MicroAlgo Inc. 10-K

Item 9A. Controls and Procedures. Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of its chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this annual report. Based on this evaluation, its principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report. Management’s Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, with the participation of its principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under these criteria, management concluded that its internal control over financial reporting was effective as of December 31, 2022. This Annual Report on Form 10-K does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as nonaccelerated filer. 68 Changes in Internal Control Over Financial Reporting On December 9, 2022, we consummated the Business Combination. See Note 1—“Nature of business and organization” and Note 3—“Reverse Capitalization” to the consolidated financial statements. We are currently integrating policies, processes, people, technology and operations for the combined company. Management will continue to evaluate our internal control over financial reporting as we execute integration activities. Other than as noted above, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and our Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by the collusion of two or more people or by management override of controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 69 PART III Item 10. Directors, Executive Officers and Corporate Governance. The following table sets forth certain information regarding our executive officers and members of the Company’s board of directors (the “Board of Directors”) as of the date of this Annual Report: Name Age Position Served From Jie Zhao 46 Chairman of the Board of Directors December 2022 Min Shu 47 Director, Chief Executive Officer December 2022 Shan Cui 50 Independent Director December 2022 Haixia Zhao 57 Independent Director December 2022 Wengang Kang 34 Independent Director December 2022 Li He 37 Chief Financial Officer December 2022 Shiwen Liu 41 Chief Operating Officer December 2022 Chengwei Yi 46 Chief Technical Officer December 2022 Jie Zhao has been serving as our chairman of the board of directors since December 2022. Mr. Zhao joined the WiMi group of companies in August 2015 as the chairman of Yitian Internet. He was appointed as the director and chairman of the board in November 2020 and re-designated as a non-executive director. He also served as the chairman of the company’s nomination committee. Prior to joining the WiMi group of companies, Mr. Zhao served as a software developer for AsiaInfo Beijing Co., Ltd., a company specializing in computer systems in China from 2002 to 2004. From December 2004 to December 2012, he served as director of Shenzhen WeiXun YiTong Technology Co., Ltd., a mobile internet company in China. From February 2008 to May 2015, he served as a director of Xiamen Xiangtong Animation Co., Ltd., a mobile animation company in China. Mr. Zhao graduated from Wuhan University of Technology with a bachelor’s degree in robotics design and manufacturing in 1999 and obtained his master’s degree in software engineering from Tsinghua University in 2006. Min Shu has been serving as our executive director, chief executive officer since December 2022. Mr. Shu joined the WiMi group of companies in June 2018 as the deputy general manager of technology. Prior to joining the WiMi group of companies, he served as a software development engineer at Shenzhen Integvol Information Technology Co., Ltd. from 2001 to 2006, where he was responsible for software development and system architecture, and the development and design of a mobile application platform. From 2006 to 2012, he served as a senior software technical engineer at Shanghai Motegor Technology Co., Ltd., where he was responsible for the management of software development and system architecture. From June 2012 to April 2018, he served as the chief technical officer at Shanghai BlueSky Information Technology Co.,Ltd. Where he was responsible for the management of technology development and system architecture. Mr. Shu graduated from Huazhong University of Science and Technology with a bachelor’s degree in electrical engineering and automation in July 1999 and obtained his master’s degree in communication engineering from Huazhong University of Science and Technology in 2001. Shan Cui has been serving as our Independent Director since December 2022. Prior to the closing of our business combination, she served as an Independent Director of Venus since the closing of Venus’ IPO on February 11, 2021. Ms. Cui has been an independent director and chair of the audit committee and compensation committee of Fuqin Fintech Limited, an online lending information intermediary platform, since August 28, 2018. She has been the Executive Director of First Capital International Limited since 2010 and provided consulting services for private equity companies and venture capital companies. She was the CFO of Lizhan Environmental Corporation, a then Nasdaq-listed company engaged in the business of green leather material manufacturing, from 2011 to 2013. From 2009 to 2010, she was the Manager of Planning and Analysis for Greene, Tweed & Company, a manufacturer of high-performance engineering parts and products serving aerospace, oilfield, and semi-conductor industries. Prior to that, Ms. Cui was the Senior Finance Manager at Ikon Office Solutions from 2005 to 2008, the CFO for Invista from 2003 to 2004, the Senior Financial Consultant for the Peachtree Companies from 2001 to 2003, the Manager of Strategic Planning and Analysis for General Time Corporation from 1998 to 2001, and the Senior Vice President for Seaboard Corporation from 1996 to 1998. Ms. Cui obtained her MBA degree in Business Administration from Georgia State University and her Bachelor’s degree in International Business English from Ocean University of China. 70 Haixia Zhao has been serving as our Independent Director since December 2022. Ms. Zhao had over 15 years of management experience in the energy industry, where she gained substantial skills and knowledge in energy sector. From June 2019, she served as the independent director and chair of the risk committee at Sterlite Power Transmission Limited. From January 2010 to December 2018, she was the president of BP Singapore Pte. Ltd. where she was responsible for downstream and marketing in the eastern hemisphere in October 1996. From January 2010 to December 2016, she served as a director at Guangdong Dapeng LNG Company Ltd. where she served on the investment committee. From January 1993 to June 2010, she worked at the AES Corporation, a company listed on the New York Stock Exchange (stock code: AES) in Singapore and her last position was the general manager where she was responsible for the growth strategy in Asia and Middle East region. She was appointed as a director of AES Transpower Private Ltd. From July 1987 to December 1991, she was an Assistant Manager at China Construction Bank, where she was responsible for client development. Ms. Zhao graduated with a bachelor’s degree majoring in Civil Engineering and a bachelor’s degree majoring in physics from Zhejiang University in the PRC in 1987, and a master’s degree in construction management from University of Maryland in the United States in 1993. Wengang Kang has been serving as our Independent Director since December 2022. Mr. Kang has over four years of experience in the legal industry, where he gained substantial skills and knowledge in legal industry. From July 2017 to June 2018, Mr. Kang was an associate at Shanghai Ximu Law Firm. From June 2018 to January 2020, Mr. Kang was an associate at Beijing Zhongyin (Shanghai) Law Firm, where he advised on corporate legal matters. Since 2020, he has been a partner of Shanghai Yingdong Law Firm. Mr. Kang graduated with a degree in law at the Gansu Institute of Political Science and Law in the PRC in July 2013. Li He has been serving as our chief financial officer since December 2022. Mr. He joined the WiMi group in October 2020 as the financial controller of Yitian Internet and was appointed as chief financial officer in October 2020. Prior to joining, he served as a relationship manager at Royal Bank of Scotland (China) Limited Shenzhen Branch between 2007 and 2010. From June 2010 to July 2015, he served as an investment director at JPMorgan Asset Management, where he was responsible for investments in China. From August 2015 to February 2019, He was appointed as the vice president of the investment division at Yingxin Investment Group Co., Ltd., where he was in charge of managing the company’s investment. Mr. He graduated with a degree in international economics and trade at Shenzhen University in the PRC in July 2007. Shiwen Liu has been serving as our chief operating officer since December 2022. Mr. Liu joined VIYI in August, and he was appointed as deputy general manager in October 2020. Prior to joining VIYI, he founded Shengshi Yunfan Digital Image Technology Co., Ltd and served as the general manager from June 2010 to August 2019. From 2006 to 2009, he served as project director of Shenzhen Sun Vision Creative Technology Co., Ltd. From 2003 to 2005, he served as project manager of Shenzhen Yingchuang Landscape Design Consulting Co., Ltd. Mr. Liu graduated from Hunan City University with a bachelor’s degree in business administration. Chengwei Yi has been serving as our chief technical officer since December 2022. Mr. Yi joined the WiMi group of companies in March 2011 as the director and general manager of Yitian Internet. Prior to joining the WiMi group of companies, he served as a software development engineer at Shenzhen Aotian Information Technology Co., Ltd. from 2001 to 2004, where he was responsible for managing short message service network connections and mobile network connections, and the development and design of a network payment platform. From March 2004 to September 2010, he served as a products and services manager at Shenzhen Aspire DigitalCo., Ltd., where he was responsible for the management of company systems and business development. From September 2010 to April 2013, he served as the chief technical officer at Shenzhen WeiXun Mobile Information Technology Co.,Ltd. Where he was responsible for product planning, development and management. Mr. Yi graduated from Shenyang Institute of Technology with a degree in electronics and measurement technology in July 1998. He is also an EMBA candidate from China Europe International Business School. 71 Committees of Our Board of Directors Our board of directors has established an audit committee. The composition and its responsibilities are described below. Members serve on the committee until their resignation or until otherwise determined by our board of directors. Our board of directors may have or establish other committees as it deems necessary or appropriate from time to time. Audit Committee Our audit committee consists of 3 Independent Directors, chaired by Shan Cui. We have determined that each of them satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq and meet the independence standards under Rule 10A-3 under the Exchange Act, as amended. We have determined that Ms. Cui qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of its financial statements. The audit committee is responsible for, among other things: ● establishing clear hiring policies for employees or former employees of the independent auditors; ● reviewing and recommending to our Board of Directors for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; ● approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors at least annually; ● obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, issues regarding accounting and auditing principles and practices; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to its Board of Directors for inclusion in its annual reports; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing policies with respect to risk assessment and risk management; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; 72 ● periodically reviewing and reassessing the adequacy of the committee charter; ● approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; ● establishing and overseeing procedures for the handling of complaints and whistleblowing; ● meeting separately and periodically with management, the internal auditors and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of its procedures to ensure proper compliance; ● reporting periodically to our Board of Directors; and ● such other matters that are specifically delegated to our audit committee by our Board of Directors from time to time. Family Relationships No family relationships existed among any of our directors or executive officers. Code of Ethics We have adopted a written code of business conduct and ethics that applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer. A copy of our “Code of Business Conduct and Ethics” is included as exhibit 14. If we make any substantive amendments to our code of business conduct and ethics or grant any of our directors or executive officers any waiver, including any implicit waiver, from a provision of our code of business conduct and ethics, we will disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K. Section 16(A) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our ordinary share and other equity securities. Officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of Forms 3, 4 and 5, and any amendments thereto, furnished to us or written representations that no Form 5 was required, we believe that during the fiscal year ended December 31, 2022, all filing requirements applicable to our executive officers and directors under the Exchange Act were met in a timely manner. 73 Item 11. Executive Compensation. The following summary compensation table sets forth the compensation earned by our named executive officers for the years ended December 31, 2021 and 2022. Name and Principal Position Year Salary ($) (1) All Other Compensation Year Salary ($) All Other Compensation Jie Zhao 2021 - - 2022 - - Chairman of the Board of Directors Min Shu 2021 - - 2022 - Chief Executive Officer Chengwei Yi 2021 32,928.00 - 2022 31,588.32 - Chief Technical Officer Li He (2) 2021 37,632.00 - 2022 34,459.98 - Chief Financial Officer Shiwen Liu (3) 2021 18,816.00 - 2022 17,229.99 - Chief Operating Officer Wengang Kang (4) 2021 25,200.00 - 2022 3,919.82 - Independent Director Haixia Zhao (5) 2021 24,000.00 - 2022 287.17 - Independent Director Shan Cui 2021 - 2022 - - Independent Director (1) The amounts reported in 2021 are calculated at the rate of USD 1.00 to RMB 6.3757, and the amounts reported in 2022 are calculated at the rate of USD 1.00 to RMB 6.9646. (2) Li He joined VIYI as Chief Financial Officer in October 2020. (3) Shiwen Liu joined VIYI as Chief Operating Officer in November 2020. (4) Wengang Kang joined VIYI’s board of directors in September 2020. (5) Haixia Zhao joined VIYI’s board of directors in November 2020. 