What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-08-17 compared with 2025-04-11 · 640 added, 231 removed, 235 unchanged (79% of the section changed)

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company,” as defined by Rule 229.10(f)(1).

are currently not in compliance with the Nasdaq continued listing requirements.

If we are unable to regain compliance with Nasdaq’s

listing requirements, our securities could be delisted, which could affect our common stock’s market price and liquidity and reduce

our ability to raise capital.

November 5, 2024, the Company received a notice in the form of a letter (“Price Deficiency Letter”) from Nasdaq stating that

the Company was not in compliance with Nasdaq Listing Rule 5450(a)(1) because the bid price for the Company’s common stock had closed

below $1.00 per share for the previous 34 consecutive business days (the “Minimum Bid Price Requirement”).

In accordance with

Nasdaq Listing Rule 5810(c)(3)(A), the Company has been given 180 calendar days, or until May 5, 2025, to regain compliance with the Minimum

Bid Price Requirement.

If at any time before May 5, 2025, the bid price of the Company’s common stock closes at $1.00 per share

or more for a minimum of 10 consecutive business days, the Staff Nasdaq will provide written confirmation that the Company has achieved

In the event the Company does not regain compliance, the Company may be eligible for additional time.

To qualify for the additional

compliance period, the Company will be required to (i) submit, no later than the expiration date, an on-line Transfer Application, (ii)

submit a non-refundable $5,000 application fee, (iii) meet the continued listing requirement for the market value of its publicly held

shares and all other continued listing standards for The Nasdaq Stock Market, with the exception of the bid price requirement, and (iv)

will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse

stock split if necessary.

As part of its review process, the Nasdaq will make a determination of whether they believe the Company will

be able to cure this deficiency.

Should the Nasdaq conclude that the Company will not be able to cure the deficiency, or should the Company

determine not to submit a transfer application or make the required representation, the Staff will provide notice that the Company’s

securities will be subject to delisting.

Nasdaq Price Deficiency Letter has no immediate impact on the listing of the Company’s common stock, which will continue to be listed

and traded on The Nasdaq Global Select Market, subject to the Company’s compliance with the other continued listing requirements

of The Nasdaq Stock Market.

cannot assure you that we will be able to regain compliance with Nasdaq listing standards.

we cannot continue to satisfy the continued listing requirements and other rules of the Nasdaq Stock Market, our securities may be delisted,

which could negatively impact the price of our securities and your ability to sell them.

May 6, 2025, we was notified by the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“ Nasdaq ”) that the

Staff granted the Company’s request to transfer the listing of its common stock, par value $0.0005 per share, from The Nasdaq Global

Select Market tier to The Nasdaq Capital Market tier, and that the Staff granted the Company’s request for a second 180-calendar

day period, or until November 3, 2025, to regain compliance with the $1.00 bid price requirement, as set forth in Nasdaq Listing Rule

November 4, 2025, the Company received a delist determination letter from the staff (the “Staff”) of the Listing Qualifications

Department of The Nasdaq Stock Market, LLC advising the Company that the Staff had determined that the Company did not regain compliance

with Minimum Bid Price Requirement by the November 3, 2025, deadline.

The Staff had determined that the Company’s securities will

be scheduled for delisting from The Nasdaq Capital Market on November 11, 2025.

Company effected a one-for-ten reverse stock split of the Company’s outstanding shares of common stock (the “Reverse Stock

The Company effected the Reverse Stock Split in the market on October 27, 2025, and its common stock began trading on The

Nasdaq Capital Market on a split-adjusted basis at the market open on such date.

On November 7, 2025, the Company appealed to the Staff’s

delisting determination by submitting a hearing request to the Nasdaq Hearings Panel.

On December 1, 2025, Gulf Resources, Inc.

(the “Company”)

received a letter from The Nasdaq Stock Market, LLC stating that the Company had regained compliance with the minimum bid price requirement

for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).

Consequently, the hearing before the

Hearings Panel scheduled to take place on December 9, 2025, has been cancelled.

The Company’s securities have continued listing

and trading on The Nasdaq Stock Market.

On April 23, 2026, the Company received a notice (the “Initial Notice”) from

the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that due to the Company’s

failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Form 10-K”), with

the SEC, the Company was not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the

“Listing Rule 5250(c)(1) Rule”), which requires the timely filing of all required periodic reports with the SEC, and the Company

subsequently received a notice (the “May Notice”) from Nasdaq on May 26, 2026 due to the Company’s non-compliance with

the Listing Rule 5250(c)(1) Rule as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal

quarter ended March 31, 2026 (the “First Quarter Form 10-Q”, together with the Form 10-K, the “Delinquent Reports”).

The May Notice states that the Company had until June 22, 2026, to submit to Nasdaq a plan to regain compliance with the Rule.

June 25, 2026, the Company received a letter from Nasdaq indicating that, based on its further review and the plan of compliance submitted

by the Company on June 17, 2026, Nasdaq determined to grant an exception to enable the Company to regain compliance with the Listing Rule

5250(c)(1) Rule.

The terms of the exception were as follows:

on or before August 31, 2026, the Company must file the Delinquent Reports,

as required by the Listing Rule 5250(c)(1) Rule.

In the event the Company does not satisfy the terms, Nasdaq will provide written notification

that its securities will be delisted.

