n \n\nThe\ntrading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business.\nIf one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely decline. If one or more of these\nanalysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn\ncould cause the market price or trading volume for the ADSs to decline.\n\n \n\n**Because\nwe do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of the ADSs for return on your investment.**\n\n \n\nWe\ncurrently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our\nbusiness. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment\nin the ADSs as a source for any future dividend income.\n\n \n\nOur\nboard of directors has complete discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands\nlaw, namely that our company may only pay dividends out of profits or share premium account, and provided always that in no circumstances\nmay a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.\nIn addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our\nboard of directors. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends,\nif any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions,\nif any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by\nour board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation\nof the ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs.\nYou may not realize a return on your investment in the ADSs or even lose your entire investment in the ADSs.\n\n \n\n**You\nmay face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because\nwe are incorporated under Cayman Islands law and conduct our operations primarily in emerging markets.**\n\n \n\nWe\nare an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed\nby our memorandum and articles of association, as amended from time to time, the Companies Act (As Revised) of the Cayman Islands, and\nthe common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders\nand the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of\nthe Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman\nIslands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on\na court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands\nlaw are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States.\nIn particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware,\nhave more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies\nmay not have standing to initiate a shareholder derivative action in a federal court of the United States.\n\n \n\n54\n\n \n\n \n\nShareholders\nof Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect or obtain register of members\nor corporate records (other than the memorandum and articles of associations, our register of mortgages and charges, and special resolutions\npassed by our shareholders). Under Cayman Islands law, the names of current directors can be obtained from a search conducted at the\nRegistrar of Companies in the Cayman Islands. Our directors have discretion under our articles of association to determine whether or\nnot, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available\nto our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a\nshareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.\n\n \n\nCertain\ncorporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies\nincorporated in other jurisdictions such as the United States. If we choose to follow home country practice, our shareholders may be\nafforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.\n\n \n\nIn\naddition, we conduct substantially all of our business operations in emerging markets, including China, and substantially all of our\ndirectors and senior management are based in China. The SEC, U.S. Department of Justice, or the DOJ, and other authorities often have\nsubstantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company directors\nand officers, in certain emerging markets. Although shareholder claims that are common in the United States, including class action based\non securities law and fraud claims, it may be difficult for cross-border and direct claims or regulatory investigation to be conducted\nwithin China for lack of international cooperation mechanisms. Even if competent authorities in China may establish a regulatory cooperation\nmechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration,\nthe regulatory cooperation with the securities regulatory authorities in the United States may not achieve desirable result in the absence\nof a mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020,\nno foreign securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of\nthe PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual\nmay provide the documents and materials relating to securities business activities to foreign securities regulators.\n\n \n\nAs\na result of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by\nmanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated\nin the United States.\n\n \n\n**Certain\njudgments obtained against us by our shareholders may not be enforceable.**\n\n \n\nWe\nare a Cayman Islands exempted company and all of our assets are located outside of the United States. Substantially all of our current\noperations are conducted in China. In addition, most of our current directors and officers are nationals and residents of countries other\nthan the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result,\nit may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event\nthat you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful\nin bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against us,\nour assets, our directors and officers or their assets.\n\n \n\n**The\nvoting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to\nvote your Class A ordinary shares.**\n\n \n\nAs\na holder of the ADSs, you will only be able to exercise the voting rights with respect to the Class A ordinary shares represented by\nyour ADSs in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions\nto the depositary. If we request the depositary to ask for your instructions, then upon receipt of your voting instructions, the depositary\nwill try, as far as is practicable, to vote the underlying Class A ordinary shares which are represented by your ADSs in accordance with\nyour instructions. If we do not request the depositary to ask for your instructions, the depositary may still vote in accordance with\ninstructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to\nthe Class A ordinary shares represented by your ADSs unless you withdraw such shares and became the registered holder of such shares\nprior to the record date for the general meeting. Under our memorandum and articles of association, the minimum notice period required\nfor convening a general meeting is ten calendar days. When a general meeting is convened, you may not receive sufficient advance notice\nto withdraw the Class A ordinary shares represented by your ADSs and become the registered holder of such shares to allow you to vote\nwith respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange\nto deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can\ninstruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out\nvoting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your\nright to vote and you may have no legal remedy if the Class A ordinary shares represented by your ADSs are not voted as you requested.\n\n \n\n55\n\n \n\n \n\n**The\ndepositary may give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs if you do not give voting instructions,\nwhich could adversely affect your interests and the ability of our shareholders as a group to influence the management of our company.**\n\n \n\nUnder\nthe deposit agreement for the ADSs, if you do not give voting instructions to the depositary to direct how the Class A ordinary shares\nunderlying your ADSs are voted, upon our request, the depositary will give us (or our nominee) a discretionary proxy to vote the Class\nA ordinary shares underlying your ADSs at shareholders’ meetings if:\n\n \n\n●we\ntimely provided the depositary with notice of meeting and related voting materials and requested\nit to solicit your instructions;\n\n   \n\n●we\nrequest the depositary to give a proxy;\n\n   \n\n●we\nhave informed the depositary that there is no substantial opposition as to a matter to be\nvoted on at the meeting; and\n\n   \n\n●the\nmatter subject to voting would not have a material adverse impact on shareholders.