RISK FACTORS

RISKS RELATED TO OUR BUSINESS

We are an emerging growth company with a limited operating history and limited sales to date.

We are subject to all of the risks inherent in the establishment of an emerging growth company, including the absence of an operating history, and the risk that we may be unable to successfully operate our business. There can be no assurance that we will be able to successfully operate our business.

Oriental Rise was incorporated in 2019 and accordingly, has limited operating history upon which to base an evaluation of our business and prospects. You must consider the risks and difficulties we face as a small operating company with limited operating history. We generated approximately $22.4 million (RMB 144.3 million), $24.3 million (RMB 163.2 million) and $15.1 million (RMB 104.3 million) in revenue for the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, respectively.

Operating results for future periods are subject to numerous uncertainties and we cannot assure you that we will achieve or sustain profitability. Our prospects must be considered in light of the risks encountered by small operating companies with limited operating history, particularly companies in new and rapidly evolving markets. Operating results will depend upon many factors, including our success in attracting and retaining motivated and qualified personnel, our ability to establish short term credit lines or obtain financing from other sources, our ability to develop and market new products, control costs, and general economic conditions.

Our results of operations are substantially affected by the selling prices of our tea products, which affect our revenue.

Our results of operations are significantly affected by the selling prices of our tea products, which affect our revenue, and by the fees paid to our tea garden managers who are our major suppliers and affect our costs. All of these prices are determined by constantly changing and volatile market forces of supply and demand as well as other factors, over which we have little or no control. These factors include:

•        general economic conditions in China;

•        government regulations and actions, in particular with regards to applicable laws and regulations concerning tea leaves price and environmental protection;

•        competition in the tea production and processing industry;

•        diseases or pests (such as moths, worms, caterpillars, beetles and mites);

•        a general decrease in consumer preferences for tea products as compared to other types of products that may be viewed by consumers as substitutes for, or alternatives to such products, including coffee and other beverages;

•        the cost or ability to recruit or retain a sufficient number of qualified employees;

•        weather conditions, including the impact of weather on water supply; and

•        transportation and storage costs.

Tea product prices typically move cyclically over time, reflecting changes in market demand and supply. According to the CIC Report, the average wholesale price of primarily-processed white tea increased at an average year-on-year growth rate of 3% to 30% from 2019 to 2021 while the average wholesale price of primarily-processed black tea increased at compound annual growth rate of 1% to 5% over the same period. As our average selling prices are determined by using a market-oriented approach, the average selling prices of our tea products also increased during the preceding two years. Our average selling prices were US$42.0 (RMB271.2) per kg, US$42.6 (RMB286.3) per kg and US$60.4 (RMB418.1) per kg, respectively for the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023. If the prices of our tea products decrease, our revenue, profit and results of operations may be adversely affected.

Unfavorable fluctuations in the fees paid to our tea garden managers or interruption in service provided by our tea garden managers could materially increase our costs of sales.

One of the major operating costs for our business is the plantation costs for our tea leaves. Our plantation costs primarily include: (i) picking fees which represent the fees paid to the tea garden managers for arranging the local workers to pick our tea leaves in the tea gardens we operate; (ii) cultivation costs which represent the fees paid to the tea garden managers for arranging the local workers to cultivate our tea trees; and (iii) fertilizer costs which represent the purchase price paid to our suppliers for acquiring fertilizers and other materials to supply plant nutrients to the soil for the growth of our tea trees.

For the fiscal years ended December 31, 2021, and 2022 and six-month period ended June 30, 2023, our plantation costs accounted for approximately 98.6%, 97.6% and 97.2% of our total cost of sales, respectively. There is no assurance that our suppliers will not significantly adjust their fees including the fees incurred for arranging local workers to maintain tea gardens when the market prices of or the market demand for such local workers increase. We will continue to be exposed to price volatility of engaging the tea garden managers in the future, and any significant increase in such fees will increase the operation costs and have an adverse impact on the profitability of our business. There is no assurance that we will be able to anticipate and react to such price fluctuations by adjusting the selling prices of our tea products on a timely basis or to pass on any increase in our plantation costs to our customers accordingly. In the event that we are unable to anticipate and react to such price fluctuations, our profitability may be adversely affected.

A large portion of our revenue was generated from our top five customers, and we do not have long-term contracts with our top five customers and changes in our relationships with our top five customers, or in the trade terms with these customers, may reduce our sales and profits.

Our sales to top five customers accounted for approximately 57.1%, 40.5% and 41.8%, of our total revenue for the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, respectively. There is no assurance that we would be able to increase the number of customers to reduce our reliance on our top five customers. We do not have long-term sales agreements or other contractual assurances as to future sales to these major customers.

We have entered into framework sales agreements for one year with our top five customers. However, the sales are generally concluded on an order- by-order basis under individual purchase order. There is no assurance that our customers will continue to place orders to us; or their future orders will be at a comparative level or on similar terms as in prior years. It is uncertain that we would be able to retain our major customers or solicit new customers to offset the impact from any loss of such customers. Any reduction in revenue from our existing customers and/or any loss of our major customers could have a material adverse effect on our profitability and financial performance.

Furthermore, there is no assurance that we would be able to reduce our customer concentration by expanding our customer base or promoting sales to other existing customers. We may not be able to locate alternative customers to replace loss of customers, purchase orders or sales. As a result, our business, financial condition and results of operations may vary from period to period and may fluctuate significantly in the future.

We sell our products to independent tea business operators, and we have limited control over them.

We sell our products to independent tea business operator customers, and we have limited control over them. As of June 30, 2023, we had 18 tea business operators. For the six-month period ended June 30, 2023 and the years ended December 31, 2022, and December 31, 2021, our revenue from sales of tea products to tea business operators accounted for approximately 99.1%, 99.8% and 100.0% of our total revenue, respectively.

Any one of the following events could cause fluctuations or declines in our revenue and could have an adverse effect on our financial condition and results of operations:

•        reduction, delay or cancellation of orders from one or more of the large tea business operators;

•        failure to renew framework agreements and maintain relationships with the existing tea business operators;

•        failure to establish relationships with new tea business operators on favorable terms;

•        inability to timely identify and make sales to additional or replacement tea business operators upon the loss of one or more of the tea business operators; and

•        breach of framework agreements by the tea business operators.

We may not be able to compete successfully against larger and better-funded sales and marketing campaigns of our competitors, especially if these competitors provide their tea business operators with more favorable arrangements. We cannot assure you that we will not lose any of the tea business operators to our competitors, which could cause us to lose some or all of our favorable arrangements with such tea business operators and may result in decreases in our sales volume. In addition, we may not be able to successfully manage the tea business operators and the cost of any increase in the number of the tea business operators may exceed the revenue generated from these efforts. Such costs may include (i) the Company spending the time and efforts on negotiating the terms of the framework agreements with the additional tea business operators but they do not make any purchase with the Company during the year and (ii) the dissatisfaction from our existing tea business operators as we are unable to fully satisfy their purchase orders due to our limited production volume which may result in such tea business operators electing not to make purchase from us in the financial year concerned and in the long run. Our revenue generated from such additional tea business operators may not be able to exceed such costs of increase in the number of tea business operators. There can be no assurance that we will be successful in detecting any non-compliance by the tea business operators with the provisions of their framework agreements. Non-compliance by our tea business operators could, among other things, negatively affect our brand, demand for our products and our relationships with other tea business operators. Furthermore, we have limited control over the tea business operators and may not be able to monitor the tea business operators’ inventory level if the tea business operators decide to accumulate the tea products as inventory. We cannot assure you that all our tea products sold to Tea Business Operators are subsequently sold to consumers and the sales of our tea products truly reflect the market demands. In addition, if there is a decline in demand from end consumers or downstream Tea Business Operators, the Tea Business Operators may not place orders for new products from us or may reduce the quantity of their usual orders. The occurrence of any of these factors could result in a significant decrease in the sales volume of our products and therefore adversely affect our financial condition and results of operations.

We experience seasonal fluctuations in our revenue and profitability.

Our sales are subject to seasonality. Based on our sales trends in 2022 and 2021, we generally experience the highest sales of our products after the commencement of tea harvest seasons, namely for the period from March to October. Factors that could cause our results of operations to fluctuate include, among others, the level, cost and timing of our major promotional campaigns, regulatory events, new products introduced by us or our competitors and the general economic environment. As such, any comparison of our operating results between different periods within a financial year, or between different periods in different financial years may not be meaningful.

Our business, reputation and brands’ image may be adversely affected by product liability claims, consumer complaints or adverse publicity in relation to our products.

We may be subject to product liability claims if our products are found to be unfit for consumption. Products may be rendered unfit for consumption due to contamination of raw materials, whether intentional or not, delay in delivery, poor handling, packaging rupture, poor condition of storage facilities, unauthorized tampering by our workers during the transit of products. The occurrence of such problems may result in recalls of our products and significant damage to our brand reputation. In previous years, we have not recorded material product recalls and had not received any material complaints or product liability claims from our customers due to quality defects. However, we cannot assure you that such incidents will not occur in the future. We may incur legal liabilities and have to compensate consumers for any loss or damage they suffer in respect of valid product liability claims, and, in addition, we may also be subject to administrative or other government sanctions or penalties. In addition, adverse publicity from these types of concerns, whether valid or not, may discourage customers from purchasing our products. If customers lose confidence in our brand, we may experience long-term declines in our sales, which may have an adverse effect on our business, results of operation and financial condition.

We could be adversely affected by a change in consumers’ preferences, perception and demand for our tea products and failure to enrich our product offering or gain market acceptance of our new products could have a negative effect on our business, financial condition, and results of operations.

Our continued success depends, in large part, upon the popularity of and demand for our tea products. However, consumer preferences, perception and demand in China may shift away from such products for various reasons, including but not limited to:

•        a general decrease in consumer preferences for tea products as compared to other types of products that may be viewed by consumers as substitutes for, or alternatives to such products, including coffee and other beverages;

•        a change in consumer preferences for tea products sold in the form of tea bags to other forms, such as ready-to-drink bottled tea;

•        a change in consumers’ confidence and perception that traditional Chinese tea may be effective in achieving certain anticipated health benefits; and

•        negative publicity regarding tea leaves or other tea products supplied by other producers or in general.

Shifts in consumer preferences, perception, and demand away from Chinese tea leaves could materially and adversely affect our business prospects, financial condition and results of operations. In addition, we may from time to time fail to develop products and/or expand our product portfolio and marketing and pricing strategies that meet the trends or shifts in consumer preferences and tastes. Furthermore, we cannot assure you that we will be able to introduce new products that are in faster-growing and more profitable, or timely adjust our production of products in categories experiencing consumption declines, which in turn could materially and adversely affect our business, financial condition, and result of operations.

The preferential tax treatment, valued-added tax treatment and government grants that we currently enjoy may be altered or terminated, which could have a material adverse effect on our business, financial position, results of operations and prospects.