At that time, the Company may appeal Nasdaq’s determination to a hearings panel.

cannot assure you that we will be able to maintain compliance with Nasdaq listing standards.

Our failure to continue to meet these requirements

would result in our common stock being delisted from Nasdaq We and holders of our securities could be materially adversely impacted if

would result in our common stock being delisted from Nasdaq.

We and holders of our securities could be materially adversely impacted if

our securities are delisted from Nasdaq.

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we may be unable to raise equity capital on acceptable terms or at all;

· we may lose the confidence of our customers, which would jeopardize our ability to continue our business

as currently conducted;

· the price of our common stock will likely decrease as a result of the loss of market efficiencies associated

with Nasdaq and the loss of federal preemption of state securities laws;

we may lose the confidence of our customers, which would jeopardize our ability to continue our business as currently conducted;

the price of our common stock will likely decrease as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws;

holders may be unable to sell or purchase our securities when they wish to do so;

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we may lose media and analyst coverage;

· our common stock could be considered a “penny stock,” which would likely limit the level

of trading activity in the secondary market for our common stock;

· we would likely lose any active trading market for our common stock, as it may only be traded on one

of the over-the-counter markets, if at all.

our common stock could be considered a “penny stock,” which would likely limit the level of trading activity in the secondary market for our common stock;

we would likely lose any active trading market for our common stock, as it may only be traded on one of the over-the-counter markets, if at all.

As a China-based issuer, the Company provides the following

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any time, which could result in a material change in our operations and/or the value of our common stock.

business operating in China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly.

government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to

which we are subject may change rapidly and with little notice to us or our shareholders.

As a result, the application,

interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain.

In addition, these laws and

regulations may be interpreted and applied inconsistently by different agencies or authorities, and 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:

As a business operating in

China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly.

The PRC government has the

power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which we are subject

may change rapidly and with little notice to us or our shareholders.

As a result, the application, interpretation, and enforcement

of new and existing laws and regulations in the PRC are often uncertain.

In addition, these laws and regulations may be interpreted

and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices.

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,

● Results in negative publicity or increase our operating costs,

● Require significant management time and attention, and

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value of our Common Stock.

The Chinese government exerts

substantial influence over the manner in which we must conduct our business activities.

We are currently not required to obtain

approval from Chinese authorities to list on U.S exchanges, however, if our holding company or subsidiaries were required to obtain

approval or filing in the future and were denied permission from Chinese authorities to list on U.S.

exchanges, we will not be able

to continue listing on U.S.

exchange, which would materially affect the interest of the investors.

The Chinese government has exercised and can continue to exercise substantial

control to intervene on virtually every sector of the Chinese economy through regulation and state ownership, and as a result, it can

influence the manner in which we must conduct our business activities and effect material changes in our operations or the value of the

common stock we are registering in this resale.

Under the current government leadership, the government of the PRC has been pursuing reform

policies which have adversely affected China-based operating companies whose securities are listed in the U.S., with significant policies

changes being made from time to time without notice.

There are substantial uncertainties regarding the interpretation and application

of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance

of our contractual arrangements with borrowers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings.

Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental

regulations, land use rights, property and other matters.

The central or local governments of these jurisdictions may impose new, stricter

regulations or interpretations of existing regulations that would require additional expenditure and efforts on our part to ensure our

compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue

to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation

of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require

us to divest ourselves of any interest we then hold in Chinese properties.

statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas

and/or foreign investment in China-based issuers, any such action could 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 become 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 China-concept overseas listed companies.

date hereof, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions.

10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security Law,

which took effect in September 2021.

The PRC Data Security Law imposes data security and privacy obligations on entities and individuals

carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data

in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights

and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used.

Data Security Law also provides for a national security review procedure for data activities that may affect national security and impose

export restrictions on certain data information.

July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China- based companies that are

listed in the United States.

The Chinese cybersecurity regulator announced on July 2 that it had begun an investigation of Didi Global

DIDI) and two days later ordered that the company’s app be removed from smartphone app stores.

On July 5, 2021, the

Chinese cybersecurity regulator launched the same investigation on two other Internet platforms, China’s Full Truck Alliance of

Full Truck Alliance Co.

YMM) and Boss of KANZHUN LIMITED (Nasdaq:

On July 24, 2021, the General Office of the Communist

Party of China Central Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden

of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment

in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.

17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, or the

Regulations, which took effect on September 1, 2021.

The Regulations supplement and specify the provisions on the security of critical

information infrastructure as stated in the Cybersecurity Review Measures.

The Regulations provide, among others, that protection department

of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification of

certain critical information infrastructure.

20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which

took effect in November 2021.

As the first systematic and comprehensive law specifically for the protection of personal information in

the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use

sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators

using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights,

and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may

file a lawsuit with a People’s Court.

the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they

The Company could be subject to regulation by various political and regulatory entities, including various local and municipal

agencies and government sub-divisions.

The Company may incur increased costs necessary to comply with existing and newly adopted laws

and regulations or penalties for any failure to comply.

Additionally, the governmental and regulatory interference could 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 be worthless.

it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S.

the future, and even when such permission is obtained, whether it will be denied or rescinded.

Although the Company is currently not required

to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list

exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating

to its business or industry.