74 Compensation of Independent Directors We entered into director offer letters with each of our independent directors, according to which we had pay our independent directors Shan Cui, Haixia Zhao, Wengang Kang with a cash compensation of $ 4,206.99 in 2022. And we will also reimburse all directors for any out-of-pocket expenses incurred by them in connection with their services provided with such capacity. Employment Agreements We entered into employment agreements with our executive directors and officers. Mr. Jie Zhao, Min Shu, Chenwei Yi, Li He, and Shiwen Liu had been provided with a cash compensation of $ 83,278.29 in 2022. And during the executive’s term, the Company will reimburse for all reasonably out-of-pocket travel expenses incurred by the executive in attending any in-person meetings, provided that the executive complies with the generally applicable policies, practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses. Option Grants We had no outstanding equity awards as of the end of fiscal years ended December 31, 2021 and 2022. Option Exercises and Fiscal Year-End Option Value Table There were no stock options exercised during fiscal years ended December 31, 2021 and 2022 by the executive officers. Outstanding Equity Awards at Fiscal Year-End Table We had no outstanding equity awards as of the end of fiscal years ended December 31, 2021 and 2022. Long-Term Incentive Plans and Awards There were no awards made to a named executive officer in fiscal 2021 and 2022 under any long-term incentive plan. 75 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The table below sets forth information, as of December 31, 2022, with respect to the beneficial ownership of our ordinary shares by: (a) each named executive officer, each of our directors, and our directors and executive officers as a group; and (b) each person or entity known by us to own beneficially more than 5% of our ordinary shares (by number and by voting power). Ordinary Shares Voting Name and Address of Beneficial Owner (1) Number % Power (%) Executive Officers and Directors Jie Zhao (2) 19,803,961 45.2 % 45.2 % Chengwei Yi (3) 1,386,139 3.2 % 3.2 % Shan Cui Haixia Zhao Wengang Kang Li He Min Shu Shiwen Liu All Executive Officers and Directors as a group 21,190,100 48.4 % 48.4 % 5% Or Greater Holders WiMi Hologram Cloud Inc. 28,910,892 65.9 % 65.9 % MIDI Capital Markets, LLC 3,960,396 9.0 % 9.0 % Guosheng Holdings Limited 3,960,396 9.0 % 9.0 % Milestone Investments Limited 2,772,277 6.3 % 6.3 % (1) The business address of our directors and executive officers is Unit 507, Building C, Taoyuan Street Long Jing High and New Technology Jingu Pioneer Park Nanshan District, Shenzhen, 518052 People’s Republic of China. (2) The reported securities are held by WiMi, a company in which Jie Zhao controls 68.5% of the voting power through holding 100% of all WiMi’s issued and outstanding Class A ordinary shares and 27.1% of all WiMi’s issued and outstanding Class B ordinary shares. (3) The reported securities are held by Milestone Investment Limited, a company in which Chengwei Yi controls 50% of the voting power through holding 50% of Milestone’s ordinary shares. 76 Item 13. Certain Relationships and Related Transactions, and Director Independence. Transactions with Related Parties Due to Parent are those nontrade payables arising from transactions between the Company and the Parent, such as advances made by the Parent on behalf of the Company, and allocated shared expenses paid by the Parent. Those balances are unsecured and non-interest bearing and are payable on demand. December 31, December 31, 2021 2022 Amount due from Parent $ - $ 5,741,573 December 31, December 31, 2021 2022 Amount due to Parent $ 16,955,054 $ - Amount due to related party-Joyous Dragon $ - $ 153,333 During years ended December 31, 2021 and 2022 the Company borrowed approximately $3.2 million and $12.5 million from Parent and repaid $4.5 million and $29.9 million and loaned additional $5.7 million to Parent. Joyous Dragon is a non controlling shareholder of MicroAlgo. This amount represents advance to Venus Acquisition Corp prior to the merger. The amount was non interest bearing and due on demand. Director Independence Our board of directors has undertaken a review of the independence of each director. Shan Cui, Haixia Zhao, and Wengang Kang are all non-employee directors, all of whom our Board has determined to be independent pursuant to Nasdaq rules. All of the members of our Audit Committee are independent pursuant to Nasdaq rules. 77 Item 14. Principal Accountant Fees and Services. The following table represents the aggregate fees from our current principal accounting firm, ONESTOP ASSURANCE PAC and former principal accounting firm, Marcum LLP and Friedman LLP for the years ended December 31, 2021 and 2022, respectively. 2021 2022 Audit Fees $ 420,000 $ 515,000 Audit Related Fees $ - $ 9,126 Tax Fees $ - $ - All other fees $ - $ - Total Fees $ 420,000 $ 524,126 Audit Fees — This category includes the audit of our annual financial statements and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. Audit-Related Fees — This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”. Tax Fees — This category consists of professional services rendered by the Company’s independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice. All Other Fees — This category consists of fees for other miscellaneous items. Pre-Approval Policies and Procedures All of the services rendered to us by our independent registered public accountants were pre-approved by the Audit Committee. 78 PART IV Item 15. Exhibit and Financial Statement Schedules. (a) The following documents are filed as part of this Annual Report: 1. Financial Statements. Our consolidated financial statements and the Report of Independent Registered Public Accounting Firm are included herein on thereto begin on page F-1 of this Annual Report. 2. Financial Statement Schedules. None. All financial statement schedules are omitted because they are not applicable, not required under the instructions, or the requested information is included in the consolidated financial statements or notes thereto. 3. Exhibits. The following is a list of exhibits filed with this report or incorporated herein by reference: Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Herewith 2.1 Business combination and Merger Agreement dated as of June 10, 2021 by and among VIYI Algorithm Inc., Venus Acquisition Corporation and Venus Merger Sub Corporation and WiMi Hologram Cloud Inc. previously filed as an exhibit to Registrant’s Current Report on Form 8-K as filed with the SEC on October 4, 2022. 8-K 2.1 December 16, 2022 2.2 First Amendment to the Business Combination and Merger Agreement dated as of January 24, 2022 8-K 2.2 December 16, 2022 2.3 Second Amendment to the Business Combination and Merger Agreement dated as of August 2, 2022 8-K 2.3 December 16, 2022 2.4 Third Amendment to the Business Combination and Merger Agreement dated as of August 3, 2022 8-K 2.4 December 16, 2022 2.5 Fourth Amendment to the Business Combination and Merger Agreement dated as of August 10, 2022 8-K 2.5 December 16, 2022 3.1 MicroAlgo Inc. Amended and Restated Articles of Incorporation 8-K 3.1 December 16, 2022 4.1 Specimen Ordinary Share Certificate 8-K 4.1 December 16, 2022 4.2* Description of SECURITIES 10.1 Form of Lock-Up Agreement 8-K 10.1 December 16, 2022 10.2 Form of Escrow Agreement 8-K 10.2 December 16, 2022 79 10.3 Form of Indemnification Agreement 8-K 10.3 December 16, 2022 10.4 Form of Registration Rights Agreement 8-K 10.4 December 16, 2022 10.5 Form of Non-Competition and Non-Solicitation Agreement 8-K 10.5 December 16, 2022 10.6 Form of Amendment to Backstop Agreement 8-K 10.6 December 16, 2022 14 Form of Code of Ethics S-1 14 February 3, 2021 21.1* List of Subsidiaries 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1† Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2† Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS XBRL Instance Document. X 101.SCH XBRL Taxonomy Extension Schema Document. X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB XBRL Taxonomy Extension Labels Linkbase Document. X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. X 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). X * Filed herewith † The certifications attached accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of MicroAlgo Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. Item 16. Form 10–K Summary. None. 80 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 29 , 2023 MicroAlgo Inc. /s/ Min Shu Min Shu Chief Executive Officer (Principal Executive Officer) /s/ Li He Li He Chief Financial Officer (Principal Financial and Accounting Office) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Min Shu Director, Chief Executive Officer March 29, 2023 Min Shu (Principal Executive Officer) /s/ Li He Chief Financial Officer March 29, 2023 Li He (Principal Financial and Accounting Officer) /s/ Shiwen Liu Chief Operating Officer March 29, 2023 Shiwen Liu /s/ Chengwei Yi Chief Technical Officer March 29, 2023 Chengwei Yi /s/ Jie Zhao Chairman of the Board of Directors March 29, 2023 Jie Zhao /s/ Shan Cui Independent Director March 29, 2023 Shan Cui /s/ Haixia Zhao Independent Director March 29, 2023 Haixia Zhao /s/ Wengang Kang Independent Director March 29, 2023 Wengang Kang 81 MICROALGO INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 6732 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the board of directors of MicroAlgo Inc. and subsidiaries (formerly known as Venus Acquisition Corporation) Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MicroAlgo Inc. and subsidiaries (formerly known as Venus Acquisition Corporation (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial positions of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ ONESTOP ASSURANCE PAC ONESTOP ASSURANCE PAC (id# 6732) We have served as the Company’s auditor since 2023. Singapore March 29, 2023 F- 2 MICROALGO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts expressed in US dollars (“$”) except for numbers of shares and par value) December 31, December 31, 2021 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 42,719,795 $ 42,746,270 Accounts receivable, net 2,767,271 2,602,448 Inventories 823,635 130,524 Prepaid services fees 3,940,948 3,722,985 Other receivables and prepaid expenses 425,865 266,855 Amount due from Parent - 5,741,573 Loans receivable 3,318,851 - Total current assets 53,996,365 55,210,655 PROPERTY AND EQUIPMENT, NET 73,534 145,320 OTHER ASSETS Prepaid expenses and deposits 204,480 184,054 Deferred merger costs 602,219 - Cost method investment 94,107 172,300 Intangible assets, net 4,373,001 964,341 Operating lease right-of-use assets 322,593 150,895 Goodwill 21,945,553 15,259,169 Total non-current assets 27,541,953 16,730,759 Total assets $ 81,611,852 $ 72,086,734 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 2,052,587 $ 2,041,951 Deferred revenues 1,911,831 1,608,977 Other payables and accrued liabilities 731,222 793,143 Amount due to a related party - 153,333 Amount due to Parent 16,955,054 - Operating lease liabilities-current 164,241 150,666 Taxes payable 148,751 55,365 Total current liabilities 21,963,686 4,803,435 OTHER LIABILITIES Operating lease liabilities - noncurrent 158,401 30,754 Deferred tax liabilities, net 846,410 241,085 Total other liabilities 1,004,811 271,839 Total liabilities 22,968,497 5,075,274 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY Preferred shares, $ 0.001 par value; 1,000,000 shares authorized; no share issued - - Ordinary shares, $ 0.001 par value, 50,000,000 shares authorized, 39,603,961 and 43,856,706 issued and outstanding as of December 31, 2021 and 2022 39,604 43,857 Additional paid-in capital 27,562,736 47,394,442 Retained earnings 26,483,410 19,141,699 Statutory reserves 1,420,145 1,798,310 Accumulated other comprehensive income (loss) 2,895,054 ( 1,622,503 ) Total MicroAlgo Inc. shareholders’ equity 58,400,949 66,755,805 NONCONTROLLING INTERESTS 242,406 255,655 Total equity 58,643,355 67,011,460 Total liabilities and shareholders’ equity $ 81,611,852 $ 72,086,734 The accompanying notes are an integral part of these consolidated financial statements. F- 3 MICROALGO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (Amounts expressed in US dollars (“$”) except for numbers of shares and par value) For the Years Ended December 31, 2021 2022 OPERATING REVENUES Products $ 34,359,251 $ 20,553,929 Services 47,676,038 66,578,301 Total operating revenues 82,035,289 87,132,230 COST OF REVENUES ( 48,918,412 ) ( 68,180,339 ) GROSS PROFIT 33,116,877 18,951,891 OPERATING EXPENSES Selling expenses ( 840,109 ) ( 560,453 ) General and administrative expenses ( 5,277,790 ) ( 5,131,699 ) Research and development expenses ( 16,590,757 ) ( 13,928,429 ) Impairment loss for goodwill ( 2,861,000 ) ( 5,276,951 ) Impairment loss for intangible assets - ( 2,038,809 ) Change in fair value of business acquisition payable 502,192 - Change in fair value of warrant liability 123,750 Total operating expenses ( 25,067,464 ) ( 26,812,591 ) INCOME (LOSS) FROM OPERATIONS 8,049,413 ( 7,860,700 ) OTHER INCOME (EXPENSES) Interest income 292,196 266,059 Income from short term investment 194,994 ( 158,220 ) Finance expenses ( 277,503 ) ( 65,982 ) Other income, net 310,225 334,057 Total other income, net 519,912 375,914 INCOME (LOSS) BEFORE INCOME TAXES 8,569,325 ( 7,484,786 ) BENEFIT OF (PROVISION FOR) INCOME TAX Current ( 364,499 ) ( 15,215 ) Deferred 279,680 580,008 Total (provision) benefit for income tax ( 84,819 ) 564,793 NET INCOME (LOSS) 8,484,506 ( 6,919,993 ) Less: Net (loss) income attributable to non-controlling interests ( 83,401 ) 43,553 NET INCOME (LOSS) ATTRIBUTABLE TO MICRO ALGO INC. $ 8,567,907 $ ( 6,963,546 ) NET INCOME (LOSS) 8,484,506 ( 6,919,993 ) OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment 1,147,887 ( 4,555,839 ) COMPREHENSIVE INCOME (LOSS) 9,632,393 ( 11,475,832 ) Less: Comprehensive (loss) income attributable to noncontrolling interests ( 77,298 ) 5,271 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO MICRO ALGO INC. $ 9,709,691 $ ( 11,481,103 ) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES Basic and diluted 39,603,961 39,860,291 EARNINGS PER SHARE Basic and diluted $ 0.22 $ ( 0.17 ) The accompanying notes are an integral part of these consolidated financial statements. F- 4 MICROALGO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Amounts expressed in US dollars (“$”) except for numbers of shares and par value) Accumulated Ordinary shares Additional Retained earnings other Shares Amount paid-in capital Statutory reserves Unrestricted comprehensive loss Noncontrolling interests Total BALANCE, December 31, 2020 39,603,961 $ 39,604 $ 27,562,736 $ 729,471 $ 18,606,177 $ 1,753,270 $ 319,653 $ 49,010,911 Noncontrolling interests acquired - - - - - - 51 51 Contribution by Parent - - - - - - - - Net income - - - - 8,567,907 - ( 83,401 ) 8,484,506 Statutory reserves - - - 690,674 ( 690,674 ) - - - Foreign currency translation - - - - - 1,141,784 6,103 1,147,887 BALANCE, December 31, 2021 39,603,961 $ 39,604 $ 27,562,736 $ 1,420,145 $ 26,483,410 $ 2,895,054 $ 242,406 $ 58,643,355 Disposal of noncontrolling interest - - - - - - 7,978 7,978 Shares issued in connection with reverse recapitalization 4,252,745 4,253 19,831,706 - - - - 19,835,959 Net loss - - - - ( 6,963,546 ) - 43,553 ( 6,919,993 ) Statutory reserves - - - 378,165 ( 378,165 ) - - - Foreign currency translation - - - - - ( 4,517,557 ) ( 38,282 ) ( 4,555,839 ) BALANCE, December 31, 2022 43,856,706 $ 43,857 $ 47,394,442 $ 1,798,310 $ 19,141,699 $ ( 1,622,503 ) $ 255,655 $ 67,011,460 The accompanying notes are an integral part of these consolidated financial statements. F- 5 MICROALGO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts expressed in US dollars (“$”) except for numbers of shares and par value) For the Years Ended December 31, 2021 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss) $ 8,484,506 $ ( 6,919,993 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,487,905 1,374,682 Provision for doubtful accounts, net 223,204 897,134 Deferred tax benefit ( 279,680 ) ( 580,008 ) Loss from short term investment - 158,220 Loss from disposal of property and equipment 32 - Goodwill impairment loss 2,861,000 5,276,951 Intangible assets impairment loss - 2,038,809 Gain from disposal of subsidiary - ( 9,751 ) Amortization of operating lease right-of-use assets 124,499 145,433 Amortization of debt discount 216,497 - Change in fair value of warrant liability - ( 123,750 ) Change in fair value of business acquisition payable ( 502,190 ) - Change in operating assets and liabilities: Accounts receivables 5,041,867 ( 958,720 ) Prepaid services fees ( 2,409,686 ) 255,109 Other receivables and prepaid expenses ( 236,953 ) 142,626 Inventories ( 641,688 ) 691,217 Prepaid expenses and deposits 10,563 18,697 Accounts payable 380,797 141,017 Deferred revenues 1,048,245 ( 343,796 ) Other payables and accrued liabilities 281,784 ( 54,589 ) Operating lease liabilities ( 124,450 ) ( 137,126 ) Taxes payable ( 693,806 ) ( 56,804 ) Net cash provided by operating activities 15,272,446 1,955,358 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short term investments ( 16,011,638 ) ( 16,323,138 ) Sale of short term investments 16,011,638 16,164,918 Purchases of cost method investment ( 93,002 ) ( 89,205 ) Payment for Shanghai Guoyu acquisition ( 3,100,054 ) - Cash received from acquisition 25,054 302 Purchases of property and equipment ( 36,010 ) ( 160,923 ) Loan to a third party ( 3,279,857 ) 3,172,000 Net cash (used in) provided by investing activities ( 6,483,869 ) 2,763,954 CASH FLOWS FROM FINANCING ACTIVITIES: Advance to Parent - ( 5,741,573 ) Repayment to Parent ( 4,485,078 ) ( 29,891,621 ) Proceeds from Parent 3,192,813 12,548,920 Deferred merger costs ( 556,567 ) - Proceeds from banking facility 1,182,468 - Payments to banking facility ( 3,182,468 ) - Proceeds from loan - a related party 870,518 - Payments to loan - a related party ( 870,518 ) - Cash received from recapitalization of MicroAlgo - 20,661,356 Capital contribution from noncontrolling interests 51 - Net cash used in financing activities ( 3,848,781 ) ( 2,422,918 ) EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS 675,890 ( 2,269,919 ) CHANGE IN CASH AND CASH EQUIVALENTS 5,615,686 26,475 CASH AND CASH EQUIVALENTS, beginning of year 37,104,109 42,719,795 CASH AND CASH EQUIVALENTS, end of year $ 42,719,795 $ 42,746,270 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income tax $ 675,478 $ 185,906 Cash paid for interest $ 17,536 $ 2,992 NON-CASH INVESTING AND FINANCING ACTIVITIES: Deferred offering cost to offset proceed from recapitalization $ - $ 548,586 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 96,398 $ 110,352 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Notes to Consolidated Financial Statements (Amounts expressed in US dollars (“$”) except for numbers of shares and par value) Note 1 — Nature of business and organization MicroAlgo Inc. (“MicroAlgo” or the “Company”) (f/k/a Venus Acquisition Corporation (“Venus”)), a Cayman Islands exempted company, entered into the Business Combination and Merger Agreement dated June 10, 2021 (as amended on January 24, 2022, August 2, 2022, August 3, 2022 and August 10, 2022, the “Merger Agreement”), by and among WiMi Hologram Cloud Inc. (“WiMi” or the “Majority Shareholder”), Venus, Venus Merger Sub Corporation (“Venus Merger Sub”), a Cayman Islands exempted company incorporated for the purpose of effectuating the Business Combination, and VIYI Algorithm Inc. (“VIYI”), a Cayman Islands exempted company. On December 9, 2022, in accordance with the Merger Agreement, the closing of the business combination (the “Closing”) occurred, pursuant to which Venus issued 39,603,961 ordinary shares to VIYI shareholders. As a result of the consummation of the business combination, VIYI is now a wholly-owned subsidiary of the Company, which has changed its name to MicroAlgo Inc. The business combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Venus will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the holders of VIYI expecting to have a majority of the voting power of the post-combination company, VIYI senior management comprising substantially all of the senior management of the post-combination company, the relative size of VIYI compared to Venus, and VIYI operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the business combination will be treated as the equivalent of VIYI issuing shares for the net assets of Venus, accompanied by a recapitalization. The net assets of Venus will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the business combination will be those of VIYI. (See Note 3 for details) VIYI Algorithm Inc. (“VIYI”), is a company incorporated on September 24, 2020 under the laws of the Cayman Islands. WiMi Hologram Cloud Inc. (“WiMi Inc.” or the “Parent”) which primarily engaged in augmented reality (“AR”) advertising and entertainment services, is VIYI’s parent company. VIYI, its consolidated subsidiaries, its former variable interest entity (“VIE”) and VIE’s subsidiaries (collectively referred to as the “Company”) is primarily engaged in providing central processing algorithm services. In connection with a contemplated merger of MicroAlgo, the following steps were undertaken: (1) Reorganization of Shenzhen Yitian: Shenzhen Yitian Internet Technology Co., Ltd. (“Shenzhen Yitian”) was established on March 8, 2011 and was acquired by the Parent’s VIE, WiMi Cloud Software Co., Ltd. (“Beijing WiMi”) in 2015. Shenzhen Yitian and subsidiaries are in the PRC and mainly engaged in provide algorithm services in advertising and gaming industry. On December 24, 2020, Beijing WiMi transferred 99.0 % and 1.0 % equity interests in Shenzhen Yitian to Ms. Yao Zhaohua and Ms. Sun Yadong for consideration of RMB 1 and RMB 1, respectively, pursuant to share transfer agreements. Ms. Yao Zhaohua and Ms. Sun Yadong and the original shareholders of Shenzhen Yitian entered into contractual agreement (see contractual agreements below) with Shenzhen Weiyixin on December 24, 2020, which granted Shenzhen Weiyixin effective control of Shenzhen Yitian from December 24, 2020 and enable Shenzhen Weiyixin to receive all the expected residual returns of Shenzhen Yitian and its subsidiaries. The reorganization was completed on December 24, 2020. Shenzhen Weiyixin becomes the primary beneficiary of Shenzhen Yitian and its subsidiaries. On January 11, 2021, Shenzhen Yitian transferred its 100 % equity interest of Weidong and subsidiaries to Shenzhen Weiyixin; its 100 % equity interest YY Online to Weidong and its 100 % equity interest in Korgas 233 and Wuhan 233 to YY Online. As a result, Wuhan 233 and Korgas 233 became wholly owned subsidiaries of YY Online and YY Online became wholly owned subsidiary of Weidong and Weidong became wholly owned subsidiary of Shenzhen Weiyixin. F- 7 All of these entities are under common control of shareholders of VIYI, which results in the consolidation of Shenzhen Yitian and its subsidiaries which have been accounted for as a reorganization of entities under common control at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company. On July 1, 2021, Weidong acquired 99% interest of Shanghai Guoyu Information Technologies Co., Ltd (“Shanghai Guoyu”). The remaining 1% of Shanghai Guoyu is acquired by YY Online. The aggregate purchase price was $3.0 million (RMB 20,000,000). On July 19, 2021 Shanghai Guoyu established 100% owned subsidiary Kashi Guoyu Information Technologies Co., Ltd (“Kashi Guoyu”). On July 14, 2021, Weidong transferred its 100% equity interest of Horgas 233 and Horgas Weidong to Shanghai Guoyu. On July 19, 2021, Viwo Technology established a fully owned subsidiary Shenzhen Viwotong Technology Co., Ltd. (“Viwotong Tech”) in Shenzhen to support its operations. On November 19, Viwotong Tech acquired 100% equity interests of Guangzhou Tapuyu Internet Technology Co., Ltd. (“Tapuyu”), a provider of advertising services, for RMB 2 (approximately USD 0.3). On December 7, 2021, Viwotong Tech purchased Pengcheng Keyi (Xi’an) Intelligence Technology Co., Ltd. (“Pengcheng Keyi”), a provider of testing equipment development and sales, for RMB 2 (approximately USD 0.3). On July 1, 2022, Viwo Technology Inc. entered into an equity transfer agreement to transfer 99.0% and 1.0% of the issued share capital of Pengcheng Keyi to two unrelated individuals at RMB 1.0 and RMB 0.1(USD$ 0.01), respectively. (See Note 4 for details) Due to the business strategy adjustment, Shenzhen Yitian and its subsidiaries no longer operate the business involving foreign investment restrictions since March 1, 2022, therefore VIYI is able to have direct equity interest in Shenzhen Yitian and its subsidiaries. On April 1, 2022, VIYI terminated the agreements under the VIE structure with Shenzhen Yitian. Shenzhen Yitian’s original shareholders transferred their respective ownership to VIYI WFOE and VIYI WFOE obtained 100% equity control of Shenzhen Yitian and its subsidiaries on April 1, 2022. The reorganization has no effect on the consolidated financial statements as Shenzhen Yitian has been under common control of VIYI Cayman that there is no change of reporting entities. On April 12, 2022, VIYI Technology Limited (“VIYI Ltd”) set up a joint venture company, Vize Technology Limited (“Vize”), in Hong Kong, and VIYI Ltd has a 55% equity interest in Vize. It had no operation as of December 31, 2022. On August 15, 2022, Vize established a fully owned subsidiary Shenzhen ViZeTong Technology Co., Ltd. (“ViZeTong”) in Shenzhen. ViZeTong had no material operation as of December 31, 2022. (2) Allocation of expenses The accompanying consolidated financial statements include the Company’s direct expenses, as well as an allocation of certain general and administrative and financial expenses paid by the Parent. General and administrative expenses consist primarily of share-based compensation expense, salary and related expenses of senior management and VIYI employees, shared management expenses, including accounting, consulting, legal support services, and other expenses to provide operating support to the related businesses. These allocations are made using a proportional cost allocation method by considering the proportion of revenues, headcounts as well as estimates of time spent on the provision of services attributable to the Company and the related expenses resulted from the acquisition of subsidiary. The general and administrative expenses allocated from the Parent amounted to $ 92,759 and nil 0 for the years ended December 31, 2021 and 2022, respectively. Income tax provision reflected in the Company’s consolidated statement of income is calculated based on a separate return basis as the Company’s subsidiaries all filed separate tax returns. Management believes the basis and amounts of these allocations are reasonable. While the expenses allocated to the Company for these items are not necessarily indicative of the expenses that would have been incurred if the Company had been a separate, stand-alone entity, the Company does not believe that there is any significant difference between the nature and amounts of these allocated expenses and the expenses that would have been incurred if the Company had been a separate, stand-alone entity. The accompanying consolidated financial statements reflect the activities of VIYI and each of the following entities as of December 31, 2022: F- 8 Schedule of accompanying consolidated financial statements Name Background Ownership VIYI Technology Inc. (“VIYI”) ● A Cayman Islands company Incorporated on September 24, 2020 100% owned by MicroAlgo VIYI Technology Ltd. (“VIYI Ltd”) ● A Hong Kong company 100% owned by VIYI ● Incorporated on October 9, 2020 ● A holding company Shenzhen Weiyixin Technology Co., Ltd. (“Shenzhen Weiyixin”or “VIYI WFOE”) ● A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”) 100% owned by VIYI Ltd ● Incorporated on November 18, 2020 ● A holding company Shenzhen Yitian Internet Technology Co., Ltd. (“Shenzhen Yitian”) ● A PRC limited liability company 100% owned by Beijing WiMi before December 24, 2020 VIE of Shenzhen Weiyixin starting on December 24, 2020. 100% owned by Shenzhen Weiyixin starting April 1, 2022 ● Incorporated on March 08, 2011 ● Primarily engages central processing algorithm in mobile games industry Korgas 233 Technology Co., Ltd. (“Korgas 233”) ● A PRC limited liability company 100% owned by Shenzhen Yitian before January 11, 2021; 100% owned by YY Online after January 11, 2021 ● Incorporated on September 15, 2017 ● Primarily engages in central processing algorithm in mobile games industry Shenzhen Qianhai Wangxin Technology Co., Ltd. (“Shenzhen Qianhai”) ● A PRC limited liability company Incorporated on October 16, 2015 Primarily engages in central processing algorithm in advertising industry 100% owned by Shenzhen Yitian Shenzhen Yiyou Online Technology Co., Ltd. (“YY Online”) ● A PRC limited liability company Incorporated on January 14, 2019 Primarily engages in central processing algorithm in advertising industry 100% owned by Shenzhen Yitian before January 11, 2021; 100% owned by Weidong after January 11, 2021 Wuhan 233 Interactive Entertainment Technology Co., Ltd. (“Wuhan 233”) ● A PRC limited liability company 100% owned by Shenzhen Yitian before January 11, 2021; 100% owned by YY Online after January 11, 2021 ● Incorporated on May 15, 2020 ● Primarily engages in central processing algorithm in mobile games industry Weidong Technology Co., Ltd. (“Weidong”) ● A PRC limited liability company 100% owned by Shenzhen Yitian before January 11, 2021; 100% owned by Shenzhen Weiyixin after January 11, 2021 ● Incorporated on October 28, 2020 ● Primarily engages in central processing algorithm in advertising industry F- 9 Name Background Ownership Korgas Weidong Technology Co., Ltd. (“Korgas Weidong”) ● A PRC limited liability company 100% owned by Weidong ● Incorporated on October 30, 2020 ● Primarily engages in central processing algorithm in advertising industry Fe-da Electronics Company Private Limited (“Fe-da Electronics”) ● A Singapore company 100% owned by VIYI Acquired in September 2020 ● Incorporated on January 9, 2009 ● Primarily engages in resale of intelligent chips and customization of central processing units Excel Crest Limited (“Excel Crest”) ● A Hong Kong company 100% owned by Fe-da Electronics ● Incorporated on September 10, 2020 ● Support the daily operations of Fe-da Electronics in Hong Kong Shanghai Weimu Technology Co., Ltd. (“Shanghai Weimu”) ● A PRC limited liability company 58% owned by Shenzhen Weiyixin ● Incorporated on November 30, 2020 ● Engages in providing software support services Wisdom Lab Inc. (“Wisdom Lab”) ● A Cayman Islands company 100% owned by Fe-Da Electronics ● Incorporated on May 6, 2021 ● Engages in software solution for intelligent chips Viwo Technology Limited. (“Viwo Tech”) ● A Hong Kong company 55% owned by VIYI Ltd ● Incorporated on April 15, 2021 ● Engages in intelligent chips design ● No operations as of June 30, 2022 Shenzhen Viwotong Technology Co., Ltd. (“Viwotong Tech”) ● A PRC limited liability company 100% owned by Viwo Tech ● Incorporated on July 19, 2021 Shanghai Guoyu Information Technology Co., Ltd. (“Shanghai Guoyu”) ● A PRC limited liability company 99% owned by Weidong, 1% owned by YY Online ● Incorporated on March 18, 2019 ● Engages in R&D and application of intelligent visual algorithm technology Kashi Guoyu Information Technology Co., Ltd. (“Kashi Guoyu”) ● A PRC limited liability company 100% owned by Shanghai Guoyu ● Incorporated on July 23, 2021 ● Engages in R&D and application of intelligent visual algorithm technology F- 10 Name Background Ownership Guangzhou Tapuyu Internet Technology Co., Ltd. (“Tapuyu”) ● A PRC limited liability company 100% owned by Viwotong Tech ● Incorporated on June 22, 2021 ● Engages in central processing algorithm in advertising industry Guangzhou Bimai Network Technology Co., Ltd. (“Bimai”) ● A PRC limited liability company 100% owned by Viwotong Tech Acquired in September 2022 ● Incorporated on April 28, 2021 ● Engages in central processing algorithm in advertising industry ViZe Technology Limited (“ViZe”) ● A Hong Kong company 55% owned by VIYI Ltd. ● Incorporated on April 12, 2022 ● No activities as of December 31, 2022 Shenzhen ViZeTong Technology Co., Ltd. (“ViZeTong”) ● A PRC limited liability company 100% owned by ViZe ● Incorporated on August 15, 2022 ● No activities as of December 31, 2022 Contractual Arrangements (Terminated April 1, 2022) Due to legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include the operations of internet content providers, prior to April 1, 2022, the Company operates its internet and other businesses in which foreign investment is restricted or prohibited in the PRC through certain PRC domestic companies. As such, Shenzhen Yitian (from December 24, 2020) is controlled through contractual agreements in lieu of direct equity ownership by the Company or any of its subsidiaries. Shenzhen Yitian and its subsidiary used to provide Internet information consulting services which required the possession of the Internet Content Provision (“ICP”) licenses and were subject to foreign investment restrictions under relevant PRC laws and regulations. Due to subsequent business strategy adjustment, Shenzhen Yitian and its subsidiary have terminated such Internet information consulting services since March 1, 2022. As a result of the termination of such services, Shenzhen Yitian and its subsidiary were later notified by relevant PRC government authority that the ICP licenses were no longer required and their business was no longer subject to foreign investment restrictions, therefore VIYI can own direct equity interest in Shenzhen Yitian and its subsidiaries. VIYI terminated the agreements under the VIE structure with Shenzhen Yitian, and VIYI’s WFOE achieved 100% equity control of Shenzhen