We enjoy certain preferential tax treatment in relation to our income derived from our business of engaging in primary processing of agricultural products and carrying out cultivation of tea. Our income derived from the business of engaging in primary processing of agricultural products is exempt from earned income tax, or EIT, and our income derived from the business of carrying out cultivation of tea is exempt from 50% of EIT. The effect of tax exemptions granted to us were approximately US$11.2 million (RMB 72.0 million), US$13.07 million (RMB 87.78 million), and US$8.78 million (RMB60.8 million) for the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, respectively.

Furthermore, the Taxpayer’s Tax Reduction and Exemption Filing Registration Form issued by the State Taxation Bureau of Zherong County on December 4, 2017, accepted the filing of the value-added tax, or VAT, exemption for self-produced agricultural product produced by agricultural producer that our PRC operating subsidiary Fujian QJ applied for on the same day. Fujian QJ enjoyed the preferential treatment of VAT exemption from January 1, 2018, through the present. There can be no assurance we will enjoy comparable exemptions from VAT in the future. In addition, pursuant to the Interim Regulations on Value-Added Tax of the PRC and its implementing rules, there is no VAT on agricultural producers who sell self-produced agricultural products.

Additionally, we enjoy a number of government grants in mainland China, including government grants we have received from the local government authorities to support a subsidiary’s project of tea plantation and as a foreign investment entity. For the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, we recognized total government grants of approximately US$41,000 (RMB 262,000), US$31,000 (RMB 208,000), and US$10,000 (RMB 71,000), respectively. There can be no assurance that the preferential tax treatment, value-added tax treatment and government grants that we enjoy will not be altered or terminated. Any alteration or termination of our current preferential tax treatments or value-added tax treatment or government grants could have an adverse effect on our business, financial condition, results of operations and prospects.

We may not be able to hire or retain additional management and other personnel and our recruiting and training costs may increase as a result of turnover, both of which may increase our costs and reduce our profits and may adversely impact our ability to implement our business strategy.

The success of our business depends upon our ability to attract and retain highly motivated, well-qualified management and other personnel. Our ability to execute our business strategy may suffer if:

•        we are unable to recruit or retain a sufficient number of qualified employees;

•        the costs of employee compensation or benefits increase substantially; or

•        the costs of outsourcing certain tasks to third-party providers increase substantially.

We have engaged tea garden managers for the provision of management service for the cultivation of our tea leaves and we could be adversely affected by the performance of our tea garden managers.

In 2022, we engaged 21 tea garden managers, who are our major contractors, for the provision of management service for the cultivation of tea leaves in our tea plantations. For the fiscal years ended December 31, 2021 and 2022 and the six-month period ended June 30, 2023, management fees paid to our tea garden managers amounted to US$153,617 (RMB 991,170), US$163,256 (RMB1,096,344) and US$75,615 (RMB523,392), respectively, representing approximately 1.43%, 1.40% and 1.29% of our total cost of sales, respectively. If our tea garden managers do not perform satisfactorily, substantially increase the prices of their services, or terminate their business relationships with us, we may need to replace our tea garden managers or make alternative arrangements which could increase our costs of operations.

As our tea garden managers are responsible for employing local workers to provide services including cultivation, fertilization, cropping branches, picking of fresh tea leaves and insect and pest management, we do not have direct control over the local workers. If the tea garden managers or the local workers fail to cultivate and manage the tea gardens properly or otherwise not complying with our requirements or that of our customers, the quality of our tea leaves will be adversely affected. Our reputation in the industry will also be adversely affected if our tea garden managers do not comply with applicable laws and regulations, or do not maintain satisfactory health and environmental conditions at the tea gardens. This, in turn, may materially and adversely affect our business, reputation, financial condition and results of operations.

In addition, we have not entered into any long-term agreements with our tea garden managers and will negotiate prices with them on a year-to-year basis. If they are unable or unwilling to fulfil our requirements or satisfy at costs that we consider reasonable, we may experience interruption, reduction or termination of the management services and will be required to seek alternative tea garden managers. We cannot assure you that we will be able to find suitable garden managers that can provide services at the same quality and prices or at all. If we are unable to find suitable garden managers, we may be exposed to (i) an increase in our operation costs, which we may not be able to pass on to our customers, and/or (ii) a reduction in the quality of our tea leaves, and/or (iii) a lack of management of the tea gardens, which may result in an increase in our wastage rate or impair the quality of our products. As a result, our business, financial condition, and results of our operations may be adversely impacted.

We are dependent on the availability of large numbers of local workers to perform manual labor.

We rely on large numbers of local workers employed by the tea garden managers to cultivate and pick our tea leaves. As all of the tea gardens we operate are located in remote areas far from population centers, there is a risk that manpower for harvesting our tea leaves and for maintaining the tea gardens will not be available on a continuous basis due to factors such as rural-urban migration. We are also vulnerable to labor shortages due to strikes, labor stoppages and civil unrest. Any shortage of labor could increase our costs and reduce our production, which may have a material adverse effect on our business, financial condition, and results of operations.

The occurrence of adverse weather conditions or natural disasters may materially and adversely affect our business and financial performance.

The success of our business principally depends on our ability to obtain sufficient quantities of quality tea leaves from the tea gardens we operate which are all located in two townships:

•        Zhaizhong township, and

•        Huangbai township.

Both townships are located in Zherong County, Fujian Province, mainland China. The cultivation of our tea leaves at the tea gardens is subject to the risks associated with natural disasters and adverse weather conditions, such as droughts, fire, and rainstorms. The occurrence of any natural disaster or adverse weather in Zherong County could adversely affect the quantity and quality of our tea leaves harvest.

The quality of our tea leaves and the growth and development of our bearer plants varies from time to time depending on the soil quality, weather conditions, natural disaster, or external factors such as fertilizers and pesticides applied. The occurrence of any natural disasters, air, water and soil pollution, any diseases or pests (such as moths, worms, caterpillars, beetles and mites), or any incident that affects the soil quality and drainage, in close proximity to, or at, any of the tea gardens we operate, may damage the tea gardens and the bearer plants thereon, thereby affecting the productivity and quality of tea leaves produced from our bearer plants. As a result, our business, financial condition, and operating results may be materially and adversely affected.

Any safety problems relating to our raw materials and tea products could adversely affect our reputation, our brands’ image, our ability to sell our products and our financial performance.

Some of our raw materials may also contain harmful chemicals or substances of which we are not aware due to adulteration by our suppliers. Such raw materials may not be suitable for human consumption and may cause undesirable side effects to our consumers. We cannot assure you that our raw material suppliers will not intentionally or inadvertently contaminate our raw materials or provide us with substandard raw materials. The quality of our products could be also adversely affected if our raw materials are spoiled, contaminated or tampered with. In addition, contamination of our fresh tea leaves may occur during their production process due to reasons unknown to us or out of our control. While we have measures in place to control the quality of our raw materials and tea products, we cannot assure you that we will be able to detect defective raw materials and tea products.

Any failure to detect defective raw materials and fresh tea leaves could adversely affect the quality of our products. We could be required to recall certain of our tea products and subject to product liability claims, adverse publicity, and investigation and imposition against us of penalties by relevant authorities, resulting in increased costs and any of these events could have a material and adverse impact on our reputation, brands’ image, business, financial condition, results of operations and prospects. Furthermore, food safety scandals occurred in China in recent years may negatively influence consumer perception and demand for our products, which could in turn adversely affect our results of operations.

Our historical growth rate, revenue and profit margin may not be indicative of our future growth rate, revenue and profit margin.

For the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, our revenue was approximately US$ 22.4 million (RMB 144.3 million), US$ 24.3 million (RMB 163.2 million) and US$15.1million (RMB104.3 million), respectively. For the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, our gross profit was approximately US$ 11.5 million (RMB 74.1 million), US$ 12.7 million (RMB 85.0 million) and US9.2 million (RMB63.6 million), respectively, whereas our gross profit margin for the same periods was approximately 51.3%, 52.0% and 61.0%, respectively.

There is inherent risk in using such historical financial information to project or estimate our financial performance in the future, as they only reflect our past performance under particular conditions. We may not be able to sustain our historical growth rate, revenue and profit margin for various reasons, including but not limited to, deterioration in the market conditions of the tea industry in the key markets we operate, intensification of competition among our competitors and other unforeseen factors such as deterioration in general economic conditions, which reduce the sales volume of our products and/or reduce the profit margin of our products. There is no assurance that we will be able to achieve the performance as we did during the preceding two years. Investors should not solely rely on our historical financial information as an indication of our future financial or operating performance.

The implementation of our expansion plan may lead to an increase in operating expenses and higher depreciation expenses, which may adversely affect our profit margin and results of operations.

We expect to expand our production capacities for primarily- processed white tea and refined tea production to further enhance our vertically integrated business model by utilizing a portion of net proceeds from the offering to construct a new production facility and acquire additional machinery. For details, please refer to the paragraph headed “Business — Our business strategies — Expand tea gardens through acquisitions and increase our production volume”

in this prospectus. It is expected that the implementation of our expansion plan, the construction of our new production plant and the procurement of machinery in the future may lead to higher operating expenses (including depreciation expenses and labor costs) compared with previous periods. If we cannot implement our business strategies effectively and expand our production capacities as planned, we may not be able to enjoy the full economic benefit brought from such expansion plan and offset the higher operating expenses and our financial performance and operating results may be affected as a result.

Competition from existing industry participants and new entrants in our target markets may harm our financial performance.

We face competition from existing and new players both domestically in China as well as on an international scale. To compete effectively and maintain our sales levels, we may be forced to, amongst other possible actions, reduce our prices, offer bulk purchase terms, or provide other sales incentives to our customers. Should we be required to take such action, our business, profit margins, results of operations and prospect could be materially and adversely affected.

Furthermore, competition may cause our competitors to substantially increase their advertising and promotional activities or to engage in irrational or predatory pricing behavior. Our selling and distribution costs amounted to US$ 118,000 (RMB 768,000), US$ 70,000 (RMB 472,000) and US$ 37,000 (RMB 254,000) for the fiscal years ended December 31, 2021, and 2022 and the six-month period ended June 30, 2023, respectively. We cannot ensure that our marketing efforts will be sufficient to compete with our competitors. An increase in competition could require us to continue to increase our promotion and advertising expenses, which might place pressure on our margins and affect our profitability. Additionally, competition may result in price reductions, reduced margins, and loss of market shares for us, any of which could have an adverse impact on our results of operations. We also cannot assure you that our competitors will not actively engage in activities, whether legal or illegal, designed to undermine our brands and product quality or to influence consumer confidence in our products.

Our deferred tax assets are subject to accounting uncertainties.