\n\n \n\nThe\neffect of this discretionary proxy is that if you do not give voting instructions to the depositary to direct how the Class A ordinary\nshares underlying your ADSs are voted, you cannot prevent the Class A ordinary shares underlying your ADSs from being voted, under the\ncircumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of\nour ordinary shares are not subject to this discretionary proxy.\n\n \n\n**You\nmay not receive cash dividends if the depositary decides it is impractical to make them available to you.**\n\n \n\nThe\ndepositary of the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our Class A\nordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions\nin proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that\nit is inequitable or impractical to make a distribution available to any holders of the ADSs. For example, the depositary may determine\nthat it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than\nthe cost of mailing them. In these cases, the depositary may decide not to distribute such property to you.\n\n \n\n**We\nand the depository are entitled to amend the deposit agreement and to change the rights of ADSs holders under the terms of such agreement,\nand we may terminate the deposit agreement, without the prior consent of the ADSs holders.**\n\n \n\nWe\nand the depository are entitled to amend the deposit agreement and to change the rights of the ADSs holders under the terms of such agreement,\nwithout the prior consent of the ADSs holders. We and the depositary may agree to amend the deposit agreement in any way we decide is\nnecessary or advantageous to us. Amendments may reflect, among other things, operational changes in the ADS program, legal developments\naffecting ADSs or changes in the terms of our business relationship with the depositary. In the event that the terms of an amendment\nare disadvantageous to ADSs holders, ADSs holders will only receive 30 days’ advance notice of the amendment, and no prior consent\nof the ADSs holders is required under the deposit agreement. Furthermore, we may decide to terminate the ADS facility at any time for\nany reason. For example, terminations may occur when we decide to list our shares on a non-U.S. securities exchange and determine not\nto continue to sponsor an ADS facility or when we become the subject of a takeover or a going-private transaction. If the ADS facility\nwill terminate, ADSs holders will receive at least 90 days’ prior notice, but no prior consent is required from them. Under the\ncircumstances that we decide to make an amendment to the deposit agreement that is disadvantageous to ADSs holders or terminate the deposit\nagreement, the ADSs holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying Class A\nordinary shares, but will have no right to any compensation whatsoever.\n\n \n\n56\n\n \n\n \n\n****\n\n**You\nmay experience dilution of your holdings due to inability to participate in rights offerings.**\n\n \n\nWe\nmay, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the\ndepositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these\nrights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered under\nthe provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third\nparties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and\nwe are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have\na registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may\nexperience dilution of their holdings as a result.\n\n \n\n**You\nmay be subject to limitations on transfer of your ADSs.**\n\n \n\nYour\nADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when\nit deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number\nof reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain\nan exact number of ADSs holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends\nand public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register\nor the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement\nof law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.\n\n \n\n**ADSs\nholders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable\noutcomes to the plaintiff(s) in any such action.**\n\n \n\nThe\ndeposit agreement governing the ADSs representing our Class A ordinary shares provides that, to the fullest extent permitted by law,\nADSs holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our\nshares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.\n\n \n\nIf\nwe or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based\non the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability\nof a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally\nadjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally\nenforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the\nCity of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce\na contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily\nwaived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable\nthat you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.\n\n \n\nIf\nyou or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under\nthe deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not\nbe entitled to a jury trial with respect to such claims, which may, among other things, limit and discourage lawsuits against us and/or\nthe depositary and lead to limited access to information and other imbalances of resources between you as ADS holders and us. If a lawsuit\nis brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable\ntrial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury\nwould have had, including results that could be less favorable to the plaintiff(s) in any such action.\n\n \n\n57\n\n \n\n \n\nNevertheless,\nif this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement\nwith a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial\nowner of ADSs or by us or the depositary of compliance with any provision of the U.S. federal securities laws and the rules and regulations\npromulgated thereunder.\n\n \n\n**We\nbelieve we were a passive foreign investment company, or PFIC, for our taxable year ended December 31, 2025, and may be a PFIC for years\nafter our taxable year ended December 31, 2025. As such, certain adverse U.S. federal income tax consequences may apply to U.S. investors\nowning the ADSs or our ordinary shares.**\n\n \n\nA\nnon-U.S. corporation, such as our company, will be considered a PFIC for any taxable year if either (1) 75% or more of its gross income\nfor such taxable year consists of certain types of “passive” income or (2) 50% or more of the value of its assets (generally\nbased on an average of the quarterly values of the assets) during a taxable year is attributable to assets that produce or are held for\nthe production of passive income. Although the law in this regard is not entirely clear, we treat the VIE (and its subsidiaries) as being\nowned by us for U.S. federal income tax purposes because we control its management decisions and are entitled to substantially all of\nthe economic benefits associated with it. As a result, we consolidate its results of operations in our consolidated U.S. GAAP financial\nstatements.\n\n \n\nBased\non the market price of the ADSs and the value and composition of our assets, we believe we were a PFIC for U.S. federal income tax\npurposes for our taxable year ended December 31, 2025, and based on the current and anticipated composition of our income, assets\nand operations, there is a risk that we will continue to be treated as a PFIC for future taxable years. However, there can\nbe no assurances in this regard or any assurances with respect to our status as a PFIC in any future taxable year, as our status as\na PFIC is a fact-intensive determination made on an annual basis.\n\n \n\nBecause\nwe believe we were a PFIC for the taxable year ended December 31, 2025, certain adverse U.S. federal income tax consequences could apply\nto U.S. investors with respect to any “excess distribution” received from us and any gain from a sale or other disposition\nof the ADSs or ordinary shares. If we are so classified during a U.S. investor’s holding period, the ADSs or ordinary shares will\ngenerally continue to be treated as shares in a PFIC for all succeeding years during which such U.S. investor holds the ADSs or ordinary\nshares, even if we cease to be a PFIC, unless certain elections are made. *See* “Item 10. Additional Information—E.\nTaxation—U.S. Federal Income Taxation—Passive foreign investment company rules.” U.S. investors should consult their\nown tax advisors concerning the U.S. federal income tax consequences if we are classified as PFIC for any taxable year."}