17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the

“Overseas Listing Trial Measures”) and five relevant guidelines, which became effective on March 31, 2023.

According to the

Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or

indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.

The Overseas Listing Trial

Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following:

(1) such securities offering

and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules;

(2) the intended securities

offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance

(3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual

controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the

order of the socialist market economy during the latest three years;

(4) the domestic company intending to make the securities offering

and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion

has yet been made thereof;

or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s)

or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.

Listing Trial Measures also provides that if the issuer meets both the following criteria, the overseas securities offering and listing

conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies:

(1) 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 accounted for by domestic companies;

and (2) the issuer’s main business activities are conducted in China,

or its main place(s) of business are located in China, 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 China.

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.

In addition, the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of

domestic companies through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing

procedures in accordance with the Overseas Listing Trial Measures.

The Overseas Listing Trial Measures also requires 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.

conference held for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies

that have already been listed overseas on or before March 31, 2023, shall be deemed as existing issuers (the “Existing Issuers”).

Existing Issuers are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC upon

occurrences of certain subsequent matters such as follow-on offerings of securities.

According to the Overseas Listing Trial Measures

and the Press Conference, the existing domestic companies that have completed overseas offering and listing before March 31, 2023, such

as us, shall not be required to perform filing procedures for the completed overseas securities issuance and listing.

However, from the

effective date of the regulation, any of our subsequent securities offering in the same overseas market or subsequent securities offering

and listing in other overseas markets shall be subject to the filing requirement with the CSRC within three working days after the offering

is completed or after the relevant application is submitted to the relevant overseas authorities, respectively.

If it is determined that

any approval, filing or other administrative procedures from other PRC governmental authorities is required for any future offering or

listing, we cannot assure you that we can obtain the required approval or accomplish the required filings or other regulatory procedures

in a timely manner, or at all.

If we fail to fulfill filing procedure as stipulated by the Trial Measures or offer and list securities

in an overseas market in violation of the Trial Measures, the CSRC may order rectification, issue warnings to us, and impose a fine of

between RMB1,000,000 and RMB10,000,000.

Persons-in-charge and other persons that are directly liable for such failure shall be warned

and each imposed a fine from RMB500,000 to RMB5,000,000.

Controlling shareholders and actual controlling persons of us that organize or

instruct such violations shall be imposed a fine from RMB1,000,000 and RMB10,000,000.

On February 24, 2023, the

CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering

and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect

on March 31, 2023.

The Provisions on Confidentiality and Archives Administration require that, in the process of overseas issuance and

listing of securities by domestic entities, the domestic entities, and securities companies and securities service institutions that

provide relevant securities service shall strictly implement the provisions of relevant laws and regulations and the requirements of

these provisions, establish and improve rules on confidentiality and archives administration.

Where the domestic entities provide with

or publicly disclose documents, materials or other items related to the state secrets and government work secrets to the relevant securities

companies, securities service institutions, overseas regulatory authorities, or other entities or individuals, the companies shall apply

for approval of competent departments with the authority of examination and approval in accordance with law and report the matter to

the secrecy administrative departments at the same level for record filing.

Where there is unclear or controversial whether or not the

concerned materials are related to state secrets, the materials shall be reported to the relevant secrecy administrative departments

for determination.

However, there remain uncertainties regarding the further interpretation and implementation of the Provisions on Confidentiality

and Archives Administration.

the date of this annual report, we and our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities

that are material for the business operations of our PRC subsidiaries.

In addition, as of the date of this annual report, we and our PRC

subsidiaries are not required to obtain approval or permission from the CSRC or the CAC or any other entity that is required to approve

our PRC subsidiaries’ operations or required for us to offer securities to foreign investors under any currently effective PRC laws,

regulations, and regulatory rules.

If it is determined that we are subject to filing requirements imposed by the CSRC under the

Overseas Listing Regulations or approvals from other PRC regulatory authorities or other procedures, including the cybersecurity review

under the revised Cybersecurity Review Measures, for our future offshore offerings, it would be uncertain whether we can or how long it

will take us to complete such procedures or obtain such approval and any such approval could be rescinded.

Any failure to obtain or delay

in completing such procedures or obtaining such approval for our offshore offerings, or a rescission of any such approval if obtained

by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to file with the CSRC or failure to seek

approval from other government authorization for our offshore offerings.

These regulatory authorities may impose fines and penalties on

our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict

the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect

our business, financial condition, results of operations, and prospects, as well as the trading price of our common stock.

other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before

settlement and delivery of the securities offered.

Consequently, if investors engage in market trading or other activities in anticipation

of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur.

In addition, if the CSRC or

other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required

filing or other regulatory procedures for our prior offshore offerings, 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 or negative publicity regarding such approval requirement

could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our common stock.

addition, on December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and several other

administrations jointly issued the revised Measures for Cybersecurity Review, or the Revised Review Measures, which became effective

and has replaced the existing Measures for Cybersecurity Review on February 15, 2022.

According to the Revised Review Measures, if

an “online platform operator” that is in possession of personal data of more than one million users intends to list in a

foreign country, it must apply for a cybersecurity review.

Based on a set of Q&A published on the official website of the State

Cipher Code Administration in connection with the issuance of the Revised Review Measures, an official of the said administration

indicated that an online platform operator should apply for a cybersecurity review prior to the submission of its listing

application with non-PRC securities regulators.