Our accounting policies require us to make judgments, estimates and assumptions about the carrying amounts of certain assets and liabilities. The estimates and associated assumptions are based on historical experience and other relevant factors. As a result, actual results may differ from these accounting estimates. As of June 30, 2023, December 31, 2022, and 2021, we recognized deferred tax assets of US$ 399,000 (RMB 2,895,000), US$ 293,000 (RMB 2,037,284) and US$ 182,000 (RMB 1,158,000), respectively. Based on our accounting policies, deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. The realization of a deferred tax asset mainly depends on our estimate as to whether sufficient future profits will be available in the future. If sufficient future taxable profits are not expected to be generated or are less than expected, a material reversal of deferred tax assets may arise.

Our efforts to enhance production capabilities are subject to risks and uncertainties.

In order to achieve the economies of scale we desire in our operations to enable us to continue to increase our production of tea products, we intend to continue to expand our production capacity and enhance our operational efficiency. For details, please refer to the paragraph headed “Business — Our business strategies — Expand tea gardens through acquisition and increase our production volume” in this prospectus. Our expansion plans and business growth require significant capital expenditure and dedicated attention of our management. We intend to fund such expansion in part from the net proceeds of the offering. Nevertheless, we may require additional financing to achieve our expansion plans and may have difficulty obtaining such financing. There is no assurance that we will be able to enhance our production capabilities in time or implement our future plan effectively. We may be subject to unexpected delays and cost overruns resulting from a number of factors, many of which may be beyond our control, including increases in the prices and availability of raw materials and production equipment, shortages of local workers, disputes with customers or suppliers as well as equipment malfunctions. In addition, our efforts to enhance our production capabilities may not achieve the expected benefits. If the demand for our tea products is weaker than anticipated, we may experience problems associated with overcapacity and underutilization of personnel and other resources, which may have an adverse effect on our business, financial condition, and results of operations.

Our production facilities are subject to environmental laws in the PRC and any failure to comply with environmental regulations would expose us to penalties, fines, suspensions, or actions in other forms.

Our operations generate agriculture sewage due to the discharge of fine dust. We believe that no pollutant discharge permit is needed for the production of primarily-processed white tea and black tea, and the development of tea products which generate and discharge a very small number of pollutants with a limited impact on the environment under the relevant PRC laws and regulations. However, environmental laws and regulations may be amended from time to time by the PRC competent body and is not within our control. We cannot assure you that our existing environmental policies and equipment will be adequate to meet future environmental policies and requirements and we may be required to incur additional costs to comply with such future requirements, which may be more stringent than present laws and regulations. In such situation, our capital expenditure and cost of production will increase unexpectedly, which may materially and adversely affect our financial condition and business operation.

Disruption of operations at production facilities may materially and adversely affect our business operations and financial performance.

Our ability to stably and efficiently produce our primarily-processed tea at our production facilities is critical to our success. As at the date of this prospectus, we operate tea gardens of approximately 7,212,000 square meters and have obtained appropriate production plant, machinery, and equipment and one automatic production line of primarily-processed tea for the production of primarily-processed black tea.

Damage or disruption to our operations at our production facilities can result from the following factors, among others:

•        utility supply disruptions, terrorism, strikes or other force majeure events;

•        adverse weather conditions;

•        forced closing or suspension of our production facilities;

•        major disease outbreaks at or around our production facilities;

•        pollution of underground water resources;

•        failure to comply with applicable regulations and quality assurance guidelines;

•        labor disputes affecting our employees;

•        accidents in the processing plants, including major equipment failures or fires, which may result in suspension of operations, property damage, severe personal injuries or even fatalities; and

•        other production or distribution problems, including limitations to production capacity due to regulatory requirements, changes in the types of products produced or physical limitations that could impact continuous supply.

We have not previously experienced any material disruptions to our production facilities. However, we cannot assure you that the events and factors mentioned above, or any other events will not occur and result in a material disruption to the operations at our production facilities in the future. If we fail to take adequate steps to mitigate the likelihood or potential impact of such events or factors, or to effectively respond to such events or factors if they occur or materialize, our business, results of operations and financial condition may be materially and adversely affected.

If we are unable to obtain the forest rights certificate in respect of the tea gardens we operate, we may be unable to enforce our rights against certain third parties.

As of the date of this prospectus, Fujian QJ has not obtained the registration certificates (the “Forest Rights Certificate(s)”) confirming that it has the contractual management rights, and title to the forest trees (collectively the “Forest Rights”) with respect to approximately 4,942,667 square meters of forest land lots (the “Concerned Land Lots”) under the contractual management rights agreements executed by and between Fujian QJ and the village committees (the “Transferors”) in Zhaizhong Village and Huangbai Village. Our tea production from gardens located in the Concerned Land Lots constituted approximately 419.41 tons in 2022, or 73.58% of our total tea production.

To the best knowledge of Fujian QJ, registration of ownership of the Concerned Land Lots by the Transferors is a prerequisite for registration of the Forest Rights by Fujian QJ, and its failure to obtain the Forest Rights Certificates lies mostly in that the Transferors have not obtained the ownership certificates with respect to the Concerned Land Lots and the forest trees thereon (the “Ownership Certificate(s)”) for historical reasons, including that the Concerned Land Lots are not lodged in the relevant mainland China land record system because the owners did not apply for the lodge when required. According to the consultation made by the Company with the relevant authority responsible for issuing of Ownership Certificates, Ownership Certificates will not be issued for land lots not lodged in the mainland China land record system according to the current mainland China policies. Consequently, Transferors have not obtained the Ownership Certificates with respect to the Concerned Land Lots and the Company expects that the Transferors will not ultimately be successful in obtaining the indicated Ownership Certificates in the near future.

According to the Civil Code of the PRC and other applicable laws and regulations, ownership of forest land lots and forest trees is recognized as immovable property right, and unless the applicable laws and regulations provide otherwise, creation, or transfer of immovable property rights takes effect upon registration. According to the Regulation on the Implementation of the Forestry Law of the PRC, an owner of any collectively owned forest trees or forest land shall submit an application for ownership registration to the competent authority which will, after making examinations, issue to the owner an ownership certificate confirming its ownership in relation to the concerned forest trees or forest land.

For purposes of confirming ownership in relation to the Concerned Land Lots and the associated forest trees under PRC laws, the Transferors shall lodge an application for ownership registration with the competent authority and obtain the corresponding Ownership Certificates.

Since the Transferors have not made the registration application nor obtained the legally valid Ownership Certificates confirming their ownership of the Concerned Land Lots under the PRC laws, there exist uncertainties as to the ownership of such forest land lots and forest trees, which therefore may be subject to third party claims, disputes, or challenges.

According to the Regulation on the Implementation of the Forestry Law of the PRC, an entity or individual who uses any collectively owned forest, forest trees or forest land will submit a registration application to the competent authority, which will, after making examinations, issue a certificate confirming its right of use of the forest trees or forest land; an entity or individual who owns any forest trees shall submit an application for ownership registration to the competent authority which will, after making examinations, issue a title certificate to the owner confirming its ownership in relation to the forest trees. According to the Civil Code of the PRC, the contractual management rights without registration will not be protected against any bona fide third party under the PRC laws.

For purposes of confirming its Forest Rights under the PRC laws, Fujian QJ shall lodge an application for the registration of its Forest Rights with the competent authority to obtain the corresponding Forest Rights Certificates.

Since Fujian QJ has not obtained the Forest Rights Certificates for the Concerned Land Lots and the forest trees thereon, there can be no assurance that Fujian QJ is legally entitled to the forest rights with respect to the Concerned Land Lots, which could be subject to third party claims, disputes, or challenges.

In addition, pursuant to the Civil Code of the PRC, as Fujian QJ has not obtained the Forest Rights Certificates confirming its contractual management rights in relation to the Concerned Land Lots, the interests of Fujian QJ therein will not be protected against any bona fide third party under the PRC laws.

As of the date of this prospectus, we are not aware of any third party that may have ownership or forest rights with respect to the Concerned Land Lots or any third party that has asserted or threatened to assert any such rights. If any third party is identified by the judicial authorities as having ownership or forest rights with respect to the Concerned Land Lots and the forest trees thereon, Fujian QJ may be unable to enforce any forest rights thereof and may therefore not be able to continue operating the Concerned Land Lots or deriving any incomes therefrom, as a result of which the business, financial condition and results of operations of the Group could be materially adversely affected.

We did not conduct asset appraisal with respect to part of the forest land lots underlying the forests rights the Transferors transferred to us as required by applicable PRC laws and regulations.

According to the Regulations on the Transfer of Forest Resources in Fujian Province of PRC (the “Transfer of Forest Resources Regulations in Fujian”) which was approved by the Standing Committee of the Fujian People’s Congress on July 30, 1997 with the latest amendment taking effect on July 30, 2010, asset appraisal shall be made where

the collectively-owned forest resources are transferred by auction, bidding, agreement or in any other manners, failing which the competent authority shall not issue certificate confirming such transfer and the responsible person may be subject to penalties.

Of the 7,212,000 square meters of tea gardens operated by our PRC Subsidiaries, we did not conduct asset appraisal with respect to approximately 5,644,659 square meters of tea gardens as required by the Transfer of Forest Resources Regulations in Fujian, because of which we may be unable to obtain the forest rights certificates in relation to such tea gardens and our responsible person may be subject to penalties.

We did not conduct the fire safety completion inspection and acceptance procedures under applicable PRC laws and regulations.

Pursuant to the PRC Fire Safety Law, which was promulgated by the Standing Committee of the National People’s Congress, or the SCNPC on April 29, 1998, amended on October 28, 2008, April 23, 2019, and April 29, 2021, and effective on April 29, 2021, and the Interim Provisions on Administration of Fire Control Design Review and Acceptance of Construction Project by the Ministry of Housing and Urban-Rural Development, which became effective on June 1, 2020, the construction entity of a large-scale crowded venue (including the construction of a manufacturing plant whose size is over 2,500 square meters) and other special construction projects must apply for fire prevention design review with fire control authorities, and complete fire assessment inspection and acceptance procedures after the construction project is completed. The construction entity of other construction projects must complete the filing for fire prevention design and the fire safety completion inspection and acceptance procedures within five business days after passing the construction completion inspection and acceptance. If the construction entity fails to pass the fire safety inspection before such venue is put into use or fails to conform to the fire safety requirements after such inspection, it will be subject to (i) orders to suspend the construction of projects, use of such projects, or operation of relevant business, and (ii) a fine between RMB30,000 and RMB300,000.

We did not conduct the fire safety completion inspection and acceptance procedures after the construction of our production plant was completed as required by the PRC Fire Safety Law, as a result of which we may be subject to (i) orders to suspend the construction of projects, use of such projects, or operation of relevant business, and (ii) a fine between RMB30,000 and RMB300,000.

We are dependent on our contractual management rights agreements with the village committees in respect of the cultivation of our tea leaves.