Yitian and its subsidiaries on April 1, 2022. VIYI now controls and receives the economic benefits of Shenzhen Yitian and its subsidiaries’ business operation through equity ownership. Shenzhen Yitian The contractual arrangements consist of a series of four agreements, shareholders power of attorney and irrevocable commitment letters (collectively the “Contractual Arrangements”, which were signed on December 24, 2020). The significant terms of the Contractual Agreements are as follows: Exclusive Business Cooperation Agreement Under the exclusive business cooperation agreement between Shenzhen Weiyixin and Shenzhen Yitian dated December 24, 2020, Shenzhen Weiyixin has the exclusive right to provide to Shenzhen Yitian consulting and services related to, among other things, use of software, operation maintenance, product development, and management and marketing consulting. Shenzhen Weiyixin has the exclusive ownership of intellectual property rights created as a result of the performance of this agreement. Shenzhen Yitian agrees to pay Shenzhen Weiyixin service fee at an amount equal to the consolidated net income after offsetting previous year’s loss (if any). This agreement remained effective until April 1, 2022 when the agreement was terminated by Shenzhen Weiyixin. F- 11 Exclusive Share Purchase Option Agreement Pursuant to the exclusive share purchase option agreement dated December 24, 2020, by and among Shenzhen Weiyixin, Shenzhen Yitian and each of the shareholders of Shenzhen Yitian, each of the shareholders of Shenzhen Yitian irrevocably granted Shenzhen Weiyixin an exclusive call option to purchase, or have its designated person(s) to purchase, at its discretion, all or part of their equity interests in Shenzhen Yitian, and the purchase price shall be the lowest price permitted by applicable PRC law. Each of the shareholders of Shenzhen Yitian undertakes that, without the prior written consent of Shenzhen Weiyixin or us, they may not increase or decrease the registered capital, amend its articles of association or change registered capital structure. This agreement will remain effective unless terminated in the event that the entire equity interests held by registered shareholders in Shenzhen Yitian have been transferred to Shenzhen Weiyixin or until the date when it is terminated by Shenzhen Weiyixin. Any transfer of shares pursuant to this agreement would be subject to PRC regulations and to any changes required thereunder. Equity Interest Pledge Agreement Pursuant to the equity interest pledge agreement dated December 24, 2020, by and among Shenzhen Weiyixin, Shenzhen Yitian and the shareholders of Shenzhen Yitian, the shareholders of Shenzhen Yitian pledged all of their equity interests in Shenzhen Yitian to Shenzhen Weiyixin to guarantee their and Shenzhen Yitian’s obligations under the contractual arrangements including the exclusive consulting and services agreement, the exclusive option agreement, the power of attorney and this equity interest pledge agreement, as well as any loss incurred due to events of default defined therein and all expenses incurred by Shenzhen Weiyixin in enforcing such obligations of Shenzhen Yitian or its shareholders. The shareholders of Shenzhen Yitian agree that, without Shenzhen Weiyixin’s prior written approval, during the term of the equity interest pledge agreement, they will not dispose of the pledged equity interests or create or allow any other encumbrance on the pledged equity interests. The pledge under the equity interest pledge agreement shall take effect upon the completion of registration with the relevant administration for industry and commerce, which was completed as of January 29, 2021, and shall remain valid until the earlier of (1) the completion of all contractual obligations and the repayment of all secured debts, or (2) the time when the pledgee and/or the appointed person(s) have decided, subject to the PRC laws, to purchase the entire equity interests of the pledger in Shenzhen Yitian, and such equity interests of Shenzhen Yitian have been transferred to the pledgee and/or the appointed person(s) in accordance with the law such that the pledgee and/or the appointed person(s) may lawfully engage in the business of Shenzhen Yitian. Loan Agreement Pursuant to the loan agreement dated December 24, 2020, Shenzhen Weiyixin agreed to provide loans to the registered shareholders of Shenzhen Yitian, to be used exclusively as investment in Shenzhen Yitian. The loan must not be used for any other purposes without the relevant lender’s prior written consent. The term of the loan agreement commences from the date of the agreement and ends on the date the lender exercises its exclusive option under the relevant exclusive share purchase option agreement, or when certain defined termination events occur, such as if the lender sends a written notice demanding repayment to the borrower, or upon the default of the borrower, whichever is earlier. After the lender exercises its exclusive option, the borrower may repay the loan by transferring all of its equity interest in the relevant Onshore Holdco to the lender, or a person or entity nominated by the lender, and use the proceeds of such transfer as repayment of the loan. If the proceeds of such transfer are equal to or less than the principal of the loan under the loan agreement, the loan is considered interest-free. If the proceeds of such transfer is higher than the principal of the loan under the loan agreement, any surplus is considered interest for the loan. Power of Attorney Pursuant to the power of attorney dated December 24, 2020, by Shenzhen Weiyixin and each shareholder of Shenzhen Yitian, respectively, each shareholder of Shenzhen Yitian irrevocably authorized Shenzhen Weiyixin or any person(s) designated by Shenzhen Weiyixin to exercise such shareholder’s voting rights in Shenzhen Yitian, including, without limitation, the power to participate in and vote at shareholder’s meetings, the power to nominate directors and appoint senior management, the power to sell or transfer such shareholder’s equity interest in Shenzhen Yitian, and other shareholders’ voting rights permitted by PRC law and the Articles of Association of Shenzhen Yitian. The power of attorney remains irrevocable and continuously valid from the date of execution so long as each shareholder remains as a shareholder of Shenzhen Yitian. F- 12 Spousal Consent Letters Pursuant to these letters, the spouses of the applicable shareholders of Shenzhen Yitian unconditionally and irrevocably agreed that the equity interest in Shenzhen Yitian held by them and registered in their names will be disposed of pursuant to the equity interest pledge agreement, the exclusive option agreement, and the power of attorney. Each of their spouses agreed not to assert any rights over the equity interest in Shenzhen Yitian held by their respective spouses. In addition, in the event that any spouse obtains any equity interest in Shenzhen Yitian held by his or her spouse for any reason, he or she agreed to be bound by the contractual arrangements. Based on the foregoing contractual arrangements, which grant Shenzhen Weiyixin effective control of Shenzhen Yitian and enable Shenzhen Weiyixin to receive all of their expected residual returns, the Company accounts for Shenzhen Yitian as a VIE on December 24, 2020. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company. Due to the business strategy adjustment, Shenzhen Yitian and its subsidiaries no longer operate the business involving foreign investment restrictions since March 1, 2022, therefore VIYI is able to have direct equity interest in Shenzhen Yitian and its subsidiaries. On April 1, 2022, VIYI terminated the agreements under the VIE structure with Shenzhen Yitian. Shenzhen Yitian’s original shareholders transferred their respective ownership to VIYI WFOE and VIYI WFOE obtained 100% equity control of Shenzhen Yitian and its subsidiaries on April 1, 2022. Note 2 — Summary of significant accounting policies Basis of presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), regarding financial reporting, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Principles of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries, which include the wholly-foreign owned enterprise (“WFOE”) and variable interest entity (“VIE”) and VIE’s subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation. Use of estimates and assumptions The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property and equipment and intangible assets, impairment of long-lived assets and goodwill, allowance for doubtful accounts, provision for contingent liabilities, revenue recognition, right-of-use assets and lease liabilities, deferred taxes and uncertain tax position, the fair value of contingent consideration related to business acquisitions and allocation of expenses from the Parent and Beijing WiMi. Actual results could differ from these estimates. F- 13 Foreign currency translation and other comprehensive income (loss) The Company uses U.S. dollar (“USD”) as its reporting currency. The functional currency of VIYI is Hong Kong Dollar, its subsidiary in Singapore is U.S. dollar, and its other subsidiaries which are incorporated in PRC are RMB, respectively, which are their respective local currencies based on the criteria of ASC 830, “Foreign Currency Matters”. In the consolidated financial statements, the financial information of the Company and other entities located outside of the PRC has been translated into RMB. Assets and liabilities are translated at the exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates, and revenues, expenses, gains and losses are translated using the average rate for the period. Translation adjustments included in accumulated other comprehensive income amounted to $ 2,895,054 and negative $ 1,622,503 as of December 31, 2021 and 2022, respectively. The balance sheet amounts, with the exception of shareholders’ equity, at December 31, 2021 and 2022 were translated at USD 1.00 to HKD 7.7981 and to HKD 7.7965 , respectively. The average translation rates applied to statement of income accounts for the years ended December 31, 2021 and 2022 were USD 1.00 to HKD 7.7729 and to HKD 7.8311 , respectively. The balance sheet amounts, with the exception of shareholders’ equity at December 31, 2021 and 2022 were translated at USD 1.00 to RMB 6.3757 and to RMB 6.9646 respectively. The average translation rates applied to statement of income accounts for the years ended December 31, 2021 and 2022 were USD 1.00 to RMB 6.4515 and to RMB 6.7261 , respectively. The shareholders’ equity accounts were stated at their historical rate. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Cash and cash equivalents Cash and cash equivalents primarily consist of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use. Cash and cash equivalents also consist of funds earned from the Company’s operating revenues which were held at third party platform fund accounts which are unrestricted as to immediate use or withdraw. The Company maintains most of its bank accounts in the PRC, HK and Singapore. Accounts receivable, net Accounts receivable include trade accounts due from customers. Accounts are considered overdue after 90 days. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate and provides allowance when necessary. The allowance is based on management’s best estimates of specific losses on individual customer exposures, as well as the historical trends of collections. Account balances are charged off against the allowance after all means of collection have been exhausted and the likelihood of collection is not probable. For the year ended December 31, 2021 and 2022, the Company made $ 225,858 and nil 0 allowance for doubtful accounts for accounts receivable, respectively. Short term investments Short-term investments are investments in wealth management product with underlying in cash, bonds and equity funds. The investments can be redeemed any time and the investment was recorded at fair value. The gain (loss) from sale of any investments and fair value change are recognized in the statements of income and comprehensive income. Inventories Inventories are comprised of finished goods and are stated at the lower of cost or net realizable value using the weighted average method. Management reviews inventories for obsolescence and cost in excess of net realizable value periodically when appropriate and records a reserve against the inventory when the carrying value exceeds net realizable value. As of December 31, 2021 and 2022, the Company determined that no allowance was necessary. F- 14 Prepaid services fees Prepaid services fees are mainly payments made to vendors or services providers for future services. These amounts are refundable and bear no interest. Prepaid services fees also include money deposited with certain channel providers to ensure the contents of the advertisement do not violate the terms of the channel providers. The deposits usually have one year term and are refundable upon contract termination. Management reviews its prepaid services fees on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. As of December 31, 2021 and 2022, no allowance was deemed necessary. Other receivables and prepaid expenses Other receivables that are short term in nature include employee advances to pay certain of the Company’s expenses in the normal course of business and certain short-term deposits. Prepaid expenses included utilities or system services. An allowance for doubtful accounts may be established and recorded based on management’s assessment of the likelihood of collection. Management reviews these items on a regular basis to determine if the allowance for doubtful accounts is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. No allowance was required as of December 31, 2021 and 2022. Loans receivable Loans receivable represents loans to a third party under the terms of the agreements signed in November and December 2021 at 3.85 % interest per annum. The loans have terms of one-year and are collateralized by real estate property for approximately RMB 24.0 million (USD 3.8 million). Management regularly reviews the aging of loans receivable and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Loans receivable considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of December 31, 2022, no allowance was deemed necessary. Full amount of loans receivable was subsequently collected in May 2022. Property and equipment, net Property and equipment are stated at cost less accumulated depreciation and impairment if applicable. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with 5% residual value. The estimated useful lives are as follows: Schedule of estimated useful lives of property and equipment, net Useful Life Office equipment 3 years Office furniture and fixtures 3 – 5 years Leasehold improvements lesser of lease term or expected useful life Deferred merger costs Prepaid merger costs consist primarily of expenses paid to attorneys, consultants, underwriters, and etc. related to its merger transaction. The balance will be offset with the proceeds received after the close of the offering. Cost method investments The Company accounts for investments with less than 20% of the voting shares and does not have the ability to exercise significant influence over operating and financial policies of the investee using the cost method. The Company records cost method investments at the historical cost in its consolidated financial statements and subsequently records any dividends received from the net accumulated earrings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reduction in the cost of the investments. F- 15 Cost method investments are evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. No event had occurred and indicated that other-than-temporary impairment existed and therefore the Company did not record any impairment charges for its investments for the year ended December 31, 2021 and 2022. Intangible assets, net The Company’s intangible assets with definite useful lives primarily consist of copyrights, non-compete agreements, and technology know-hows. Identifiable intangible assets resulting from the acquisitions of subsidiaries accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company typically amortizes its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated useful lives. The estimated useful lives are as follows: Schedule of estimated useful lives of intangible assets, net Useful Life Customer relationship 4 years Technology know-hows 5 years Non-compete agreements 6 years Software copyright 6 years Goodwill Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive loss. Impairment losses on goodwill are not reversed. The Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the option to assess qualitative factors to determine whether it is necessary to perform further impairment testing in accordance with ASC 350-20, as amended by ASU 2017-04. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the impairment test described below is required. The Company compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, impairment is recognized for the difference, limited to the amount of goodwill recognized for the reporting unit. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow. Impairment for long-lived assets Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. For the years ended December 31, 2021 and 2022, no impairment of long-lived assets was recognized. F- 16 Business combination The purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expenses in the Company’s consolidated statements of operations. The results of operations of the acquired business are included in the Company’s operating results from the date of acquisition. Fair value measurement The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow: ● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. ● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Warrants liabilities The Company accounts for warrants (Public Warrants or Private Warrants) as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480 and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations. The Company has elected to account for its Public Warrants as equity and the Private Warrants as liabilities. Revenue recognition The Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC Topic 606). The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identifies the contract with the customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocates the transaction price to the respective performance obligations in the contract, and (v) recognizes revenue when (or as) the Company satisfies the performance obligation. F- 17 (i) Central Processing Advertising Algorithm Services — Advertising display services For the advertising algorithm advertising display services, the Company’s performance obligation is to identify advertising spaces, embed images or videos into films, shows and short form videos that are hosted by leading online streaming platforms in China. Revenue is recognized at a point in time when the related services have been delivered based on the specific terms of the contract, which are commonly based on specific action (i.e., cost per impression (“CPM”) for online display). The Company enters into advertising contracts with advertisers where the amounts charged per specific action are fixed and determinable, the specific terms of the contracts were agreed on by the Company, the advertisers and channel providers, and collectability is probable. Revenue is recognized on a CPM basis as impressions. The Company considers itself as provider of the services as it has control of the specified services and products at any time before it is transferred to the customers which is evidenced by (1) the Company is primarily responsible to its customers for products and services offered where the products were designed in house and the Company has customer services team to directly serve the customers; and (2) having latitude in establish pricing. Therefore the Company acts as the principal of these arrangements and reports revenue earned and costs incurred related to these transactions on a gross basis. — Performance-based advertising service The Company provides central processing algorithm performance-based advertising services for its customers, which enable the customers to get the optimal business opportunities. The Company’s performance obligation is to help customers to accurately match consumers and traffic users, and thereby increasing the conversion rate of product sale using its proprietary data optimization algorithms. The Company’s revenue is recognized at a point when an ender user completes a transaction at a rate specified in contract. Related service fees are generally billed monthly, based on a per transaction basis. The Company considers itself as provider of the services as it has control of the specified services and products at any time before it is transferred to the customers which is evidenced by (1) it is primarily responsible to its customers for the services offered where the algorithms and data optimization were designed and performed in house and it has customer services team to directly serve the customers; and (2) having latitude in establish pricing. Therefore, VIYI acts as the principal of these arrangements and reports revenue earned and costs incurred related to these transactions on a gross basis. In addition, through the Company’s data algorithm optimization, it is able to identify certain end user needs and it facilitates certain value added services to the end users. The Company engages third party services provider to perform the services. The Company concludes that it does not control the services as the third party service provider is responsible for providing the service and its responsibility is merely to facilitate the provision of these value added service to the end users and charges a fee. As such the Company recorded revenue from the value added services on a net basis when the services is provided by third party service provider. (ii) Mobile Games Services The Company generates revenue from jointly operated mobile game publishing services and the licensed out games. In accordance with ASC 606, Revenue Recognition: Principal Agent Considerations, the Company evaluates agreements with the game developers, distribution channels and payment channels in order to determine whether or not the Company acts as the principal or as an agent in the arrangement with each party respectively. The determination of whether to record the revenues gross or net is based on whether the Company’s promise to its customers is to provide the products or services or to facilitate a sale by a third party. The nature of the promise depends on whether the Company controls the products or services prior to transferring it. Control is evidenced by if the Company is primarily responsible for fulling the provision of services and has discretion in establishing the selling price. When the Company controls the products or services, its promise is to provide and deliver the products and revenue is presented gross. When the Company does not control the products, the promise is to facilitate the sale and revenue is presented net. F- 18 — Jointly operated mobile game publishing services The Company offers publishing services for mobile games developed by third-party game developers. The Company acted as a distribution channel that it will publish the games on their own app or a third-party owned app or website, named game portals. Through these game portals, game players can download the mobile games to their mobile devices and purchase coins, the virtual currency, for in game premium features to enhance their game playing experience. The Company contracts with third-party payment platforms for collection services offered to game players who have purchased coins. The third-party game developers, third-party payment platforms and the co-publishers are entitled to profit sharing based on a prescribed percentage of the gross amount charged to the game players. The Company’s obligation in the publishing services is completed at a point in time when the game players made a payment to purchase coins. With respect to the publishing services arrangements between the Company and the game developer, the Company considered that the Company does not control the services as evidenced by (i) developers are responsible for providing the game product desired by the game players; (ii) the hosting and maintenance of game servers for running the online mobile games is the responsibility of the third-party platforms; (iii) the developers or third-party platforms have the right to change the pricing of in game virtual items. The Company’s responsibilities are publishing, providing payment solution and market promotion service, and thus the Company views the game developers to be its customers and considers itself as the facilitator of the game developers in the arrangements with game players. Accordingly, the Company records the game publishing service revenue from these games, net of amounts paid to the game developers. — Licensed out mobile games The Company also licenses third parties to operate its mobile games developed internally through mobile portal and receives revenue from the third-party licensee operators on a monthly basis. The Company’s performance obligation is to provide mobile games to game operators which enable players of the mobile games to make in game purchases and the Company recognized revenue at a point in time when game players completed the purchases. The Company records revenues on a net basis, as the Company does not have the control of the services provided as it does not have the primary responsibility for fulfilment nor does not have the right to change the pricing of the game services. (iii) Sale of intelligent chips Starting in September 2020, the Company has also been engaged in resale of intelligent chips products and accessories. The Company typically enters into written contracts with its customer where the rights of the parties, including payment terms, are identified and sales prices to the customers are fixed with no separate sales rebate, discount, or other incentive and no right of return exists on sales of inventory. The Company’s performance obligation is to deliver products according to contract specifications. The Company recognizes gross product revenue at a point in time when the control of products or services are transferred to customers. To distinguish a promise to provide products from a promise to facilitate the sale from a third party, the Company considers the guidance of control in ASC 606-10-55-37A and the indicators in 606-10-55-39. The Company considers this guidance in conjunction with the terms in the Company’s arrangements with both suppliers and customers. In general, the Company controls the products as it has the obligation to (i) fulfil the products delivery and (ii) bear any inventory risk as legal owners. In addition, when establishing the selling prices for delivery of the resale products, the Company has control to set its selling price to ensure it would generate profit for the products delivery arrangements. The Company believes that all these factors indicate that the Company is acting as a principal in this transaction. As a result, revenue from the sales of products is presented on a gross basis. (iv) Revenue from software development The Company also designs software for central processing units based on customers’ specific needs. The contract is typically fixed priced and does not provide any post contract customer support or upgrades. The Company’s performance obligation is to design, develop, test and install the related software for customers, all of which are considered one performance obligation as the customers do not obtain benefit for each separate service. The duration of the development period is short, usually less than one year. F- 19 The Company’s revenue from software development contracts is generally recognized over time during the development period and the Company has no alternative use of the customized software and application without incurring significant additional costs. Revenue is recognized based on the Company’s measurement of progress towards completion based on output methods when the Company could appropriately measure the customization progress towards completion by reaching certain milestones specified in contracts. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period. Contract balances: The Company records receivable related to revenue when it has an unconditional right to invoice and receive payment. Payments received from customers before all the relevant criteria for revenue recognition met are recorded as deferred revenue. The Company’s disaggregated revenue streams in consideration of the Company’s type of goods and services and sales channels are as follows: Schedule of disaggregation of revenue December 31, December 31, 2021 2022 Central processing advertising algorithm services $ 40,229,589 $ 66,399,113 Mobile games 2,092,377 179,188 Sales of intelligent chips 34,319,479 20,533,929 Software development 5,393,844 - Total revenues $ 82,035,289 $ 87,132,230 The Company’s revenue by timing of transfer of goods or services are summarized below: Schedule of revenue by timing of transfer of goods or services December 31, December 31, 2021 2022 Goods and services transferred at a point in time $ 76,641,445 $ 87,132,230 Services transferred over time 5,393,844 - Total revenues $ 82,035,289 $ 87,132,230 The Company’s revenue by geographic locations are summarized below: Schedule of revenue by geographic locations December 31, December 31, 2021 2022 Mainland PRC revenues $ 42,372,826 $ 66,751,637 Hong Kong revenues 5,393,844 - International revenues 34,268,619 20,380,593 Total revenues $ 82,035,289 $ 87,132,230 Cost of revenues Cost of revenue for central processing algorithm services comprised of costs paid to channel distributors based on the sales agreements, shared costs with content providers based on the profit sharing arrangements, third party consulting services expenses and compensation expenses for the Company’s professionals. For intelligent chip and services, the cost of revenue consist primarily of the costs of products sold and third party software development costs. F- 20 Cost allocation Cost allocation include allocation of certain general and administrative and financial expenses paid by the Parent. General and administrative expenses consist primarily salary and related expenses of senior management and VIYI employees, shared management expenses, including accounting, consulting, legal support services, and other expenses to provide operating support to the related businesses. These allocations are made using a proportional cost allocation method by considering the proportion of revenues, headcounts as well as estimates of time spent on the provision of services attributable to the Company and the related expenses resulted from the acquisition of subsidiary. Advertising costs Advertising costs are expensed as incurred and included in selling expenses. Advertising costs are historically immaterial to the Company’s operating expenses. Advertising costs amounted to $ 279 and nil 0 for the years ended December 31, 2021 and 2022, respectively. Research and development Research and development expenses include salaries and other compensation-related expenses to the Company’s research and product development personnel, outsourced subcontractors, as well as office rental, depreciation and related expenses for the Company’s research and product development team. Value added taxes (“VAT”) and goods and services taxes (“GST”) Revenue represents the invoiced value of service, net of VAT or GST. The VAT and GST are based on gross sales price and VAT rates range up to 13% in China, depending on the type of service provided or product sold, and GST rate is generally 7% in Singapore. Entities that are VAT/GST general taxpayers are allowed to offset qualified input VAT/GST paid to suppliers against their output VAT/GST liabilities. Net VAT/GST balance between input VAT/GST and output VAT/GST is recorded in tax payable. All of the VAT/GST returns filed by the Company’s subsidiaries in China and Singapore, have been and remain subject to examination by the tax authorities for five years from the date of filing. Income taxes The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. PRC tax returns filed in 2019 to 2021 are subject to examination by any applicable tax authorities. F- 21 Other Income, net Other Income includes government subsidies which are amounts granted by local government authorities as an incentive for companies to promote development of the local technology industry. The Company receives government subsidies related to government sponsored projects and records such government subsidies as a liability when it is received. The Company records government subsidies as other income when there is no further performance obligation. Total government subsidies amounted to $ 45,378 and $ 184,778 for the years ended December 31, 2021 and 2022, respectively. Other income also includes $ 260,149 and $ 73,415 of input VAT credit the Company redeemed during the years ended December 31, 2021 and 2022. As part of VAT reform in 2019, from April 1, 2019 to December 31, 2021, a taxpayer in certain service industries could claim additional 10% of input VAT credit based on total input VAT paid to suppliers, the credit was applied to offset with the Company’s VAT payable. Leases The Company adopted FASB ASU 2016-02, “Leases” (Topic 842) for the year ended December 31, 2020, and elected the practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption, the Company recognized approximately RMB 1.6 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 7% based on the duration of lease terms. Operating lease ROU assets and lease liabilities are recognized at the adoption date or the commencement date, whichever is earlier, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term. Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows. Share-based compensation The Company records share-based compensation expense for employees by allocations from Wimi Inc. using a proportional cost allocation method by considering the headcount and its estimates of each employee’s time attributable to the Company. The share-based compensation expenses are valued at fair value on the grant date when the reward is approved. Share-based compensation is recognized net of forfeitures, as amortized expense on a straight-line basis over the requisite service period, which is the vesting period. The Company accounts for share-based compensation expenses using an estimated forfeiture rate at the time of grant and revising, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Share-based compensation expenses are recorded net of estimated forfeitures such that expenses are recorded only for those share-based awards that are expected to vest. F- 22 Employee benefit The full-time employees of the Company are entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans were $ 213,314 and $ 278,978 for the years ended December 31, 2021and 2022, respectively. Noncontrolling interests Noncontrolling interest consists of an aggregate of 42 % of the equity interest of Shanghai Weimu , 40 % of the equity interest of Tianjin Weidong (no operations), 45 % of equity interest of Viwo Tech and 45 % of ViZe (no operations) held by other investors. Excess of contribution received from noncontrolling shareholders over carrying value of the entity is recorded in additional paid in capital. The noncontrolling interests are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Noncontrolling interests in the results of the Company are presented on the face of the consolidated statement of operations as an allocation of the total income or loss for the year between non-controlling interest holders and the shareholders of the Company. Noncontrolling interests consist of the following: Schedule of noncontrolling interests December 31, December 31, 2021 2022 Shanghai Weimu $ 252,908 $ 234,328 Viwo Tech ( 10,502 ) 21,337 Vize Tech ( 10 ) Total $ 242,406 $ 255,655 Earnings per share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. During the years ended December 31, 2021 and 2022, there was no dilutive shares. Statutory reserves Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss. F- 23 Segment reporting FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Company’s CODM has been identified as the CEO, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. Based on management’s assessment, the Company determined that it has two operating segments and therefore two reportable segments as defined by ASC 280, which are central processing algorithm services and intelligent chips and services. All of the Company’s net revenues were generated in the PRC, Hong Kong and Singapore. Recently issued accounting pronouncements In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments — Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments — Credit Losses — Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-02 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. The adoption of this ASU does not have a material effect on the Company’s consolidated financial statements. Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows. Note 3 — Reverse Capitalization On December 9, 2022, in accordance with the Merger Agreement, the Closing occurred, pursuant to which Venus issued 39,603,961 ordinary shares to VIYI shareholders. Immediately after giving effect to the Business Combination, MicroAlgo has 43,856,706 ordinary shares issued and outstanding consisting of (i) the 3,963,745 ordinary shares held by previous Venus public shareholders and its Sponsor; (ii) the 39,603,961 newly issued Venus ordinary shares to the VIYI shareholders pursuant to the Merger Agreement, of which 792,079 ordinary shares issued to the Majority Shareholder will be held in escrow to satisfy any potential indemnification claims(s) which may be made by Venus under the Merger Agreement; (iii) the 214,000 newly issued Venus ordinary shares to the Joyous JD Limited as part of the backstop investment; and (iv) the 75,000 ordinary shares held by Venus’ underwriter. F- 24 Venus rights held by its Sponsor and previous public investors were automatically converted to 482,500 ordinary shares upon the consummation of the Business Combination. Immediately after the closing of the Business Combination, MicroAlgo has 4,825,000 warrants issued and outstanding, consisting of (i) 4,600,000 warrants held by previous public investors of Venus; and (ii) 225,000 warrants held by the Sponsor of Venus. Common shares issued and outstanding following the Closing are as follows: Schedule of consummation of Merger Venus public shares after redemption 2,106,245 Venus shares converted from rights 482,500 Venus Sponsor shares 1,375,000 Venus shares issued to underwriter 75,000 Venus shares issued in the Business Combination 39,603,961 Venus shares issued to Joyous JD Limited 214,000 Weighted average shares outstanding 43,856,706 Percent of shares owned by VIYI shareholders 90.3 % Percent of shares owned by underwriter 0.17 % Percent of shares owned by Venus 9.04 % Percent of shares owned by Joyous JD limited 0.49 % Note 4 — Variable interest entity (“VIE”) Shenzhen Weiyixin entered into Contractual Arrangements with Shenzhen Yitian on December 24, 2020. The significant terms of these Contractual Arrangements are summarized in “Note 1 — Nature of business and organization” above. As a result, prior to April 1, 2022, the Company classifies Shenzhen Yitian as VIE was consolidated in the consolidated financial statements based on the structure as described in Note 1. A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Shenzhen Weiyixin is deemed to have a controlling financial interest and be the primary beneficiary of Shenzhen Yitian because it has both of the following characteristics: (1) The power to direct activities at Shenzhen Yitian that most significantly impact such entity’s economic performance, and (2) The right to receive benefits from Shenzhen Yitian that could potentially be significant to such entity. Pursuant to the Contractual Arrangements, Shenzhen Yitian pays service fees equal to all of its net income to Shenzhen Weiyixin. The Contractual Arrangements are designed so that Shenzhen Yitian operate for the benefit of Shenzhen Weiyixin and ultimately, the Company. Accordingly, the accounts of Shenzhen Yitian were consolidated in the accompanying financial statements as VIE of Shenzhen Weiyixin from December 24, 2020 forward and retroactively as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company. Under the VIE Arrangements, the Company has the power to direct activities of Shenzhen Yitian and can have assets transferred out of Shenzhen Yitian. Therefore, the Company considers that there is no asset in Shenzhen Yitian that can be used only to settle obligations of Shenzhen Yitian, except for registered capital and PRC statutory reserves, if any. As Shenzhen Yitian is incorporated as limited liability company under the Company Law of the PRC, creditors of the Shenzhen Yitian do not have recourse to the general credit of the Company for any of the liabilities of Shenzhen Yitian. F- 25 In the opinion of management and the Company’s PRC counsel, (i) the ownership structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Shenzhen Yitian and the VIE are in compliance with existing PRC laws and regulations in all material respects. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management and the Company’s PRC counsel, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual Arrangements is remote based on current facts and circumstances. Due to the business strategy adjustment, Shenzhen Yitian and its subsidiaries no longer operate the business involving foreign investment restrictions since March 1, 2022, therefore VIYI is able to have direct equity interest in Shenzhen Yitian and its subsidiaries. On April 1, 2022, VIYI terminated the agreements under the VIE structure with Shenzhen Yitian. Shenzhen Yitian’s original shareholders transferred their respective ownership to VIYI WFOE and VIYI WFOE obtained 100% equity control of Shenzhen Yitian and its subsidiaries on April 1, 2022. The reorganization has no effect on the consolidated financial statements as Shenzhen Yitian has been under common control of VIYI Cayman that there is no change of reporting entities. The carrying amount of the consolidated assets and liabilities are as follows: Schedule of Variable interest entity December 31, December 31, 2021 2022 Current assets $ 3,112,213 $ - Property and equipment, net 3,948 - Other noncurrent assets 15,610,504 - Total assets 18,726,665 - Total liabilities 2,170,307 - Net assets $ 16,556,358 $ - December 31, December 31, 2021 2022 Current liabilities: Accounts payable $ 31,514 $ - Other payables and accrued liabilities 56,041 - Due to WiMi Inc. 1,995,944 - Operating lease liabilities 6,678 - Taxes payable 80,130 - Total current liabilities 2,170,307 - Total liabilities $ 2,170,307 $ - The summarized operating results of the VIE are as follows: For the year ended December 31, 2021 For the period from Jan 1, 2022 to April 1, 2022 Operating revenues $ 2,081,501 $ 329,231 Gross profit 1,938,898 313,816 Income from operations 795,962 109,155 Net income $ 636,897 $ 80,809 F- 26 The summarized statements of cash flow of the VIE are as follows: For the year ended December 31, 2021 For the period from Jan 1, 2022 to April 1, 2022 Net cash used in operating activities $ 1,048,779 $ ( 2,632,880 ) Net cash used in investing activities - $ ( 357,844 ) Effect of exchange rates change in cash and cash equivalents $ 56,346 $ 11,875 Net decrease in cash and cash equivalents $ 1,105,125 $ ( 2,978,849 ) Cash and cash equivalents, beginning of year $ 1,873,724 $ 2,978,849 Cash and cash equivalents, end of year $ 2,978,849 $ - Note 5 — Business combination Acquisition of Shanghai Guoyu On July 1, 2021, Weidong acquired 99 % interest of Shanghai Guoyu Information Technologies Co., Ltd (“Shanghai Guoyu”). The remaining 1 % of Shanghai Guoyu is acquired by YY Online. The aggregate purchase price is RMB 20,000,000 ($ 3,090,760 ). On July 19, 2021 Shanghai Guoyu established 100% owned subsidiary Kashi Guoyu Information Technologies Co., Ltd (“Kashi Guoyu”). On July 14, 2021, Weidong transferred its 100% equity interest of Horgas 233 and Horgas Weidong to Shanghai Guoyu. Shanghai Guoyu is committed to the R&D and application of intelligent visual algorithm technology, using image recognition, data analysis and modeling, virtual imaging, visual artificial intelligence algorithm and other technologies, integrating algorithm and data processing capabilities, and integrating functions from data processing to algorithm application, so as to provide customers with a full stack of intelligent visual algorithm services. At present, Shanghai Guoyu mainly serves the Internet marketing industry. The development of Shanghai Guoyu’s business is closely related to the progress and development of the computer vision industry and the Internet marketing industry. The Company’s acquisition of Shanghai Guoyu was accounted for as business combination in accordance with ASC 805. The Company then allocated the fair value of consideration of Shanghai Guoyu based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the Business Combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation on the date of the acquisition of Shanghai Guoyu based on valuation performed by an independent valuation firm engaged by the Company and translated the fair value from USD to RMB using the exchange rate on July 1, 2021 at the rate of USD 1.00 to RMB 6.4709 . Schedule of recognized identified assets acquired and liabilities assumed Fair value USD Software 1,383,888 Goodwill 2,052,844 Deferred tax liabilities ( 345,972 ) Total consideration 3,090,760 F- 27 Software consists of mainly data algorithm software, with a fair value of $ 1,383,888 and estimated finite useful life of 6 years. The amount of sales and net income what resulted from the acquisition and included in the consolidated statements of income and comprehensive income during the year ended December 31, 2021 were immaterial. The amount of revenue and net loss what resulted from the acquisition were approximately $ 4.0 million and $ 0.2 million during years ended December 31, 2022. Acquisitions of Tapuyu and Pengcheng Keyi On November 17, 2021, Viwotong Tech entered into Acquisition Framework Agreement to acquire 100% equity interests of Guangzhou Tapuyu Internet Technology Co., Ltd. (“Tapuyu”), a provider of advertising services. The aggregate purchase price is RMB 2 (USD 0.3) and the transaction consummated on November 19, 2021. On November 17, 2021, Viwotong Tech entered into Acquisition Framework Agreement to acquire 100% equity interests of Pengcheng Keyi (Xi’an) Intelligence Technology Co., Ltd. (“Pengcheng Keyi”), a provider of testing equipment development and sales. The aggregate purchase price is RMB 2 (USD 0.3) and the purchase consummated on December 7, 2021. The Company’s acquisitions of Tapuyu and Pengcheng Keyi were accounted for as business combination in accordance with ASC 805. The Company then allocated the fair value of consideration of Tapuyu and Pengcheng Keyi based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the Business Combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation on the date of the acquisition of Tapuyu and translated the fair value from USD to RMB using the exchange rate on November 19, 2021 at the rate of USD 1.00 to RMB 6.3825 and the net purchase price allocation on the date of the acquisition of Pengcheng Keyi and translated the fair value from USD to RMB using the exchange rate on December 7, 2021 at the rate of USD 1.00 to RMB 6.3738 . Schedule of recognized identified assets acquired and liabilities assumed Fair value USD Cash 25,335 Other current assets 266,815 Current liabilities ( 292,150 ) Total consideration - On July 1, 2022, Viwo Technology Inc. entered into an equity transfer agreement to transfer 99.0% and 1.0% of the issued share capital of Pengcheng Keyi to two unrelated individuals at RMB 1.0 and RMB 0.1, respectively. The disposal resulted in a gain from disposal of approximately $ 10,000 . Acquisitions of Bimai On September 23, 2022, Viwotong Tech entered into Acquisition Framework Agreement to acquire 100% equity interests of Guangzhou Bimai Network Technology Co., Ltd. (“Bimai”), a provider of advertising services. The aggregate purchase price is RMB 2 (USD 0.3) and the transaction consummated on September 23, 2022. F- 28 The Company’s acquisitions of Bimai accounted for as business combination in accordance with ASC 805. The Company then allocated the fair value of consideration of Bimai