Given the recency of the issuance of the Revised Review Measures and their pending

effectiveness, there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and

implementation.

For example, it is unclear whether the requirement of cybersecurity review applies to follow-on offerings by an

“online platform operator” that is in possession of personal data of more than one million users where the offshore

holding company of such operator is already listed overseas.

Furthermore, the CAC released the draft of the Regulations on Network

Data Security Management in November 2021 for public consultation, which among other things, stipulates that a data processor listed

overseas must conduct an annual data security review by itself or by engaging a data security service provider and submit the annual

data security review report for a given year to the municipal cybersecurity department before January 31 of the following year.

the draft Regulations on Network Data Security Management are enacted in the current form, we, as an overseas listed company, will

be required to carry out an annual data security review and comply with the relevant reporting obligations.

If the Chinese government

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the value of such securities to significantly decline or be worthless.

Recent statements

by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or

foreign investments in China based issuers.

PRC has recently proposed new rules that would require companies collecting or holding large

amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly tighten oversight

over China-based internet giants.

Recent statements by the

Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign

investments in China based issuers.

PRC has recently proposed new rules that would require companies collecting or holding large amounts

of data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly tighten oversight over

China-based internet giants.

On January 4, 2022, the Cyberspace Administration of China, or CAC, issued the revised Measures on Cyberspace

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Any future action by the PRC government

expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CRSC or the CAC could

significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of

such securities to significantly decline or be worthless.

expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CRSC, or the CAC

could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value

of such securities to significantly decline or be worthless.

The occurrence of security

24 unchanged sentences

may be cited for reference but have limited precedential value.

the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters generally.

effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments

PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters generally.

The overall effect

of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments

However, the PRC has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently

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at all and may have a retroactive effect.

As a result, we may not be aware of our violation of any of these policies and rules until sometime

after the violation.

In addition, any administrative and court proceedings in the PRC may be protracted, resulting in substantial costs

and diversion of resources and management attention.

As a result, we may not be aware of our violation of any of these policies and rules until some

time after the violation.

In addition, any administrative and court proceedings in the PRC may be protracted, resulting in substantial

costs and diversion of resources and management attention.

If the Chinese government

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and cause the value of such securities to significantly decline or be worthless.

date of this annual report, we and our PRC subsidiaries, (1) are not required to obtain permissions from any PRC authorities to operate

or issue our common stock to foreign investors, (2) are not subject to permission requirements from the CSRC, CAC or any other entity

that is required to approve of our PRC subsidiaries’ operations, and (3) have not received or were denied such permissions by any

PRC authorities.

Nevertheless, 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 were 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.

current PRC regulatory environment, it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission

from the PRC government to list on U.S.

exchanges in the future, and even when such permission is obtained, whether it will be denied

or rescinded.

We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other

PRC governmental authorities required for overseas listings.

As of the date of this annual report, we have not received any inquiry, notice,

warning, sanctions or regulatory objection to listing on U.S.

exchange from the CSRC or other PRC governmental authorities.

However, there

remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas

securities offerings and other capital markets activities.

17, 2023, the CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic

Companies (the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023.

Pursuant to the

Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing

procedures and report relevant information to the CSRC.

If a domestic company fails to complete the filing procedures or conceals any

material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties

by the CSRC, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge

and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

As a listed company, we

believe that we and all of our PRC subsidiaries are not required to fulfill filing procedures and obtain

approvals from the CSRC to continue

to offer our securities or operate our business as of the date of this annual report.

In addition, to date, none of us and our PRC subsidiaries

has received any filing or compliance requirements from CSRC for the listing of the Company at Nasdaq and all of its overseas offerings.

Furthermore, based on our understanding of the current PRC laws, we believe that the CSRC’s approval is not required to be obtained

for the Company’s listing on Nasdaq;

however, there are substantial uncertainties regarding the interpretation and application of

the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors (“M&A Rules”), other PRC Laws and

future PRC laws and regulations, and there can be no assurance that any governmental agency will not take a view that is contrary to or

otherwise different from our belief stated herein.

determined in the future that the approval of the CSRC, the CAC or any other regulatory authority is required for our listing on U.S.

exchange, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies.

These regulatory agencies may impose fines and

penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in 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.

Our common stock may

be delisted from the Nasdaq under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit documentation

located in China.

The delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value

of your investment.

was enacted on December 18, 2020.

The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered

public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall

prohibit such ordinary shares from being traded on a national securities exchange or in the over the counter trading market in the U.S.

various legal and operational risks and uncertainties associated with having our operations in China and the complex and evolving PRC

laws and regulations.

The PRC government has significant authority in regulating our operations and may intervene or influence our operations

at any time, which could result in a material adverse change in our operations and the value of our securities.

The PRC government has

recently indicated its intent to exert more oversight and control over offerings that are conducted overseas and foreign investment in

China-based issuers.

Such actions could 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 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 were made available to the public on July 6, 2021.

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.

Given the current PRC regulatory environment, it is uncertain when and whether we or our

PRC subsidiaries, will be required to obtain permission from the PRC government to list on U.S.

exchanges in the future, and even when

such permission is obtained, whether it will be denied or rescinded.