We work closely with the village committees and local workers for cultivating and harvesting our tea leaves. We have entered into contractual management rights agreements with the respective village committees in respect of the tea gardens where our tea trees are located at a fixed term of 30 years. The expiry dates of our contractual management rights are between 2041 to 2051. We cannot assure you that the respective village committees would renew such lease agreements with us upon expiry. In such events, if we are unable to conclude new Contractual Management Rights Agreements on commercially viable terms with the village committees for the suitable tea gardens, we may not be able to satisfy orders from our customers for our tea products, and accordingly, our business, financial condition and results of operations may be materially and adversely affected.

In the event any of our licenses or approvals are revoked, not renewed, or not extended, our business operations and financial condition may be materially and adversely affected.

In accordance with the applicable PRC laws and regulations, we are required to obtain licenses and permits for purposes of conducting our business, including but not limited to the business license, the food production license, and the food trade license. In the event any of our licenses and permits are revoked, not renewed, or not extended, we may not be able to carry on the business of food production and processing in mainland China. Our operations have not previously been materially affected due to revocation of our licenses or permits. However, we cannot assure you that any of the above circumstances will not occur in the future, which may materially and adversely affect our business operations, production, and financial performance. In addition, our customers may lose confidence in us, and we may face a decline in the number of orders for our products which in turn could materially and adversely affect our business, results of operations and financial condition.

The epidemic of COVID-19 could significantly affect our production, the demand for our products and our business.

The epidemic of COVID-19 since late 2019 has caused significant disruption to the PRC and world-wide economic activities. COVID-19 has spread to many countries and was declared a pandemic by the World Health Organization, which has significantly affected virtually all facets of the Chinese and global economies. From early 2020 through the end of 2022, the PRC government implemented enhanced screenings, quarantine requirements and travel restrictions in connection with the COVID-19 pandemic. We have been able to maintain our operations and minimize the impact of the pandemic on our business due to the measures we have put in place to manage the risks associated with COVID-19. Since December 2022, many of the restrictive policies previously adopted by the PRC government to control the spread of COVID-19 have been revoked or replaced with more flexible measures. Although there were occasional increases in COVID-19 cases in mainland China after the government reduced or withdrawn some of its restrictive policies, as of the date of this prospectus, our PRC Subsidiaries has resumed normal operations. There are still uncertainties of future impact of the COVID-19 pandemic, and the extent of the impact will depend on a number of factors, including the duration and severity of the pandemic; and the macroeconomic impact of government measures to contain the spread of COVID-19 and related government stimulus measures.

We did not keep records in relation to the production of our tea products in accordance with applicable laws and regulations, which could lead to imposition of fines and penalties.

According to the Law of the People’s Republic of China on the Quality and Safety of Agricultural Products (the “Produce Safety Law”) promulgated on April 29, 2006 with the latest amendment taking effect on September 2, 2022, agricultural products processing enterprises, specialized farmers’ cooperatives, and socialized agricultural service organizations are required to establish records (“Production Records”) relating to the production of agricultural products to faithfully record: (i) the names, sources, usage, and dosage of agricultural inputs used and dates of using and stopping using such agricultural inputs; (ii) the occurrence and prevention and control of animal epidemic diseases, crop diseases and insect pests; (iii) the dates of harvest, slaughter or fishing; records on the production of agricultural products shall be preserved for at least two years. The Produce Safety Law also provides that where an agricultural products processing enterprise, specialized farmers’ cooperative, or socialized agricultural service organization fails to establish or preserve the records in accordance with the provisions of the Produce Safety Law, or forges or alters the records, the agriculture and rural affairs department of the local government at or above the county level will order it to remediate within a specified period, failing which may result in imposition of a fine of not less than RMB2,000 but not more than RMB20,000.

Since we are engaged in processing tea products which are classified as agricultural products under the Produce Safety Law, we are required to keep Production Records. However, because we did not previously establish proper Production Records in relation to the production of our tea products in accordance with the Produce Safety Law, we may be ordered by the competent authority to remediate within a specified period and may be subject to a fine of not less than RMB2,000 but not more than RMB20,000.

Our non-compliance with the laws and regulations in respect of the facility agricultural land parcel we lease from the relevant village committee for tea production purposes could lead to imposition of fines and penalties.

According to the Notice of the Ministry of Land and Resources and the Ministry of Agriculture on Further Supporting the Healthy Development of Facility Agriculture (the “2014 Notice’’) promulgated on and effective since September 29, 2014, the facility agricultural land (which is defined as the agricultural land that is directly used for the production facilities, ancillary facilities and supporting facilities served in agricultural production) is governed by the 2014 Notice. The 2014 Notice provides that since facility agricultural lands’ nature belongs to agricultural land, it is administrated in accordance with the administration of agricultural land and no examination and approval procedures for the conversion of agricultural land is required. When the land concerned no longer functions as facility agricultural land, the grantor shall reclaim the land in accordance with relevant regulations, and the occupied cultivated land shall be reclaimed as cultivated land. On December 17, 2019, the Ministry of Natural Resources and the Ministry of Agriculture and Rural Affairs promulgated the Notice of the Ministry of Natural Resources and the Ministry of Agriculture and Rural Affairs on Issues Related to the Management of Facility Agricultural Land Management (the “2019 Notice’’), which abolished and replaced the 2014 Notice. The 2019 Notice stipulates that facility agricultural land includes facility land directly used for crop planting, livestock, and poultry aquaculture in agricultural production.

We lease one facility agricultural land parcel of approximately 2,267.98 square meters at Houlong Village from the Houlong village committee for tea production purposes, with the lease term beginning on February 1, 2015, and ending on January 31, 2035.

We operate our automatic production facilities to process our tea products on the above-mentioned facility agricultural land parcel, which may be found by competent authority exceeding the permitted use of the facility agricultural land as required under the 2019 Notice. The competent authority therefore may order us to remediate, halt production and impose fines on us, which could materially and adversely affect our business, results of operations and financial condition.

If the buildings we use for our production are identified as illegal buildings due to violation of applicable laws and regulations, our business and operations could be materially affected.

According to the Land Administration Law of the PRC (the “Land Administration Law”), which was promulgated by the SCNPC on June 25, 1986, effective since January 1987 and was last amended on August 26, 2019, the state implements a land-use control system. The state formulates the general plan for land use, specifies the land use, and divides the land into agricultural land, construction land and unused land. Agricultural land refers to the land directly used for agricultural production, including cultivated land, forest land, and grassland. Construction land refers to land on which buildings and structures are constructed. If any construction involves occupation of agricultural land, the statutory procedures shall be completed for conversion of the agricultural land into construction land before commencing the construction, failing which the competent authority may order to dismantle the buildings or other facilities illegally built on the land, and a fine may be imposed.

It is required under the PRC law to obtain relevant permits from different authorities before commencing the construction of a building. The required permits include, inter alia, a Land Use Certificate, a Planning Permit of Land for Construction Use, a Planning Permit of Construction Project, and a Commencement Permit of Construction Project. After the completion of construction, an examination of completion by the experts must be organized and the construction enterprise must submit an application to the competent government department at or above county level where the project is located for examination upon completion of building for filing purposes. Further, pursuant to relevant PRC laws and regulations, the premises title certificate is the only legal certificate by which the owner legally has the ownership in respect of the building and thereby exercises rights to possess, utilize, profit from and dispose of the premises.

According to the Urban and Rural Planning Law of the People’s Republic of China, if a rural construction planning permit is not obtained in accordance with the law or construction is not carried out in accordance with the provisions of the rural construction planning permit, the township or town people’s government shall order the construction to stop and make corrections within a time limit.

The buildings we use for our production are constructed on the facility agricultural land which is deemed as agricultural land under the Land Administration Law and title certificates will not be issued with respect to constructions on the facility agricultural land under the PRC laws. According to the 2014 Notice and the 2019 Notice, the permitted use of facility agricultural land does not require the conversion of the agricultural land into construction land according to the Land Administration Law or permissions such as the Planning Permit of Land for Construction Use, the Planning Permit of Construction Project, or the Commencement Permit of Construction Project before construction. Nevertheless, If the buildings we thus constructed exceed the permitted use of the facility agricultural land according to the 2014 Notice and the 2019 Notice, such buildings may be identified as illegal buildings, and the competent authority may order us to dismantle the buildings and impose fines on us, which could materially and adversely affect our business, results of operations and financial condition.

Our non-compliances with the labelling requirements under applicable laws and regulations could lead to imposition of fines and penalties.

According to the Food Safety Law of the PRC (the “PRC Food Safety Law”), which took effect on February 28, 2009 and was last amended on April 29, 2021, the packages of pre-packed food shall indicate the name, address and contact of the manufacturer, the expiry date, the production permit code, etc., failing which the manufacturers or entities engaged in sale of such food may be subject to penalties including but not limited to confiscation of relevant income, the food produced, the tools, equipment, raw materials, and other items used for illegal production or trade, suspension of business, revocation of permits and imposition of fines not less than RMB5,000 but not more than RMB50,000 if the goods value of the food illegally produced is less than RMB10,000 or a fine of not less than five times but not more than ten times the goods value if the goods value is no less than RMB10,000.

Fujian MDH is engaged in sale of refined tea and also produced refined tea before the expiration of its food production license. However, the packages of the products sold or produced by Fujian MDH fail to indicate the above-mentioned information as required by the PRC Food Safety Law, as a result of which we may be subject to penalties including but not limited to confiscation of relevant income, the food produced, the tools, equipment, raw materials, and other items used for illegal production or trade, imposition of fines up to ten times the value of goods such produced or sold, suspension of business, and revocation of permits.

While as of the date of this prospectus, Fujian MDH has not been punished for the above-mentioned non-compliance nor have Fujian MDH received any notice from competent authority that any penalties are likely to be imposed, it is still likely that competent authorities may impose penalties on Fujian MDH with respect to its non-compliance with applicable labelling requirements, with the anticipated fines Fujian MDH may be subject to ranging from RMB5,000 to ten times the value of goods such produced or sold.

Nevertheless, we expect to come into compliance with the applicable labelling requirements of the PRC Food Safety Law after we obtained our new food production license.

Our non-compliance with applicable PRC tax laws and regulations could lead to imposition of fines and penalties.

We conduct our core business in China, and we are subject to the PRC tax laws and regulations. The PRC Invoice Management Measures approved by the PRC State Council on December 12, 1993 with the latest amendment taking effect on March 2, 2019 provide that any entity or individual that receives payment by selling goods, providing service or engaging in other business activities shall provide the payers with an invoice representing the transaction amounts, failing which such entity or individual may be subject to orders by competent tax authorities for rectification, fines of not more than RMB10,000, and confiscation of any illegal gains.

We did not provide invoices for part of our customers who did not require any invoice from us, with the transaction amount we received without issuing invoices at about RMB99,524,026 and RMB147,679,894 respectively in 2021 and 2022, which conflicts with the requirements under the PRC Invoice Management Measures. We may therefore be subject to orders by competent tax authorities for rectification, fines of not more than RMB10,000, and confiscation of any illegal gains.

According to the PRC Tax Collection Administration Law which was promulgated by the SCNPC on September 4, 1992 with the latest amendment taking effect on April 24, 2015, where a taxpayer does not file tax returns, or does not pay or underpays the taxes payable, the tax authority shall pursue the payment of the taxes unpaid or underpaid and the late fee, and impose a fine ranging from 50% to five times of the taxes unpaid or underpaid and the taxpayer may even be subject to criminal punishment in serious cases. While we believe that we have filed the tax returns in compliance with the PRC Tax Collection Administration Law and other applicable PRC tax laws and regulations, we cannot assure you that the PRC tax authority would not determine that we failed to file the tax returns in compliance with the applicable PRC tax laws and regulations and we shall be subject to penalties such as payment of taxes unpaid, late fee and imposition of fines ranging from 50% to five times of the taxes unpaid or underpaid, which could adversely affect our business, financial condition and results of operations, as well as our reputation. In addition, further adjustments or changes to PRC tax laws and regulations, together with any uncertainty resulting therefrom, could also have an adverse effect on our business, financial condition and results of operations.

Our non-compliances with social insurance and housing provident fund contribution laws and regulations in the PRC could lead to imposition of fines and penalties.

We conduct our core business in China, and we are required by the PRC labor laws and regulations to pay various statutory employee benefits, including pensions insurance, medical insurance, work-related injury insurance, unemployment insurance, maternity insurance, and housing provident fund, to designated government agencies for the benefit of our employees.

In October 2010, the SCNPC promulgated the Social Insurance Law of PRC (the “PRC Social Insurance Law”), effective on July 1, 2011, and amended it on December 29, 2018. According to the PRC Social Insurance Law, employers shall make full contributions to the social insurance fund in a timely manner, failing which the employers may be ordered by the competent authority to make full payments within a prescribed period, and the employers may also be subject to late payment fees and fines in an amount more than the outstanding fees but not exceeding three times the outstanding fees.

On April 3, 1999, the State Council promulgated the Regulations on the Administration of Housing Provident Fund (the “PRC Housing Provident Fund Regulations”), which was amended on March 24, 2002, and March 24, 2019. Pursuant to the PRC Housing Provident Fund Regulations, employers shall make full contributions to the housing provident fund in a timely manner, failing which the competent authority may order the employers to make full payments for the housing provident fund within a prescribed period, otherwise the competent authority may apply to the court for enforcement.

On May 30, 2003, the Ministry of Labor and Social Security (dissolved) issued the Opinions of the Ministry of Labor and Social Security on Several Matters in Relation to Employment of Part-Time Workers, which provide that an employer shall make contributions to the work-related injury insurance fund for part-time workers. According to the Regulation on Work-Related Injury Insurance which was promulgated by the State Council on April 27, 2003 with the latest amendment taking effect on January 1, 2011, if an employer fails to make contributions to the work-related injury insurance fund in compliance with applicable laws and regulations, it may be ordered by the competent authority to make full payments within a prescribed period, and the employers may also be subject to late payment fees at the rate of 0.05% of the outstanding amount per day and fines in an amount more than the outstanding fees but not exceeding three times the outstanding fees.

We have not previously made full contributions to the social insurance fund and the housing provident funds for our employees in compliance with the provisions of the Social Insurance Law and the Administrative Regulations on Housing Provident Funds of the PRC, and we also did not make any contribution to the social insurance fund and the housing provident funds for some of our employees in compliance with applicable PRC laws and regulations, as a result of which we may be subject to orders by competent labor authorities for rectification, late payment fees, fines up to three times the outstanding fees and/or other penalties. As of the date of this prospectus, we are still not in compliance with such funding requirements and the approximate amount of the shortfalls in the Company’s required contributions is US$ 150,000 (RMB 1.08 million).

Furthermore, we cannot assure you that our employees who have consented to not contribute to the social insurance fund or the housing provident fund will not lodge complaints with the relevant authorities against us in respect of our failure to make contribution to the social insurance fund or the housing provident fund or initiate a claim against or disputes with us.

If the relevant authorities impose any fine or penalty on us for our non-compliance, or demand that we take any remedial steps which may lead to the incurrence of substantial expenses, our financial condition and results may be materially and adversely affected. In addition, in the event that the relevant authorities later strengthen the enforcement of the relevant laws and regulations on social insurance and housing provident funds in respect of the enterprises within its jurisdiction and accordingly considers it necessary to make retrospective contribution to social insurance and housing provident fund contributions, or if provisions are required to be made, the amount of which may be significant, our business, financial condition and results of operation may be materially and adversely affected.

Our management team has limited public company experience.

Our management team has limited public company experience. We have never operated as a public company in the United States and several of our senior management positions are currently held by employees who have been with us for a short period of time. Our entire management team, as well as other Company personnel, will need to devote substantial time to compliance, and may not effectively or efficiently manage our transition into a public company. If we are unable to effectively comply with the regulations applicable to public companies or if we are unable to produce accurate and timely financial statements, which may result in material misstatements in our financial statements or possible restatement of financial results, our stock price may be materially adversely affected. Any such failures could also result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities, harm to our reputation and diversion of financial and management resources from the operation of our business, any of which could materially adversely affect our business, financial condition, results of operations and growth prospects. Additionally, the failure of a key employee to perform in his or her current position could result in our inability to continue to grow our business or to implement our business strategy.

We are dependent on our key management personnel.

Our future business performance and implementation of our expansion plans are dependent, to a substantial extent, on the continuous contributions of our executive directors and senior management. In particular, Mr. Dezhi Liu, who is our Chief Executive Officer and Chairman of the Board of Directors, has over seven years of experience in tea industry. We expect that our executive directors and senior management team will continue to play an important role in the future growth and success of our business. However, there is no assurance that we will be able to continue to attract and retain the service of our business leaders. If any of our executive directors or senior management terminates his or her service agreement with us and we are unable to find a suitable replacement in a timely manner, or at all, our business operations and implementation of our future plans may be adversely affected.

We may be exposed to credit risks resulting from delays and/or defaults in payments by our customers which would adversely affect our business, financial condition, and results of operations.

We typically offer our customers a credit period of 60 days after the product delivery date to our customers and are therefore subject to credit risks of our customers. Our liquidity depends on our customers making prompt payments to us.

As of June 30, 2023, December 31, 2022, and 2021, our trade receivables amounted to approximately US 2.3 million (RMB 16.3 million), US$ 0.9 million (RMB 6.0 million) and US$ 1.9 million (RMB 12.1 million), respectively, and our trade receivables turnover days were 37.7 days, 20.8 days and 17.0 days, respectively. We have not previously recorded any impairment loss on trade receivables.

If our customers delay or default in their payments to us, we may have to make impairment provisions and write-off the relevant receivables. This in turn may materially and adversely affect our business, financial condition, and results of operation.

We may not be able to adequately protect our intellectual property and knowhow, which could materially and adversely affect our business.

We believe that our current intellectual property rights provide protection to our business and are necessary for our operations. However, there can be no assurance that our intellectual property rights will adequately protect our intellectual property, we will be able to detect breaches of our intellectual property rights, our intellectual property rights will not be challenged by third parties or found to be invalid or unenforceable, or our intellectual property rights will be effective in preventing third parties from utilizing similar business models, processes or brand names to offer similar products. For example, counterfeit products are potential threats to our trademarks, which could reduce demand for our products. We may also be subject to disputes, claims or litigation involving our intellectual property rights or third-party intellectual property rights and there may be claims that we infringe third-party intellectual property rights. Any of these could disrupt our business and divert our management’s attention from our operations. The costs associated with these types of disputes, claims or litigation may be substantial and could have a material adverse effect on our brand image, business, financial condition, results of operations and prospects.

We may not be able to identify and prevent fraud or other misconduct committed by our employees, customers or other third parties.

We are exposed to fraud or other misconduct committed by our employees, customers or other third parties, which could subject us to financial losses, third party claims, regulatory investigations, or reputational damages. Despite our internal control measures in place, we cannot assure you that our internal control policies and procedures are sufficient to prevent, or that we could properly manage the conduct of our employees or customers, or that we can otherwise fully detect or deter, all incidents of fraud, legal, tax or other regulatory non-compliance, violations of relevant laws and regulations and other misconduct. Any such conduct committed by our employees, customers or other third parties could have an adverse effect on our reputation, business, financial condition, and results of operations. Improvements to our risk management and internal control systems may not be adequate or effective. We have designed and implemented risk management and internal control systems consisting of relevant organizational framework policies and procedures, financial reporting procedures and processes, compliance rules and policies and risk management measures that we believe are appropriate for our business operations. We seek to continue to improve our risk management and internal control systems from time to time. However, we cannot assure you that our risk management and internal control systems will be sufficiently effective in ensuring, among other things, the accurate

reporting of financial results and in preventing fraud. Since our risk management and internal control systems depend on implementation by our employees, we cannot assure you that our employees are sufficiently trained to implement the systems or that their implementation will not involve any human error or mistake. If we fail to timely update, implement and modify or fail to deploy sufficient human resources, as applicable, our risk management policies and procedures, our business, financial condition and results could be materially and adversely affected.

Personal injuries, damage to property or fatal accidents may occur in our production facilities.

We use machineries and equipment in our production processes such as cutting equipment, heating equipment and wilting equipment, which are potentially dangerous and may cause industrial accidents and personal injuries to our employees. In addition, our employees may violate safety measures or other related rules and regulations, which may cause industrial accidents. We are also subject to claims and legal proceedings and may be liable for medical expenses, fines, penalties, and other payments resulting from any accidents and personal injuries caused to the local workers employed by the tea garden managers. We have not previously had any incidents, claims or complaints which had materially and adversely affected our operations.

However, we cannot guarantee that we will not encounter significant cost, legal or regulatory liabilities as a result of personal injury of our employees or local workers employed by the tea garden managers in the future.

Any significant accident could interrupt production and result in personal injuries, damages to properties, fatal accidents, and legal and regulatory liabilities. In addition, potential industrial accidents leading to significant property loss or personal injury may subject us to claims and legal proceedings, and we may be liable for medical expenses and other payments to employees, local workers employed by the tea garden managers and their families as well as fines or penalties. As a result, our reputation, brand, business, results of operations and financial condition may be materially and adversely affected.

Our insurance coverage may not be adequate to cover all of the risks and we may be subject to product liability.

We maintain insurance policies for our production plant, machinery and inventory against physical loss or damages arising from natural hazards or accidents in relation to our operations in mainland China. However, we do not maintain insurance policies against interruptions to business operations or maintain third-party liability insurance against claims for environmental liabilities. If there were to be any interruptions to business operations or third-party liability claims with respect to which we are not covered by insurance or our insurance coverage is inadequate, our business, financial condition, results of operations and prospects could be materially and adversely affected.