We have been closely monitoring regulatory developments in China

regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings.

As of the date of

this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to listing on U.S.

exchange from

the CSRC or other PRC governmental authorities.

However, there remains significant uncertainty as to the enactment, interpretation and

implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.

For more details,

see “Item 1A.

Risk Factors - Risks Related to Doing Business in China”

On February 17, 2023, the

CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies

(the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023.

Pursuant to the Trial Measures,

domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures

and report relevant information to the CSRC.

If a domestic company fails to complete the filing procedures or conceals any material fact

or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties by the CSRC,

such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other

directly liable persons may also be subject to administrative penalties, such as warnings and fines.

Currently, we and our PRC subsidiaries

are not required to file for a cybersecurity review by the Cyberspace Administration of China, or the CAC, for our past issuance of securities

to investors and maintaining our listing status on the Nasdaq, since our company already listed on Nasdaq before promulgation of the

Trial Measures is not required to file for a cybersecurity review by the CAC to maintain our listing status on the Nasdaq Stock Market

LLC, or the Nasdaq on which our securities have been listed.

Even though we are not required to complete the filing procedures

with the CSRC for our historical issuance of securities, we may be required by the Trial Measures to file with the CSRC in connection

with future securities offerings and listings outside of mainland China, including follow-on offerings, issuance of convertible bonds,

offshore relisting after going-private transactions, and other equivalent offering activities.

There remain substantial uncertainties

about the interpretation, application and implementation of the laws and regulations relating to the CSRC filing and CAC cybersecurity

If we fail to obtain any requisite approvals with respect to future offerings of our equity securities to foreign investors,

or if we inadvertently conclude that such permissions or approvals are not required, or if the applicable laws, regulations or interpretations

thereof change and we become subject to the requirement of additional permissions or approvals in the future, our ability to execute

our financing and equity offering plans may be significantly limited or completely hindered.

Any lack of or failure to maintain requisite

approvals, licenses or permits applicable to us or our PRC subsidiaries may have a material adverse impact on our business, results of

operations, financial condition and prospects, 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 become worthless.

Our common stock

may be delisted from the Nasdaq under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit

documentation located in China.

The delisting of our common stock, or the threat of their being delisted, may materially and adversely

affect the value of your investment.

Foreign Companies Accountable Act, or HFCAA, was enacted on December 18, 2020, as amended by the Consolidated Appropriations Act, 2023.

The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not

been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such ordinary shares from

being traded on a national securities exchange or in the over-the-counter trading market in the U.S.

24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the

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a process to be subsequently established by the SEC.

The SEC is assessing how to implement other requirements of the HFCAA, including

the listing and trading prohibition requirements described above.

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating

Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, amends the HFCAA and requires the SEC to prohibit

an issuer’s securities from trading on any U.S.

stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive

years instead of three.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the

PCAOB to use when determining, as contemplated under the HFCAA Act, whether the PCAOB is unable to inspect or investigate completely registered

public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC issued amendments to finalize the interim final rules previously adopted in March 2021 to implement the submission

and disclosure requirements in the HFCAA.

The rules apply to registrants that the SEC identifies as having filed an annual report with

an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to

inspect or investigate completely because of a position taken by an authority in a foreign jurisdiction.

On December 16, 2021, the PCAOB

issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms

headquartered in:

(1) mainland China of the PRC, because of a position taken by one or more authorities in mainland China;

Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong.

The PCAOB has made such designations as mandated under the HFCAA.

Pursuant to each annual determination by the PCAOB, the SEC will, on

an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions in the future.

August 26, 2022, the PCAOB signed the Protocol with the CSRC and the MOF of the People’s Republic of China, governing inspections

and investigations of audit firms based in mainland China and Hong Kong.

The Protocol remains unpublished and is subject to further explanation

and implementation.

Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion

to select any issuer audits for inspection or investigation and the unfettered ability to transfer information to the SEC.

15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting

firms headquartered in China mainland and Hong Kong completely in 2022.

The PCAOB Board vacated its previous 2021 determinations that

the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong

However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting

firms headquartered in China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s,

The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and was already making plans

to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations

The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

Therefore, the PCAOB may in the future determine that it is unable to inspect or investigate completely registered public accounting firms

in mainland China and Hong Kong.

GGF CPA LTD, Certified Public Accountants, the independent registered public accounting firm that issued the audit report included in

our annual report, an auditor of companies that are traded publicly in the United States and an China-based accounting firm registered

with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance

with the applicable professional standards.

Our auditor is based in the China and is subject to inspection by the PCAOB on a regular basis.

Senate passed the Accelerating Holding Foreign

Companies Accountable Act, which was signed into law on December 29, 2022, amends the HFCAA and requires the SEC to prohibit an issuer’s

securities from trading on any U.S.

stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered

public accounting firms headquartered in China mainland and Hong Kong completely in 2022.

The PCAOB Board vacated its previous 2021 determinations

that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and

date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered

public accounting firms headquartered in any jurisdiction.

As a result, we do not expect to be identified as a “Commission-Identified

Issuer” under the HFCAA for the fiscal year ended December 31, 2025, after we file our annual report on Form 10-K for such fiscal

On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the

number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, and (ii)

so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s

As it was originally enacted, the HFCAA applied only if the PCAOB’s inability to inspect or investigate because of a position

taken by an authority in the foreign jurisdiction where the relevant public accounting firm is located.