The work-related injury insurance policies we maintain for our part-time employees may not be adequate to cover all of the risks and we may be subject to work-related injury liabilities.

We maintain commercial insurance policies against work-related injuries for our part-time employees in mainland China. However, such insurance policies we maintain may not be adequate to cover all of the risks and liabilities we may be responsible for any work-related injuries, and we will be responsible for the outstanding damages not covered by our insurance policies, in which case substantial expenses may be incurred and our business, financial condition, results of operations and prospects could be materially and adversely affected.

RISKS RELATING TO THE TEA INDUSTRY

The tea industry that we operate in is fragmented with a large number of players.

According to the CIC Report, the tea industry that we operate in is characterized as fragmented with a large number of players and we compete with a number of existing mainland China domestic and international tea manufacturers, as well as potential new entrants to the market. Some of our competitors may have, in comparison to us, lower costs of operation, greater expertise and more extensive technical capabilities, greater resources to invest in product development and customer support, longer operating history, greater pricing flexibility and name recognition, larger customer bases and/or stronger technical and professional teams. In addition, more specialized manufacturers with greater financial resources may enter our market in the future. Our ability to compete successfully in the industry depends on various factors, including our reputation, brands’ image, high quality products, vertically integrated business model and strong relationships with our customers. We cannot assure you that we will be able to

compete effectively against current and future competitors. Intensified competition may result in price reduction of our products, a decrease in our profit margins, loss of market share and increased difficulty in market penetration, which may have a material and adverse effect on our business, prospects, financial condition, and results of operation.

If the tea industry does not grow at a rate as we expect, or at all, or if we fail to keep pace with consumer preferences and demands, our business, results of operation and financial condition may be adversely affected.

Our growth depends, to a significant extent, on the continued growth in the tea industry and the demand for our products, including our primarily-processed white tea and black tea. Any downturn of the tea industry or future reduced demand may materially and adversely affect our sales and profitability. Furthermore, we are subject to the changing consumer preferences and demands. If there is a change in market preference or if we fail to keep pace with these changes, we may not be able to achieve the growth as expected and our business and financial condition may be adversely affected.

The tea products in mainland China could face competition from substitute products such as other beverage products.

According to the CIC Report, mainland China’s tea production volume increased from approximately 2,490.4 thousand tons in 2017 to approximately 3,060.1 thousand tons in 2021, representing a compound annual growth rate of approximately 5.3%. CIC expects that mainland China’s domestic tea production volume will increase to approximately 3,700.4 thousand tons in 2026, representing a compound annual growth rate of approximately 3.9%, which is predicted based on the same assumptions as we disclosed on page 6. The difference between the domestic sales volume and production volume is mainly consisted of export volume, which is projected to be approximately 0.4 million tons in 2026 and accounts for 12% of the production volume, volume of tea stored for further ageing and inventory. The tea industry in mainland China may experience relatively slower growth in the future due to market saturation and competition from other beverage products that may be viewed by consumers as substitutes for, or alternatives to, our tea products, which may impact upon the size and growth of the market for primarily- processed tea and other tea products. The steady growth in the tea industry in recent years in mainland China should not be used as an indicator for our future growth. We cannot assure you that the tea markets in mainland China will be able to continue the rapid growth rate they experienced for the past several years or will be able to maintain the steady growth we expect. If these markets do not grow as we expect, our sales volume, sales revenue and profitability may be adversely affected.

Consumer concerns about the safety and quality of tea products may adversely affect the sales of our products and our financial performance.

Consumer demand may be affected by factors such as negative publicity resulting from the publication of industry findings, research reports or health concerns concerning food safety of products produced in the tea industry or mainland China in general. Adverse publicity and news about the safety and quality of domestically produced food products and counterfeiting and imitation of food products are widespread practices in mainland China. Although we have not previously been affected by any material safety or quality concerns on our tea products or any actual or alleged counterfeiting or imitation of tea products, we cannot assure you that these events will not occur in the future. Such complaints and negative publicity, regardless of their merits, may lead to a loss of consumer confidence, reduction in the demand for our products, and consequently our business operations, financial performance and prospects may be adversely affected.

Changes in existing food safety laws may expose us to additional costs for compliance and affect our business operations.

As a manufacturer of agricultural products intended for direct human consumption, we are subject to extensive governmental laws and regulations in relation to food safety in the PRC. For instance, the food safety laws in the PRC require enterprises engaged in the production and sale of food to obtain permits, failing which the Company may be subject to penalties including but not limited to confiscation of illegal income, the food illegally produced or dealt in, and the tools, equipment, raw materials, and other items used for illegal production or trade, imposition of fines not less than RMB100,000 but not more than RMB150,000 if the goods value of the food illegally produced or dealt in is less than RMB10,000 or a fine of not less than 15 times but not more than 30 times of the goods value if the goods value is RMB10,000 or above, revocation of food production licenses and, in more extreme cases, criminal proceedings may be initiated against the management.

Our previous food production license obtained by Fujian MDH expired in June 2022 and consequently, refined tea has not been produced by Fujian MDH thereafter. On March 7, 2023, Fujian MDH has obtained a new food production license, which remains valid from March 7, 2023, to March 6, 2028. Fujian MDH is currently producing refined tea after obtaining the renewed food production license. However, failure to obtain or renew such licenses, or comply with food safety laws in the PRC may result in fines based on the related goods’ value, suspension of operations, loss of food production or operation licenses and, in more extreme cases, criminal proceedings against us and our management pursuant to the PRC Food Safety Law and other applicable laws and regulations. Any of these events may have an adverse impact on our production, business, results of operations and financial condition.

There can be no assurance that the PRC government will not impose additional or stricter laws or regulations on food safety in the future, providing for stricter and more comprehensive monitoring and regulation of food manufacturers in areas including, but not limited to, food production and distribution, which may lead to an increase in our costs of complying with such regulations. We may be unable to pass these additional costs on to our customers, which may result in an adverse effect on our results of operations.

The tea gardens we operate are in mainland China and the land lots where such tea gardens are situated are subject to significant PRC regulations. Regulatory changes may adversely affect such tea gardens, our forest rights, and our business, financial condition, and results of operations.

Currently all of the tea gardens we operate are in mainland China and are subject to significant regulation, particularly with respect to our contractual management rights, which consist of the forest rights.

Our contractual management rights are critical to our operations as we must acquire the rights from the village committees in order to harvest the tea leaves from the tea gardens. In mainland China, all land lots are owned by the State or the collectives, but the forest rights of the land lots thereon can be transferred or leased to entities or individuals in accordance with PRC laws and regulations. Our forest rights were obtained from the village committees who own the land lots or were provided with the forest rights. We do not own title to the land lots but rather usage right of the land lots. The contractual management rights we obtained pursuant to our contractual management rights agreements have a term of 30 years. There is no assurance that we can renew our existing contractual management rights agreements upon expiry, or that we will always obtain or maintain our contractual management rights due to the continued development of PRC forestry policies. Without contractual management rights, we will not be able to cultivate and harvest the tea leaves from the tea gardens situated on the land lots.

In addition to our contractual management rights, all of our operations are subject to different national, provincial and local government policies and regulations. Significant regulatory changes in the PRC, including but not limited to, changes in applicable environmental legislation and regulations, tax policies, or any conditions attached to any of our certificates, permits or licenses may have a material adverse effect on our business, financial condition, and results of operations.

RISKS RELATED TO OUR CORPORATE STRUCTURE

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We have been advised by Conyers, Dill and Pearman, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of

the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”

You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

The Companies Act (As Revised), Cap. 22 of the Cayman Islands (the “Companies Act”) does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our post-offering amended and restated articles of association allow our shareholders holding shares which carry in aggregate not less than one-third of all votes attaching to the issued and outstanding shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders, in which case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. Other than this right to requisition a shareholders’ meeting, our post-offering amended and restated articles of association do not provide our shareholders with any other right to put proposals before annual general meetings or extraordinary general meetings. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.

Our amended and restated articles of association contain a provision by which our shareholders agrees to waive any claim or right of action that they may have, both individually or by or in the right of our Company, against any director on account of any action taken by such director, or the failure of such director to take any action in the performance of his or her duties with or for our Company, except such waiver shall not extend to any matter in respect of any fraud, willful default or dishonesty which may attach to such director.

Section 166(2) of our amended and restated articles of association states that our members (i.e., our shareholders) agrees to waive any claim or right of action that they might have, whether individually or by or in the right of our Company, against any director on account of any action taken by such director, or the failure of such director to take any action in the performance of his or her duties with or for our Company, except such waiver shall not extend to any matter in respect of any fraud, willful default or dishonesty which may attach to such director. Accordingly, shareholders may face difficulties or an outright prohibition on bringing claims or rights of action against any director or multiple directors absent a showing of fraud, willful default or dishonesty of such director or directors.

The Company takes no position as to whether such provision in our amended and restated articles of association are enforceable under U.S. state or federal law, including but not limited to the Securities Act or the Exchange Act. Such provision in our amended and restated articles of association may discourage shareholders, including other individual shareholders and institutional shareholders, from bringing or attempting to bring claims or suits against any, multiple or all of our directors, which may discourage other individuals or institutions to invest in our Company and therefore may negatively impact the price of our Ordinary Shares.

The Commission has taken the position that waivers of compliance with provisions of federal securities laws, including the Securities Act or the Exchange Act, are against public policy and therefore void as a matter of federal law. Accordingly, there is uncertainty if and how a U.S. state or federal court may interpret the provision in our amended and restated articles of association states purports to waive certain or most claims or rights of action against our director. Such uncertainty may also discourage other individuals or institutions to invest in our Company and therefore may negatively impact the price of our Ordinary Shares.

Recently introduced economic substance legislation of the Cayman Islands may impact the Company or its operations.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. Effective January 1, 2019, the International Tax Co-operation (Economic Substance) Act of the Cayman Islands (the “Substance Act”) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019,

will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company, compliance obligations include filing annual notifications for the Company, which need to state whether we are carrying out any relevant activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.

United States civil liabilities and certain judgments obtained against us by our shareholders may be unenforceable.

We are a Cayman Islands exempted company and substantially all our assets are located outside of the United States. In addition, three of our directors are Chinese nationals who reside in either mainland China or Singapore, as is our Chief Financial officer Bangjie Hu. One of our directors, Swee Leng Seng, is a citizen and resident of Singapore, and only one of our directors, Kenneth Cheng, is a U.S. citizen and resident. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.

Further, it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts outside the United States, including in the Cayman Islands. Courts of the Cayman Islands may not, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands would recognize a final and conclusive judgment in the federal or state courts of the United States based on agreements to which we are a party and under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personal judgment for non-monetary relief, and would give a judgment based thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment; (ii) such courts did not contravene the rules of natural justice of the Cayman Islands; (iii) such judgment was not obtained by fraud; (iv) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (vi) there is due compliance with the correct procedures under the laws of the Cayman Islands.