As a result of the Consolidated

Appropriations Act 2023, the HFCAA now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm

is due to a position taken by an authority in any foreign jurisdiction.

The denying jurisdiction does not need to be where the accounting

firm is located.

However, whether the PCAOB will be able to continue to conduct inspections and investigations completely to its satisfaction

of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong are subject to uncertainty and depends on a

number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.

Each year, the PCAOB

will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.

If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland

China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on

our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual

report on Form 10-K for the relevant fiscal year.

There can be no assurance that we would not be identified as a Commission-Identified

Issuer for any future fiscal year, and if we were identified for two consecutive years, we would become subject to the prohibition on

trading under the HFCAA.

Our auditor, GGF CPA LTD, Certified Public Accountants, the independent

registered public accounting firm that issued the audit report included in our annual report, an auditor of companies that are traded

publicly in the United States and a China-based accounting firm registered with the PCAOB, is subject to laws in the United States pursuant

to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.

Our auditor is based

in the China and is subject to inspection by the PCAOB on a regular basis.

our auditor’s working papers related to us, and our subsidiaries are located in China.

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of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the Nasdaq.

Changes in China’s

economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

Because the majority

of our operations are in mainland China and our auditor has been located in mainland China, a jurisdiction where the U.S.

Public Company

Accounting Oversight Board (“PCAOB”) is currently unable to conduct inspections without the approval of Chinese authorities,

there have been concerns regarding oversight of the audits of our financial statements filed with the SEC.

If the PCAOB continues to be

unable to inspect our audit firm in the PRC for three consecutive years, the HFCAA requires the SEC to prohibit the trading of our securities

on a national securities exchange, including Nasdaq, or on over-the- counter markets in the United States.

In addition, the U.S.

House of Representatives have each passed bills, which, if enacted, would decrease the number of non-inspection years from three

consecutive years to two, thus reducing the time period before our securities may be prohibited from trading on a U.S.

securities exchange

or delisted from Nasdaq.

The foregoing could adversely affect the market price of our securities and our ability to raise capital effectively.

Auditors of companies that are

registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, are required

to be registered with the PCAOB and to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United

States and applicable professional standards.

Because our current auditor is located in mainland China, a jurisdiction where the PCAOB

is currently unable to conduct inspections without the approval of Chinese authorities, our auditor is not currently inspected by the

PCAOB inspections of auditors located outside of mainland China and

Hong Kong have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be

addressed as part of the PCAOB’s inspection process to improve future audit quality.

The lack of PCAOB inspections of audit work

undertaken in mainland China and Hong Kong prevent the PCAOB from regularly evaluating our auditor’s audits and its quality control

As a result, investors are deprived of the benefits of PCAOB inspections, which could result in limitations or restrictions

on our access to the U.S.

capital markets.

Furthermore, in recent years,

Congress and regulatory authorities have continued to express concerns about challenges in their oversight of financial statement

audits of U.S.-listed companies with significant operations in China.

As part of this continued focus on access to audit and other information

currently protected by national law, in particular under Chinese law, the United States enacted the HFCAA in December 2020.

requires the SEC to identify issuers that have filed an annual report with an audit report issued by a registered public accounting firm

that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because

of a restriction imposed by a non-U.S.

authority in the auditor’s local jurisdiction (a “Commission-Identified Issuer”).

Under the HFCAA, if the SEC conclusively identifies an issuer as a Commission-Identified Issuer for three consecutive years, the SEC is

required to prohibit the trading of the issuer’s securities on a national securities exchange or through any other method that is

within the jurisdiction of the SEC to regulate, including over-the counter markets in the United States.

Our securities may be prohibited

from trading on the Nasdaq or other U.S.

stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and

this ultimately could result in our securities being delisted.

Furthermore, in June 2021, the

Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if enacted, would amend the

HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S.

stock exchanges if its auditor is not subject

to PCAOB inspections for two consecutive years (as opposed to the three years under the HFCAA).

In February 2022, the U.S.

House of Representatives

passed the America Creating Opportunities for Manufacturing Pre- Eminence in Technology and Economic Strength (COMPETES) Act of 2022 (the

“America COMPETES Act”), which similarly would amend the HFCAA to shorten the number of non-inspection years from three years

to two years.

The America COMPETES Act, however, includes a broader range of legislation than the AHFCA Act in response to the U.S.

and Competition Act passed by the U.S.

Senate in 2021.

House of Representatives and the U.S.

Senate will need to agree on amendments

to these respective bills to allow the legislature to pass their amended bills before the President can sign the bill into law.

unclear if or when either of these bills will be signed into law.

In September 2021, the PCAOB

adopted PCAOB Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, which provides a framework for the

PCAOB to use when determining whether the PCAOB is unable to inspect or investigate completely a registered public accounting firm located

in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction for the purposes of the HFCAA.

Rule 6100 establishes the manner of the PCAOB’s determinations;

the factors the PCAOB will evaluate and the documents and information

it will consider when assessing whether a determination is warranted;

the form, public availability, effective date, and duration of such

determinations;

and the process by which the PCAOB will reaffirm, modify or vacate any such determinations.

In November 2021, the SEC

announced that it had approved Rule 6100.

In December 2021, the SEC adopted amendments to finalize rules implementing the submission and

disclosure requirements in the HFCAA for Commission-Identified Issuers, which became effective on January 10, 2022.

In addition, the PCAOB

issued a Determination Report, pursuant to PCAOB Rule 6100, which found that the PCAOB is unable to inspect or investigate completely

registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in

those jurisdictions.

The SEC began to identify Commission- Identified Issuers for fiscal years beginning after December 18, 2020.

A Commission-Identified

Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was so

If an issuer is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December

31, 2021, the issuer will be required to comply with the submission or disclosure requirements in its annual report for the fiscal year

ended December 31, 2022.

If we are identified as a Commission-Identified Issuer that uses an auditor not subject to PCAOB inspection for

three consecutive years, or, if the AHFCAA or the America COMPETES Act is passed, two consecutive years, our securities may be delisted

from Nasdaq as a result.

Delisting of our securities would force holders of our securities to sell their securities.

Further, we may be

prohibited from listing our securities on another U.S.

securities exchange, making our shares harder to trade for the investors, potentially

reducing demand and lowering our share price.

The market price of our securities could be adversely affected as a result of anticipated

negative impacts of such legislative or executive actions upon, as well as negative investor sentiment toward, companies with significant

operations in mainland China and Hong Kong that are listed in the United States, regardless of whether such actions are implemented and

regardless of our actual operating performance.

Our auditor, GGF CPA LTD., Certified

Public Accountants, is a China-based accounting firm registered with the PCAOB, and is subject to laws in the United States pursuant to

which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.

Our auditor is headquartered

in the China and is subject to inspection by the PCAOB on a regular basis.

On August 26, 2022, the PCAOB signed the Protocol with the

CSRC and the MOF of the People’s Republic of China, governing inspections and investigations of audit firms based in mainland China

and Hong Kong.

The Protocol remains unpublished and is subject to further explanation and implementation.

Pursuant to the fact sheet with

respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or

investigation and the unfettered ability to transfer information to the SEC.

On December 15, 2022, the PCAOB announced that it was able

to secure complete access to inspect and investigate PCAOB registered public accounting firms headquartered in China mainland and Hong

Kong completely in 2022.

The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate

completely registered public accounting firms headquartered in China mainland and Hong Kong.

However, whether the PCAOB will continue

to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in China mainland and Hong

Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control.

The PCAOB is continuing

to demand complete access in China mainland and Hong Kong moving forward and was already making plans to resume regular inspections in

early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed.

The PCAOB has

indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

Therefore, the PCAOB

in the future may determine that it is unable to inspect or investigate completely registered public accounting firms in mainland China

and Hong Kong.

Our auditor’s working papers related to us and our subsidiaries are located in China.

If our auditor is not permitted

to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight

of our auditor through such inspections which could result in limitation or restriction to our access to the U.S.

capital markets and

trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the Nasdaq.

For a detailed description of

risks related to our doing business in China, see “Item 1A.

Risk Factors - Risks Related To Doing Business In China”

Changes in China’s economic,

political or social conditions or government policies could have a material adverse effect on our business and operations.

Substantially

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foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among

various sectors of the economy.

Any adverse changes in economic conditions in the PRC, in the policies of the Chinese government or

in the laws and regulations in the PRC could have a material adverse effect on the overall economic growth of the PRC.

developments could adversely affect our business and operating results, lead to a reduction in demand for our services 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 may benefit the overall Chinese economy, but may have a negative effect on us.

example, our financial condition and results of operations may be adversely affected by government control over capital investments

or changes in tax regulations.

In addition, in the past the Chinese government has implemented certain measures, including interest

rate adjustment, to control the pace of economic growth.

These measures may cause decreased economic activity in the PRC, which may

adversely affect our business and operating results.

Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various sectors

of the economy.

Any adverse changes in economic conditions in the PRC, in the policies of the Chinese government or in the laws and regulations

in the PRC could have a material adverse effect on the overall economic growth of the PRC.

Such developments could adversely affect our

business and operating results, lead to a reduction in demand for our services and adversely affect our competitive position.

government has implemented various measures to encourage economic growth and guide the allocation of resources.

Some of these measures

may benefit the overall Chinese economy but may have a negative effect on us.

For example, our financial condition and results of operations

may be adversely affected by government control over capital investments or changes in tax regulations.

In addition, in the past the Chinese

government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth.

These measures

may cause decreased economic activity in the PRC, which may adversely affect our business and operating results.

China’s economic,

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results of operations.

If the Company becomes

directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend

significant resources to investigate and resolve the matters.

Any unfavorable results from the investigations could harm our business

operations and our reputation.

public companies that have substantially all of their operations in China have been subjects of intense scrutiny, criticism and negative

publicity by investors, financial commentators and regulatory agencies, such as the SEC.

Much of the scrutiny, criticism and negative

publicity has centered on financial and accounting irregularities, lack of effective internal control over financial reporting, inadequate

corporate governance and ineffective implementation thereof and, in many cases, allegations of fraud.

As a result of enhanced scrutiny,

criticism and negative publicity, the publicly traded stocks of many U.S.-listed Chinese companies have sharply decreased in value and,

in some cases, have become virtually worthless or illiquid.