RISKS RELATED TO DOING BUSINESS IN CHINA

The operational and legal risks associated with being based in and having operations in China may also to the extent applicable apply to operations in Hong Kong and Macau which operate under different sets of laws from those of Mainland China, except for those confined to laws relating to defense and foreign affairs, as well as other matters outside the autonomy of Hong Kong or Macau.

Because we conduct all of our operations in China, our business is subject to the evolving laws and regulations there. The Chinese government may exercise oversight and supervision over the conduct of our business and may intervene in or influence our operations in accordance with applicable laws and regulations, which could result in a material change in our operations and/or the value of our Ordinary Shares, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.”

As a business operating in China, we are subject to the evolving laws and regulations of the PRC. The PRC government has the power to exercise oversight over the conduct of our business in accordance with PRC laws and regulations, and certain regulations to which we are subject may change quickly and with little notice to us or our shareholders. In particular, the Chinese government strengthen its regulation over offerings conducted overseas and foreign investment in mainland China-based issuers, which could result in a material change in our operations and the value of the Ordinary Shares being registering.

As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC could be uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may:

•        Delay or impede our development,

•        Result in negative publicity or increase our operating costs,

•        Require significant management time and attention, and

•        Subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices.

Changes in China’s economic, political, or social conditions or government policies and the current tensions in international economic relations could have an adverse effect on our business and operations.

All of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic, and social conditions in mainland China. The Chinese economy differs from the economies of other countries in certain respects, including the level of government involvement, level of development, growth rate, foreign exchange management, allocation of resources, evolving regulatory system and in the regulatory process.

While the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on China’s overall economic growth. Such changes could adversely affect our business and operating results and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government management over capital investments or changes in tax regulations that are applicable to us.

Uncertainties regarding the enforcement of some laws, and changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and us.

Our operating subsidiary is incorporated under and governed by the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation, and trade. As the significant part of our business is conducted in mainland China, our operations are principally governed by PRC laws and regulations. However, since the PRC legal system continues to evolve, the enforcement of certain laws, regulations and rules involves uncertainties, which may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the ability of a mainland China-based company, such as our company, to obtain or maintain permits or licenses required to conduct business in mainland China. In the absence of required permits or licenses, governmental authorities could impose material penalties on us. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. The PRC administrative and court authorities have discretion to the extent permitted by applicable laws in interpreting and implementing statutory and contractual terms, and it may be difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy. Furthermore, the PRC government may issue certain policies and internal rules, some of which are not publicly published on a timely basis or at all. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties could materially and adversely affect our business and impede our ability to continue our operations.

The PRC government has oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate in accordance with applicable laws and regulations. Furthermore, the PRC government has recently indicated an intent to exert more oversight over securities offerings and other capital markets activities that are conducted overseas and foreign investment in mainland China-based companies like us. Any such intervention in or influence on our business operations or action to exert more oversight over securities offerings and other capital markets activities, once taken by the PRC government, could adversely affect our business, financial condition and results of operations and the value of our ordinary shares, or significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

The Chinese government may exercise significant oversight over the conduct of our business and may intervene in or influence our operations in accordance with applicable laws and regulations, which could result in a material change in our operations and/or the value of our Ordinary Shares.

The PRC government has significant authority to exert influence on our operations in mainland China in accordance with applicable laws and regulations. Therefore, uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protection available to you and us, hinder our ability to offer or continue to offer the Ordinary Shares, result in a material adverse effect on our business operations, and damage our reputation, which might further cause the Ordinary Shares to significantly decline in value or become worthless. Changes in China’s economic, political or social conditions, or government policies could materially and adversely affect our business, financial condition, and results of operations.

The economic, political and social conditions in the PRC differ from other countries in certain respects, including structure, government involvement, level of development, growth rate, foreign exchange management, capital reinvestment, allocation of resources, rate of inflation and trade balance position. Before the adoption of its reform and opening up policies in 1978, the PRC was primarily a planned economy. In recent years, the PRC government has been reforming the PRC economic system and government structure. For example, the PRC government has implemented economic reform and measures emphasizing the utilization of market forces in the development of the PRC economy in the past three decades. These reforms have resulted in significant economic growth and social prospects. Economic reform measures, however, may be adjusted, modified or applied inconsistently from industry to industry or across different regions of the country.

We cannot predict whether the resulting changes will have any adverse effect on our current or future business, financial condition or results of operations. Despite these economic reforms and measures, the PRC government continues to play a significant role in regulating industrial development, allocation of natural and other resources, production, pricing and management of currency, and there can be no assurance that the PRC government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly. Our ability to successfully expand business operations in the PRC depends on a number of factors, including macro-economic and other market conditions. Demand for our future products in the Chinese market and our business, financial condition and results of operations may be materially and adversely affected by the following factors:

•        changes in political or social conditions of the PRC;

•        changes in laws, regulations, and administrative directives or the interpretation thereof;

•        measures which may be introduced to control inflation or deflation; and

•        changes in the rate or method of taxation.

These factors are affected by a number of variables which are beyond our control. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we conduct our business and could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our products, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our Ordinary Shares.

The New Administrative Rules regarding Overseas Listings may affect our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of mainland China-concept overseas listed companies, and laws and regulations in relation to cybersecurity and data privacy protection requirements and similar matters will be revised.

On February 17, 2023, the CSRC released the Trial Administrative Measures and relevant supporting guidelines, which came into force on March 31, 2023. The New Administrative Rules Regarding Overseas Listings regulate both direct and indirect overseas offering and listing of mainland China domestic companies’ securities by adopting a filing-based regulatory regime. Pursuant to the Trial Administrative Measures, where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. The Trial Administrative Measures also require subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings. On February 17, 2023, the CSRC also issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, or the Overseas Offering Administration Notice, pursuant to which, on or prior to the effective date of the Trial Administrative Measures, domestic companies that have already submitted valid applications for overseas securities offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may arrange the timing for submitting their filing applications with the CSRC in a reasonable manner, and must complete the filing before the completion of their overseas securities offering and listing. Pursuant to the Trial Administrative Measures and the Overseas Offering Administration Notice, we are required to complete the filing procedures with the CSRC before completion of this offering. We submitted the required filing materials to the CSRC on September 6, 2023. However, it is uncertain as to when we will, and whether we will be able to complete the filing procedures with the CSRC. According to the Trial Administrative Measures, the CSRC will conclude the filing procedures and publish the filing results on the CSRC website within 20 working days after receiving the filing materials if the filing materials are complete and comply with the stipulated requirements. However, during the filing process, the CSRC may request the Company to provide additional documents or may consult with competent authorities, the time for which will not be counted in the 20 working days. Since the New Administrative Rules Regarding Overseas Listings are newly promulgated, we cannot assure you that we will be able to complete the relevant filings in a timely manner or fulfil all of the regulatory requirements thereunder. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares.

On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies and became effective on March 31, 2023. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing to be consistent with the Trial Administrative Measures. The revised Provisions provide, among others, that (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.

On December 28, 2021, the CAC, jointly with the relevant authorities, formally published Measures for Cybersecurity Review (2021) which took effect on February 15, 2022. Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services and online platform operators carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review. Any online platform operator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country. Since our business does not rely on the collection of user data or implicate cybersecurity and we do not possess more than one million users’ individual information, we believe that we are not subject to a cybersecurity review to issue our Ordinary Shares or list and trade of our Ordinary Shares on Nasdaq in connection with this offering under the Measures for Cybersecurity Review (2021). There remains uncertainty, however, as to how the Cybersecurity Review Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures.

Furthermore, the PRC government authorities may further strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in mainland China-based issuers like us. Therefore, any such changes may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer securities and reduce the value of such securities.

As of the date of this prospectus, we and our PRC Subsidiaries have not been involved in any investigations on cybersecurity review initiated by the Cyber Administration of China or related governmental regulatory authorities and have not received any requirements to obtain permissions from any PRC authorities to issue our Ordinary Shares to foreign investors or were denied such permissions by any PRC authorities. However, we or our PRC Subsidiaries may be required to obtain permission from the PRC government to list on U.S. exchanges in addition to the CSRC filing in the future, and even when such permission is obtained, whether it will be denied or rescinded.

As of the date of this prospectus, we believe we are in compliance with the above-mentioned regulations or policies that have been issued by the CAC and the CSRC in all material aspects. We have been closely monitoring regulatory developments in mainland China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings, including this offering. We believe we are in compliance with all applicable regulations issued by the CSRC or other PRC governmental authorities relating to this offering and the proposed listing. As of the date of this prospectus, except for the potential uncertainties disclosed above, we have not received any inquiry, notice, warning, sanctions, or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. If it is determined in the future that the approval of the CSRC, the CAC or any other regulatory authority is required for this offering, the offering will be delayed until we have obtained the relevant approvals. There is also the possibility that we may not be able to obtain or maintain such approval or that we inadvertently concluded that such approval was not required. If the approval was required while we inadvertently concluded that such approval was not required or if applicable laws and regulations or the interpretation of such were modified to require us to obtain any other governmental approval in addition to the CSRC filing in the future, we may face penalties by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in mainland China, limit our ability to pay dividends outside of mainland China, limit our operations in mainland China, delay or restrict the repatriation of the proceeds from this offering into mainland China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, the CAC, or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of our Ordinary Shares. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC, the CAC or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of our securities.

If we are unable to complete the filing with the CSRC in a timely manner, the securities to be offered may substantially decline in value and become worthless.

According to the New Administrative Rules Regarding Overseas Listings, a domestic enterprise in the PRC that seeks to offer and list securities in overseas markets shall fulfill the filing procedures with the CSRC in accordance with the Trial Administrative Measures. Where a domestic enterprise seeks to directly offer and list securities in overseas markets, the issuer shall file with the CSRC. Where a domestic enterprise seeks to indirectly offer and list securities in overseas markets, the issuer shall designate a major domestic operating entity, which shall, as the domestic responsible entity, file with the CSRC. Initial public offerings or listings in overseas markets shall be filed with the CSRC within 3 working days after the relevant application is submitted overseas. If an issuer offers securities in the same overseas market where it has previously offered and listed securities, filings shall be made with the CSRC within 3 working days after the offering is completed. Upon occurrence of any material event, such as change of control, investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities, change of listing status or transfer of listing segment, or voluntary or mandatory delisting, after an issuer has offered and listed securities in an overseas market, the issuer shall submit a report thereof to the CSRC within 3 working days after the occurrence and public disclosure of such event. Pursuant to the Trial Administrative Measures, if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed an indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is attributed to domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in the PRC, or its main place(s) of business are located in the PRC, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in the PRC.