Many of these companies are now subject to shareholder lawsuits and SEC enforcement

actions and are conducting internal and external investigations into the allegations.

It is not clear what effects the sector-wide investigations

will have on the Company.

If the Company becomes the subject of any unfavorable allegations, whether such allegations are proven to be

true or untrue, the Company will have to expend significant resources to investigate such allegations and defend the Company.

allegations were not proven to be baseless, the Company would be severely hampered and the price of the stock of the Company could decline

substantially.

If such allegations were proven to be groundless, the investigation might have significantly distracted the attention of

the Company’s management.

It may be difficult to

serve the Company with legal process or enforce judgments against the Company or its management.

the Company’s assets are located in China, all of its directors and officers are non-residents of the United States and located

in China, and all or substantial portions of the assets of such non-residents are located outside the United States.

As a result, it may

not be possible to effect service of process within the United States upon such persons to originate an action in the United States.

there is uncertainty that the courts of China would enforce judgments of U.S.

courts against the Company, its directors or officers based

on the civil liability provisions of the securities laws of the United States or any state, or an original action brought in China based

upon the securities laws of the United States or any state.

The recognition and enforcement of foreign judgments are provided under

the PRC Civil Procedures Law.

PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil

Procedure Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between

jurisdictions.

China does not have any treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition

and enforcement of foreign judgments.

In addition, according to the PRC Civil Procedure Law, the PRC courts will not enforce a foreign

judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national

sovereignty, security or public interest.

As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment

rendered by a court in the United States.

You may experience

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between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.

PRC regulation of

loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay

us from making 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.

PRC regulation of loans

to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from

making 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 transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by

12 unchanged sentences

could adversely affect our liquidity and our ability to fund and expand our business.

30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of

Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015.

SAFE Circular 19 launched a nationwide reform

of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital

at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure

beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises.

The SAFE issued the Circular

on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective

in June 2016.

Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency

to Renminbi on a self-discretionary basis.

SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital

account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to

all enterprises registered in China.

SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated

capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations,

while such converted Renminbi shall not be provided as loans to its non-affiliated entities.

As this circular is relatively new, there

remains uncertainty as to its interpretation and application and any other future foreign exchange related rules.

Violations of these

Circulars could result in severe monetary or other penalties.

SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability

to use Renminbi converted from the net proceeds of this offering to fund our PRC operating subsidiary, to invest in or acquire any other

PRC companies through our PRC Subsidiary, which may adversely affect our business, financial condition and results of operations.

2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested

Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015.

SAFE Circular 19 launched a nationwide reform of the administration

of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion,

but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their

business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises.

The SAFE issued the Circular on Reforming

and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016.

Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi on

a self-discretionary basis.

SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account

items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises

registered in China.

SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a

company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while

such converted Renminbi shall not be provided as loans to its non-affiliated entities.

As this circular is relatively new, there remains

uncertainty as to its interpretation and application and any other future foreign exchange-related rules.

Violations of these Circulars

could result in severe monetary or other penalties.

SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to use Renminbi

converted from the net proceeds of this offering to fund our PRC operating subsidiary, to invest in or acquire any other PRC companies

through our PRC Subsidiary, which may adversely affect our business, financial condition and results of operations.

Fluctuations in exchange

rates could have a material and adverse effect on our results of operations and the value of your investment.

of the Renminbi against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes in political

and economic conditions and the foreign exchange policy adopted by the PRC government.

It is difficult to predict how long such appreciation

of RMB against the U.S.

The value of the Renminbi

against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic

conditions and the foreign exchange policy adopted by the PRC government.

It is difficult to predict how long such appreciation of RMB

against the U.S.

dollar may last and when and how the relationship between the RMB and the U.S.

dollar may change again.

our revenues and substantially all of our costs are denominated in Renminbi.

We rely on dividends paid by our operating subsidiaries

in China for our cash needs.

Any significant revaluation of Renminbi may materially and adversely affect our results of operations and

financial position reported in Renminbi when translated into U.S.

dollars, and the value of, and any dividends payable on, the common

stock in U.S.

All of our revenues

and substantially all of our costs are denominated in Renminbi.

We rely on dividends paid by our operating subsidiaries in China for

our cash needs.

Any significant revaluation of Renminbi may materially and adversely affect our results of operations and financial position

reported in Renminbi when translated into U.S.

dollars, and the value of, and any dividends payable on, the common stock in U.S.

To the extent that we need to convert U.S.

dollars into Renminbi for our operations, appreciation of the Renminbi

against the U.S.

dollar would have an adverse effect on the Renminbi amount we would receive.

Conversely, if we decide to convert our

Renminbi into U.S.

dollars for the purpose of making payments for dividends on our common stock or for other business purposes, appreciation

dollar against the Renminbi would have a negative effect on the U.S.

dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S.

would have an adverse effect on the Renminbi amount we would receive.

Conversely, if we decide to convert our Renminbi into U.S.

for the purpose of making payments for dividends on our common stock or for other business purposes, appreciation of the U.S.

against the Renminbi would have a negative effect on the U.S.

dollar amount.

Governmental control of currency

conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

Governmental control

of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government

33 unchanged sentences

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What changed 10-K

Item 1A. Risk Factors