According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trail Measures (i.e. March 31, 2023) shall be deemed as the Existing Issuers. Although Existing Issuers are not required to complete the filing procedures immediately, Existing Issuers shall be required to file with the CSRC for any subsequent offerings.

Since we did not obtain approval from the SEC for the overseas offering and listing of our Ordinary Shares on or before March 31, 2023, our PRC counsel advised us that we are required to complete the filing procedures with the CSRC in connection with such offering and listing. We submitted the required filing materials to the CSRC on September 6, 2023. However, we are unable to predict the timing to complete the filling process. According to the Trial Administrative Measures, the CSRC will conclude the filing procedures and publish the filing results on the CSRC website within twenty working days after receiving the filing documents, if the filing documents are complete and comply with the stipulated documents. However, during the filing process, the CSRC may request us to comply with additional documents or may consult with competent authorities, the time for which will not be counted in the twenty working days. We cannot assure you that we will be able to obtain such approval or complete such filing. Any failure on our part to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares, which will cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our Ordinary Shares to significantly decline in value or become worthless.

The PRC Foreign Investment Law may impose new obligations on us.

The PRC Foreign Investment Law, or the FIL, was enacted by the National People’s Congress of the PRC on March 15, 2019, and became effective on January 1, 2020. The FIL replaced the trio of existing laws regulating foreign investment in mainland China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino- foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. This law has become the legal foundation for foreign investment in the PRC. The FIL embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, uncertainties exist with respect to interpretation and implementation of the FIL, which may adversely impact on our corporate governance practices and increase our compliance costs. For instance, we might be required by governmental interpretations or implementing rules of the FIL to adjust the corporate

governance of our PRC Subsidiaries in a five-year transition period. In addition, the FIL imposes information reporting requirements on foreign investors or foreign invested enterprises. Failure to take timely and appropriate measures to cope with any of these or other regulatory compliance requirements under the FIL may lead to rectification obligations, penalties, or other regulatory sanctions on us.

Failure of beneficial owners of our shares who are mainland China residents to comply with certain the PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.

The State Administration of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Foreign Exchange Control on Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or Circular 37, and its appendices. These regulations require mainland China residents, including mainland China institutions and individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such mainland China residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle”, or SPV. The term “control” under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the mainland China residents in the offshore SPVs by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the SPV, such as increase or decrease of capital contributed by mainland China individuals, share transfer or exchange, merger, division or other material event. In the event that a mainland China shareholder holding interests in a SPV fails to fulfill the required SAFE registration, the mainland China subsidiaries of that SPV may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the SPV may be restricted in its ability to contribute additional capital into its mainland China subsidiaries. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

These regulations apply to our direct and indirect shareholders who are mainland China residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to mainland China residents. We cannot assure you that these direct or indirect shareholders of our company who are mainland China residents will be able to successfully update the registration of their direct and indirect equity interest as required in the future. If they fail to update the registration, our PRC Subsidiaries could be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange activities.

On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

We cannot assure you that any or all of our shareholders that are subject to SAFE regulations have made, or will continue to make, required filings or updates in a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all mainland China residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC Subsidiaries’ ability to distribute dividends to, or obtain foreign exchange denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations, and our ability to make distributions to you could be materially and adversely affected.

We may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a mainland China domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

PRC regulations of loans and direct investment by offshore holding companies to mainland China entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in mainland China through our PRC Subsidiaries. We may make loans to our PRC subsidiaries, or we may make additional capital contributions to our subsidiary in mainland China. Any loans by us to our subsidiaries in mainland China to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of the PRC State Administration of Foreign Exchange, or SAFE. In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. To date, we have not made any loans to our operating subsidiary in mainland China.

In March 2015, SAFE promulgated the Circular on Reforming the Administration Measures on Conversion of Foreign Exchange Registered Capital of Foreign-invested Enterprises, or SAFE Circular 19, which took effect and replaced certain previous SAFE regulations from June 1, 2015. On December 30, 2019, the State Administration of Foreign Exchange promulgated the “notice concerning the abolishment and invalidation of the terms of five normative documents on foreign exchange control and seven normative documents on foreign exchange control. SAFE further promulgated the Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, which took effective on June 9, 2016 and, among other things, amended certain provisions of SAFE Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of Renminbi capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope, or to provide loans to persons other than affiliates, unless otherwise permitted under its business scope. SAFE Circular 19 and SAFE Circular 16 may limit our ability to transfer the net proceeds from this offering to our PRC Subsidiaries and convert the net proceeds into RMB.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in the mainland China entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC Subsidiaries or future capital contributions by us to our subsidiary in mainland China. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from this offering and to capitalize or otherwise fund our mainland China operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could materially and adversely affect our ability to grow, make investments or complete acquisitions that could benefit our business, pay dividends to you, and conduct our business.

Substantially all of our revenues are earned by our PRC Subsidiaries. However, the ability of our PRC Subsidiaries to make dividend and other payments to its offshore parent company is subject to PRC laws and regulations. PRC laws permit payments of dividends by our PRC Subsidiaries only out of its accumulated after-tax profits, if any, determined in accordance with mainland China accounting standards and regulations. Our PRC Subsidiaries are also required under PRC laws and regulations to allocate at least 10% of its annual after-tax profits determined in accordance with mainland China GAAP to a statutory general reserve fund until the amount in such fund reaches 50% of our PRC Subsidiaries’ registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends. Any limitations on the ability of our PRC Subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business. In addition, to the extent that our cash or/or other assets are held in our PRC subsidiaries or our Hong Kong subsidiary, if any new restrictions or limitations are imposed on the transfer of such funds or assets outside of mainland China or Hong Kong. In that event, our cash and assets, which are held primarily in our PRC Subsidiaries, may become unavailable to fund operations or for other uses outside of mainland China or Hong Kong.

Governmental management of currency conversion may affect our ability to utilize our cash balance effectively and affect the value of your investment.

The convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of mainland China are be subject to PRC laws and regulations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC Subsidiaries in mainland China may be used to pay dividends to our Company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC Subsidiaries to pay off its debt in a currency other than Renminbi owed to entities outside mainland China, or to make other capital expenditure payments outside mainland China in a currency other than Renminbi.

In light of the flood of capital outflows, the PRC may from time to time impose more restrictive foreign exchange policies and increase scrutiny of major outbound capital movements. More restrictions and substantial vetting processes may be required by PRC laws and regulations to regulate cross-border transactions falling under the capital account. If access to foreign currencies for current account transactions is restricted in the future, we may be prevented from obtaining sufficient foreign currencies to satisfy our foreign currency demands, and we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our Ordinary Shares.

The M&A Rules and certain other PRC laws and regulations establish a series of procedures for some acquisitions of mainland China companies by foreign investors, which could make it difficult for us to pursue growth through acquisitions in mainland China.

PRC laws and regulations, such as the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, Anti-Monopoly Law of the PRC and the Rules of the PRC Ministry of Commerce, or the MOFCOM, on Implementation of the Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rules, established additional procedures and requirements with respect to merger and acquisition activities in mainland China by foreign investors, including requirements in some instances that the MOFCOM be notified in advance of any change of control transaction in which a foreign investor takes control of a mainland China domestic enterprise, or that the approval from the MOFCOM be obtained in circumstances where offshore companies established or controlled by mainland China enterprises or residents acquire affiliated domestic companies. PRC laws and regulations also require certain merger and acquisition transactions to be subject to merger control review or security review.

According to these laws and regulations, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns, and for mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises that have “national security” concerns. In addition, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject to the security review, the MOFCOM will look into the substance and actual impact of the transaction. The MOFCOM Security Review Rules further prohibit foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions.

We might grow our business in part by acquiring other companies operating in our industry. Complying with the requirements of the relevant regulations to complete such transactions could be time-consuming, and any required approval processes, including approval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

offering price of US$4.00 per Ordinary Share and our net tangible book value per Ordinary Share as of June 30, 2023, after giving effect to the net proceeds to us from this offering. In addition, you may experience further dilution to the extent that our Ordinary Shares are issued upon the exercise of any share options. See “Dilution” for a more complete description of how the value of your investment in the Ordinary Shares will be diluted upon completion of this offering.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of the Ordinary Shares for return on your investment.

We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the Ordinary Shares as a source for any future dividend income.

Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium; provided that in no circumstances may a dividend be paid out of share premium if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our Ordinary Shares will likely depend entirely upon any future price appreciation of our Ordinary Shares. There is no guarantee that our Ordinary Shares will appreciate in value after this offering or even maintain the price at which you purchased the Ordinary Shares. You may not realize a return on your investment in our Ordinary Shares and you may even lose your entire investment in our Ordinary Shares.

Substantial future sales or perceived potential sales of Ordinary Shares in the public market could cause the price of the Ordinary Shares to decline.

Sales of Ordinary Shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of the Ordinary Shares to decline. Immediately after the completion of this offering, we will have 23,000,000 Ordinary Shares issued and outstanding, assuming the underwriters do not exercise their over-allotment option. All Ordinary Shares sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. All of our executive officers and directors and shareholders holding at least five percent (5%) of our Ordinary Shares have agreed not to sell our Ordinary Shares for a period of 180 days following the effective date of this prospectus, subject to extension under specified circumstances. Ordinary Shares subject to these lock-up agreements will become eligible for sale in the public market upon expiration of these lock-up agreements, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. To the extent shares are released before the expiration of the lock-up period and sold into the market, the market price of the Ordinary Shares could decline. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short our Ordinary Shares. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. In addition, rapid market sales or sales in significant volumes of up to 1,000,000 Ordinary Shares offered by the Selling Shareholders may significantly depress the market value of the Ordinary Shares held by investors in our underwritten primary offering.

The approval of the China Securities Regulatory Commission under the M&A Rules may be required in connection with this offering under PRC law.

The M&A Rules requires an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China domestic companies and controlled by mainland China companies or individuals to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. However, we are not certain as to the interpretation and application of the regulations, and this offering may ultimately require approval from the CSRC under the M&A Rules. If CSRC approval is required under the M&A Rules, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to penalties imposed by the CSRC and other PRC regulatory agencies.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Ordinary Shares are directly or indirectly held by residents of the U.S. and we fail to meet additional requirements necessary to maintain our foreign private issuer status. In the future, if we lose our foreign private issuer status as of the last date of our second fiscal quarter, we would be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on the following January 1, which are more detailed and extensive than the forms available to a foreign private issuer. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders would become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq Capital Market listing rules. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.

We will incur increased costs as a result of being a public company.

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.235 billion in net revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. We will be in a continuing process of developing, establishing, and maintaining internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting if and when required to do so under Section 404 of the Sarbanes-Oxley Act of 2002. Although our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act until the date we are no longer an emerging growth company, our management will be required to report on our internal controls over financial reporting under Section 404.