based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the Business Combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation on the date of the acquisition of Bimai and translated the fair value from USD to RMB using the exchange rate on September 23, 2022 at the rate of USD 1.00 to RMB 6.9920 and the net purchase price allocation on the date of the acquisition. Schedule of recognized identified assets acquired and liabilities assumed Fair value USD Cash 291 Other current assets 316,539 Current liabilities ( 316,830 ) Total consideration - The amount of revenue and net loss that resulted from the acquisitions were approximately $ 0.7 million and $ 0.1 million during the years ended December 31, 2022. Note 6 — Short term investments As of December 31, 2021 and 2022, short term investments amounted to nil 0 and nil 0 , respectively. During the years ended December 31, 2022, the Company invested a total of $ 16.3 million in marketable securities and redeemed approximately $16.2 million. The fair value change resulted in loss of approximately $ 0.1 million for the year ended December 31, 2022. During the years ended December 31, 2021, the Company invested a total of $ 15.7 million in marketable securities and redeemed approximately $ 16.0 million. The fair value change resulted in loss of approximately $ 0.3 million for the year ended December 31, 2021. Note 7 — Accounts receivable, net Accounts receivable, net consisted of the following: Schedule of Accounts receivable, net December 31, December 31, 2021 2022 Accounts receivable $ 3,106,480 $ 3,821,120 Less: allowance for doubtful accounts ( 339,209 ) ( 1,218,672 ) Accounts receivable, net $ 2,767,271 $ 2,602,448 The following table summarizes the changes in allowance for doubtful accounts: Schedule of changes in allowance for doubtful accounts December 31, December 31, 2021 2022 Beginning balance $ 113,351 $ 339,209 Addition 223,204 1,218,672 Recovery - ( 321,538 ) Effect of exchange rates change 2,654 ( 17,671 ) Ending balance $ 339,209 $ ( 1,218,672 ) Allowance for doubtful accounts net for the years ended December 31, 2021 and 2022 amounted to $ 225,858 and $ 897,134 , respectively. F- 29 Note 8 — Property and equipment, net Property and equipment, net consist of the following: Schedule of Property and equipment, net December 31, December 31, 2021 2022 Office electronic equipment $ 95,887 $ 54,681 Office fixtures and furniture 492 492 Vehicles - 172,507 Leasehold improvements 75,655 72,054 Subtotal 172,034 299,734 Less: accumulated depreciation ( 98,500 ) ( 154,414 ) Total $ 73,534 $ 145,320 Depreciation expense for the years ended December 31, 2021 and 2022 amounted to $ 20,556 and $ 63,320 , respectively. Impairment expenses amounted to nil and $ 20,324 for the years ended December 31, 2021 and 2022, respectively. Note 9 — Intangible assets, net The Company’s intangible assets with definite useful lives primarily consist of copyrights, non-compete agreements and technology know-hows. The following table summarizes acquired intangible asset balances as of: Schedule of Intangible assets, net December 31, December 31, 2021 2022 Customer relationships $ 4,000,000 $ - Non-compete agreements 2,729,112 2,498,349 Technology know-hows 447,326 - Software copyright 1,404,552 1,285,788 Subtotal 8,580,990 3,784,137 Less: accumulated amortization ( 4,207,990 ) ( 2,819,796 ) Intangible assets, net $ 4,373,000 $ 964,341 Amortization expense for the years ended December 31, 2021 and 2022 amounted to $ 1.5 million and $ 1.3 million, respectively. The Company performs annual impairment analysis as of December 31, 2022 and concludes there was $ 1,996,029 impairment loss for intangible assets for semiconductor segment due to reducing sales forecast as of December 31, 2022 as our carrying value exceeds the fair value. The estimated amortization is as follows: Schedule of estimated annual amortization expense Twelve months ending December 31, Estimated amortization expense USD 2023 $ 214,298 2024 214,298 2025 214,298 2026 214,298 2027 107,149 Total $ 964,341 F- 30 Note 10 — Cost method investments Cost method investments consist of the following: Schedule of cost method investments December 31, 2021 December 31, 2022 5.0% Investment in a company in mobile games industry $ 94,107 $ 94,107 5.0% Investment in a company in central processing advertising algorithm services - 78,193 Total $ 94,107 $ 172,300 During the years ended December 31, 2021 and 2022, the Company’ cost method investments amounted to $ 94,107 and $ 172,300 , respectively. Note 11 — Goodwill Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. The following table summarizes the components of acquired goodwill balances as of: Schedule of Goodwill December 31, December 31, 2021 2022 Goodwill from Shenzhen Yitian acquisition (a) $ 14,585,105 $ 13,351,845 Goodwill from Fe-da Electronics acquisition (b) 5,276,951 - Goodwill from Shanghai Guoyu acquisition (c) 2,083,497 1,907,324 Goodwill $ 21,945,553 $ 15,259,169 (a) Goodwill represents the excess fair value of consideration over the identifiable assets of Shenzhen Yitian acquired by Beijing WiMi in 2015 for the central processing algorithm services segment. (b) VIYI acquired Fe-da Electronics in 2020 to acquire 100% of the capital stock of Fe-da Electronics for a net consideration of approximately $22.6 million. The excess fair value of consideration over the identifiable assets acquired of approximately $5.3 million was allocated to goodwill for the intelligent chips and services segment. Impairment loss of $5.3 million was recognized for the year ended December 31, 2022 because of market change that affect the demand of products. Its customers are mainly in consumer electronics and communication which has faced slowdown in consumer demand for electronic gadget. (c) Weidong and YY Online acquired Shanghai Guoyu in 2021 to acquire 100% of the capital stock of Shanghai Guoyu for a net consideration of $2.1 million. The excess fair value of consideration over the identifiable assets acquired of $16.7 million was allocated to goodwill for the central processing algorithm services segment. The changes in the carrying amount of goodwill allocated to reportable segments As of December 31, 2021 and 2022 are as follows: Schedule of changes in the carrying amount of goodwill Central processing algorithm services Intelligent chips and services Total As of December 31, 2020 $ 14,394,554 $ 8,137,951 $ 22,532,505 Add: acquisition of Shanghai Guoyu 2,083,497 - 2,083,497 Less: goodwill impairment of Fe-da Electronics - ( 2,861,000 ) ( 2,861,000 ) Translation difference 190,551 - 190,551 As of December 31, 2021 16,668,602 5,267,951 21,945,553 Less: goodwill impairment of Fe-da Electronics - ( 5,267,951 ) ( 5,267,951 ) Translation difference ( 1,409,433 ) - As of December 31, 2022 $ 15,259,169 $ - $ 15,259,169 F- 31 Note 12 — Related party transactions and balances Amounts due to Parent are those nontrade payables arising from transactions between the Company and the Parent, such as advances made by the Parent on behalf of the Company, and allocated shared expenses paid by the Parent. Those balances are unsecured and non-interest bearing and are payable on demand. Schedule of related parties December 31, December 31, 2021 2022 Amount due from Parent $ - $ 5,741,573 December 31, December 31, 2021 2022 Amount due to Parent $ 16,955,054 $ - Amount due to a related party-Joyous Dragon $ - $ 153,333 During years ended December 31, 2021 and 2022 the Company obtained approximately $ 3.2 million and $ 12.5 million from Parent and repaid $ 4.5 million and $ 29.9 million and provided additional $ 5.7 million to Parent. Joyous Dragon is a non controlling shareholder of MicroAlgo. This amount represents advance to Venus Acquisition Corp prior to the merger. The amount was non interest bearing and due on demand. Note 13 — Taxes Income tax Cayman Islands Under the current laws of the Cayman Islands, VIYI and Wisdom Lab are not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed. Hong Kong VIYI Ltd, Excel Crest and Viwo Tech are incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5 % in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, VIYI Ltd, Excel Crest, Viwo Tech are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends. Singapore Fe-da Electronics is incorporated in Singapore and is subject to Singapore Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Singapore tax laws. The applicable tax rate is 17% in Singapore, with 75% of the first SGD 10,000 (approximately RMB 49,000) taxable income and 50% of the next SGD 190,000 (approximately RMB 937,000) taxable income are exempted from income tax. PRC The subsidiaries and VIE incorporated in the PRC are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis. EIT grants preferential tax treatment to certain High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years. In addition, 75% of R&D expenses of the PRC entities are subject to additional deduction from pre-tax income. F- 32 Korgas 233, Korgas Weidong and Kashi Guoyu were formed and registered in Korgas and Kashi in Xinjiang Provence, China in 2017, 2020 and 2021. These companies are not subject to income tax for 5 years and can obtain another two years of tax exempt status and three years at reduced income tax rate of 12.5% after the 5 years due to the local tax policies to attract companies in various industries. Shenzhen Qianhai was formed and registered in Qianhai District in Guangdong Provence, China in 2015. The company is subject to income tax at a reduced rate of 15% due to the local tax policies to attract companies in various industries. The reduced rate benefit will expire in December 2025. The effective tax rates is 1.0% and (3.6)% for the years ended December 31, 2021 and 2022. Significant components of the provision for income taxes are as follows: Schedule of components of the provision for income taxes For the year ended December 31, 2021 For the year ended December 31, 2022 Current income tax expenses $ ( 364,499 ) $ ( 15,215 ) Deferred income tax benefits 279,680 580,008 Income tax expenses $ ( 84,819 ) $ 564,793 The following table reconciles China statutory rates to the Company’s effective tax rate: Schedule of effective income tax rate reconciliation For the year ended December 31, 2021 For the year ended December 31, 2022 China statutory income tax rate 25.0 % 25.0 % Preferential tax rate in China ( 13.1 )% ( 12.5 )% Tax rate difference outside China (1) ( 4.8 )% ( 12.8 )% Change in valuation allowance 14.4 % ( 13.5 )% Additional R&D deduction in China ( 20.6 )% ( 2.1 )% Permanent difference ( 0.1 )% 23.4 % Effective tax rate 1.0 % 7.5 % (1) It is mainly due to the lower tax rate of the entities incorporated in Hong Kong, Singapore, and tax exempt in Cayman Islands. Deferred tax assets and liabilities Significant components of deferred tax assets and liabilities were as follows: Schedule of deferred tax assets and liabilities December 31, December 31, 2021 2022 Deferred tax assets: Net operating loss carryforwards $ 754,073 $ 1,832,369 Allowance for doubtful accounts 69,111 207,174 Less: valuation allowance ( 823,184 ) ( 2,039,543 ) Deferred tax assets, net $ - $ - Deferred tax liabilities: Recognition of intangible assets arising from business combinations $ 846,410 $ 241,085 Total deferred tax liabilities, net $ 846,410 $ 241,085 F- 33 The Company evaluated the recoverable amounts of deferred tax assets, and provided a valuation allowance to the extent that future taxable profits will be available against which the net operating loss and temporary difference can be utilized. The Company considers both positive and negative factors when assessing the future realization of the deferred tax assets and applied weigh to the relative impact of the evidences to the extent it could be objectively verified. The Company’s cumulative net operating loss (“NOL”) of approximately $ 9.8 million as of December 31, 2022 was mainly from NOL of Fe-da, Shenzhen Qianhai Wangxin, Shenzhen Yitian, Shanghai Weimu, Wuhan 233, Shanghai Guoyu and Bimai. The NOL starts to expire in 2023. Management considers projected future losses outweighs other factors and made a full allowance of related deferred tax assets. The Company recognized deferred tax liabilities related to the excess of the intangible assets reporting basis over its income tax basis as a result of fair value adjustment from acquisitions in 2015. The deferred tax liabilities will reverse as the intangible assets are amortized for financial statement reporting purposes. Uncertain tax positions The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of December 31, 2021 and 2022, the Company did no t have any significant unrecognized uncertain tax positions. The Company did no t incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 2021 and 2022 and also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from December 31, 2022. Value added taxes (“VAT”) and goods and services taxes (“GST”) Revenue represents the invoiced value of service, net of VAT or GST. The VAT and GST are based on gross sales price and VAT rates range up to 13 % in China, depending on the type of service provided or product sold, and GST rate is generally 7% in Singapore. Taxes payable consisted of the following: Schedule of Taxes payable December 31, December 31, 2021 2022 VAT taxes payable $ 25,810 $ 5,913 Income taxes payable 118,563 45,992 Other taxes payable 4,378 3,460 Totals $ 148,751 $ 55,365 Note 14 — Concentration of risk Credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. In China, the insurance coverage of each bank is RMB 500,000 (approximately USD 72,000 ). As of December 31, 2022, cash balance of $ 21,598,231 was deposited with financial institutions located in China, of which $18,003,223 was subject to credit risk. The Hong Kong Deposit Protection Board pays compensation up to a limit of HKD 500,000 (approximately USD 64,000) if the bank with which an individual/a company hold its eligible deposit fails. As of December 31, 2022, cash balance of $ 20,388,504 was maintained at financial institutions in Hong Kong, of which nil was subject to credit risk. The Singapore Deposit Insurance Corporation Limited (SDIC) insures deposits in a Deposit Insurance (DI) Scheme member bank or finance company up to SGD 75,000 (approximately USD 56,000) per account. As of December 31, 2022, cash balance of $ 459,262 was maintained at DI Scheme banks in Singapore, of which $330,758 was subject to credit risk. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. F- 34 A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the PBOC. Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance. To the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company. Customer concentration risk For the year ended December 31, 2021, one customer accounted for 23.9 % of the Company’s total revenues. For the year ended December 31, 2022, one customer accounted for 18.5 % of the Company’s total revenues. As of December 31, 2021, three customers accounted for 46.1 % of the Company’s accounts receivable. As of December 31, 2022, two customers accounted for 57.8 % of the Company’s accounts receivable. Vendor concentration risk For the year ended December 31, 2021, three vendors accounted for 61.2 % of the Company’s total purchases. For the year ended December 31, 2022, one vendor accounted for 11.3 % of the Company’s total purchases. As of December 31, 2021, six vendors accounted for 95.8 % of the Company’s accounts payable. As of December 31, 2022, three vendors accounted for 82.4 % of the Company’s accounts payable. Note 15 — Leases Lease commitments The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All of the Company’s real estate leases are classified as operating leases. The Company has entered into eight non-cancellable operating lease agreements for ten office spaces expiring through December 2023. As of December 31, 2020, upon adoption of FASB ASU 2016-02, the Company recognized approximately RMB 2.7 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases, using a weighted average discount rate of 7 %, which is determined using an incremental borrowing rate with similar term in the PRC. Two ROU assets and lease liabilities were recognized during the years ended December 31, 2022. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The leases generally do not contain options to extend at the time of expiration and the weighted average remaining lease terms are 1 year. The Company takes the short-term lease exemption for the lease agreements with a term of less than 1 year and expensed $ 42,844 and $ 100,988 during the years ended December 31, 2021 and 2022, respectively. Operating lease expenses are allocated between the cost of revenue and selling, research and development, general, and administrative expenses. Rent expenses for the years ended December 31, 2021 and 2022 was $ 239,983 and $ 245,573 , respectively. Impairment of right of use assets amounted for the years ended December 31, 2021 and 2022 was nil and $ 22,456 , respectively. F- 35 The maturity of the Company’s operating lease obligations is presented below: Schedule of operating lease obligations Twelve Months Ending December 31, Operating Lease Amount 2023 * $ 256,297 2024 31,597 2025 - 2026 - 2027 - Total lease payments 287,894 Less: Interest 5,487 Present value of lease liabilities $ 282,407 * include operating leases with a term less than one year. Note 16 — Shareholders’ equity Ordinary shares The Company was established under the laws of Cayman Islands on May 14, 2018 with authorized share of 50,000,000 ordinary shares of par value USD 0.001 each. On February 11, 2021, the Company consummated the IPO of 4,000,000 units (the “Units”). In addition, the underwriters exercised in full the over-allotment option for an additional 600,000 Units on such date, resulting in the issuance and sale of an aggregate of 4,600,000 Units. Each Unit consists of one ordinary share, par value $0.001 per share (“Share”), one warrant (“Warrant”) entitling its holder to purchase one-half of one Share at a price of $11.50 per Share, and one right to receive one-tenth (1/10) of one Share upon the consummation of the Company’s initial business combination. Simultaneously with the closing of the Initial Public Offering on February 11, 2021, the Sponsor purchased an aggregate of or 225,000 Private Units at a price of $ 10.00 per Private Unit, ($ 2,250,000 in the aggregate), from the Company in a private placement. As of December 31, 2022, the Company had 4,600,000 Public Warrants and 225,000 Private Warrants outstanding. See Note 17 for further details. Statutory reserve VIYI PRC entities are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, VIYI PRC entities may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. VIYI PRC entities may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange. As of December 31, 2021 and 2022, VIYI PRC entities collectively attributed $ 1,420,145 and RMB 11,964,278 (USD 1,798,310 ), of retained earnings for their statutory reserves, respectively. During the years ended December 31, 2021 and 2022, VIYI PRC entities collectively attributed $ 690,674 and RMB 2,453,576 (USD 378,165 ) to statutory reserves, respectively. F- 36 Restricted assets The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws and regulations permit payments of dividends by VIYI PRC entities only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of VIYI PRC entities. As a result of the foregoing restrictions, VIYI PRC entities are restricted in their ability to transfer their assets to the Company. Foreign exchange and other regulation in the PRC may further restrict VIYI PRC entities from transferring funds to the Company in the form of dividends, loans and advances. As of December 31, 2022, amounts restricted are the paid-in-capital and statutory reserve of VIYI PRC entities, which amounted to RMB 201,281,466 (USD 28,900,650 ). Note 17 — Warrants Public Warrants Each public warrant entitles the holder thereof to purchase one-half (1/2) of one ordinary share at a price of $ 11.50 per full share, subject to adjustment as described in this prospectus. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only an even number of warrants may be exercised at any given time by a warrant holder. No public warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. It is the Company’s current intention to have an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares in effect promptly following consummation of an initial business combination. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within 90 days following the consummation of our initial business combination, public warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “Fair Market Value” (defined below) by (y) the Fair Market Value. The “Fair Market Value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the day prior to the date of exercise. For example, if a holder held 300 warrants to purchase 150 shares and the Fair Market Value on the date prior to exercise was $15.00, that holder would receive 35 shares without the payment of any additional cash consideration. If an exemption from registration is not available, holders will not be able to exercise their warrants on a cashless basis. The Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b) 12 months from the effective date of the registration statement relating to the IPO. The warrants will expire at 5:00 p.m., New York City time, on the fifth anniversary of our completion of an initial business combination, or earlier upon redemption. The Company may redeem the outstanding warrants (including any outstanding warrants issued upon exercise of the unit purchase option issued to Ladenburg Thalmann & Co., Inc.,), in whole and not in part, at a price of $0.01 per warrant: ● at any time while the Public Warrants are exercisable, ● upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder, F- 37 ● if, and only if, the reported last sale price of the ordinary shares equals or exceeds $18.00 per share, for any 20 trading days within a 20 trading day period ending on the third trading day prior to the notice of redemption to Public Warrant holders, and ● if, and only if, there is a current registration statement in effect with respect to the issuance of the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. If the foregoing conditions are satisfied and the Company would issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the ordinary shares may fall below the $18.00 trigger price as well as the $11.50 warrant exercise price per full share after the redemption notice is issued and not limit our ability to complete the redemption. The redemption criteria for the warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants. If the Company call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether the Company will exercise our option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of our ordinary shares at the time the warrants are called for redemption, the Company’s cash needs at such time and concerns regarding dilutive share issuances. Private Warrants Simultaneously with the closing of the Initial Public Offering, the Company consummated a private placement of 270,500 Private Units at $ 10.0 per unit, purchased by the sponsor. The Private Units are identical to the units sold in the Initial Public Offering except that the warrants included in the Private Units (the “Private Warrants”) and the ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The private warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the balance sheets. The warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs. The Company established the initial fair value for the private warrants at $ 380,000 on February 11, 2021, the date of the Company’s Initial Public Offering, using a Black-Scholes model. The Company allocated the proceeds received from the sale of Private Units, first to the private warrants based on their fair values as determined at initial measurement, with the remaining proceeds recorded as ordinary shares subject to possible redemption, and ordinary shares based on their relative fair values recorded at the initial measurement date. The warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs. F- 38 The key inputs into the Black-Scholes model were as follows at their following measurement dates: Schedule of Black-Scholes model December 31, 2022 December 09, 2022 Input Share price $ 1.25 $ 10.47 Risk-free interest rate 4.0 % 3.8 % Volatility 5.7 % 5.7 % Exercise price $ 11.50 $ 11.50 Warrant life (yr) 4.92 4.97 As of December 09, 2022, the aggregate value of the private warrants was $ 123,750 . The change in fair value from January 1, 2022 to December 9, 2022 was approximately $0.3 million was included in the historical retained earnings (accumulated deficits) of Venus. The fair value of the warrants on December 31, 2022 was nil. The change in fair value of warrants of $ 123,750 from December 09, 2022 to December 31, 2022 and is reflected in the Company's Statement of Operations. Note 18 — Commitments and contingencies Contingencies From time to time, the Company is party to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements. Coronavirus (“COVID-19”) The ongoing outbreak of the novel coronavirus (COVID-19) has spread rapidly to many parts of the world. In March 2020, the World Health Organization declared the COVID-19 as a pandemic. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities in China from February to mid-March in 2020. All of the Company’s business operations and the workforce are concentrated in China in 2020, so the Company closed offices and implemented work-from-home policy during that period. Due to the nature of the Company’s business, the impact of the closure on the operational capabilities was not significant. As a result of the resurgence of COVID-19 variants in first quarter of 2022 in China, the Company’s office in the PRC was again closed for one week in first quarter of 2022. The Company’s customers have been impacted as a result of business disruption due to closures in various cities and affected their customers’ advertising spending. As a result, VIYI experienced lower revenue growth on advertising which affected VIYI’s gross margin. In early December 2022, Chinese government eased the strict control measure for COVID-19, which has led to surge in increased infections and disruption in our business operations. Any future impact of COVID-19 on the Company’s China operation results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and resurgence of COVID-19 variants and the actions taken by government authorities to contain COVID-19 or treat its impact, almost all of which are beyond our control. F- 39 Note 19 — Segments ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s business segments. The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial information of the separate operating segments when making decisions about allocating resources and assessing the performance of the group. The Company has determined that it has two operating segments: (1) central processing algorithm services and (2) intelligent chips and services. The following tables present summary information by segment for the years ended December 31, 2021 and 2022: Schedule of segments Central processing algorithm services Intelligent chips and services Total for the year ended December 31, 2021 Revenues $ 42,321,966 $ 39,713,323 $ 82,035,289 Cost of revenues $ 15,016,980 $ 33,901,432 $ 48,918,412 Gross profit $ 27,304,986 $ 5,811,891 $ 33,116,877 Depreciation and amortization $ 379,642 $ 1,108,263 $ 1,487,905 Total capital expenditures $ - $ 36,010 $ 36,010 Central Processing algorithm services Intelligent chips and services Total for the year ended December 31, 2022 Revenues $ 66,578,301 $ 20,553,929 $ 87,132,230 Cost of revenues $ 48,206,832 $ 19,973,507 $ 68,180,339 Gross profit $ 18,371,469 $ 580,422 $ 18,951,891 Depreciation and amortization $ 253,721 $ 1,120,961 $ 1,374,682 Total capital expenditures $ 160,924 $ - $ 160,924 Total assets as of: December 31, 2021 December 31, 2022 Central processing algorithm services $ 59,940,271 $ 47,787,032 Intelligent chips and services 21,671,581 24,299,702 Total assets $ 81,611,852 $ 72,086,734 The Company’s operations are primarily based in the mainland PRC and international, where the Company derives a substantial portion of their revenues. Management also review consolidated financial results by business locations. Disaggregated information of revenues by geographic locations are as follows: Schedule of Disaggregation Total for the year ended December 31, 2021 Total for the year ended December 31, 2022 Mainland PRC revenues $ 42,372,826 $ 66,751,637 Hong Kong revenues 5,393,844 - International revenues 34,268,619 20,380,593 Total revenues $ 82,035,289 $ 87,132,230 F- 40 Note 20 — Subsequent events The Company evaluated all events and transactions that occurred after December 31, 2022 up through the date the Company issued these consolidated financial statements. On January 13, 2023, MicroAlgo Inc. (the “Company”) entered into a Private Placement Unit Purchase Agreement (the “Purchase Agreement”) with Joyous JD Limited (the “Investor”). Pursuant to the Purchase Agreement, the Investor will purchase up to 2,666,667 units of the Company’s securities at $ 1.20 per unit. Each unit consists of one ordinary share of the Company, par value $0.001 per share, (“Ordinary Share”) and one warrant entitling the holder to purchase one whole Ordinary Share at an exercise price of $1.35 per whole share. The gross proceeds to the Company from this private offering is approximately $ 3.2 million. The closing is subject to the satisfaction of customary closing conditions. In connection with the private placement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor pursuant to which the Company will file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement covering the Registrable Securities within a reasonable timeframe upon the demand of the Investor. The Company shall use reasonable efforts to cause the registration statement covering the Registrable Securities to be declared effective as promptly as practicable after the filing thereof. Note 21 — Condensed financial information of the parent company The Company performed a test on the restricted net assets of consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company. The subsidiary did not pay any dividend to the Company for the periods presented. For the purpose of presenting parent only financial information, the Company records its investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income of the subsidiary is presented as “share of income of subsidiary”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The Company did not have significant capital and other commitments, long-term obligations, or guarantees As of December 31, 2021 and 2022. F- 41 PARENT COMPANY BALANCE SHEETS Schedule of Condensed Balance Sheets December 31 December 31 2021 2022 USD USD ASSETS CURRENT ASSETS Cash in bank 272 Total current assets - 272 OTHER ASSETS Investment in subsidiaries 58,400,949 46,249,542 Intercompany receivables 20,659,324 Total current assets 58,400,949 66,908,866 Total assets 58,400,949 66,909,138 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Other payables - related party 153,333 Total current liabilities - 153,333 Total liabilities - 153,333 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY Ordinary shares, $ 0.001 par value, 50,000,000 shares authorized, 39,603,961 and 43,856,706 issued and outstanding as of December 31, 2021 and 2022 39,604 43,857 Additional paid-in capital 27,562,736 47,394,442 Retained earnings 26,483,410 19,141,699 Statutory reserves 1,420,145 1,798,310 Accumulated other comprehensive loss 2,895,054 ( 1,622,503 ) Total shareholders’ equity 58,400,949 66,755,805 Total liabilities and shareholders’ equity 58,400,949 66,909,138 F- 42 PARENT COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) Schedule of Condensed Statements of Income And Comprehensive Income Year Ended 2021 2022 USD USD OPERATING REVENUES - COST OF REVENUES - GROSS PROFIT - - OPERATING EXPENSES General and administrative expenses ( 2,033 ) Total operating expenses - ( 2,033 ) INCOME FROM OPERATIONS - ( 2,033 ) OTHER INCOME (EXPENSE) Income (loss) from subsidiaries 8,567,907 ( 6,961,513 ) Total other income (loss) 8,567,907 ( 6,961,513 ) NET INCOME (LOSS) 8,567,907 ( 6,963,546 ) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS 1,141,784 ( 4,517,557 ) COMPREHENSIVE INCOME (LOSS) 9,709,691 ( 11,481,103 ) F- 43 PARENT COMPANY STATEMENTS OF CASH FLOWS Schedule of Condensed Statements of Cash Flows 2021 2022 USD USD CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) 8,567,907 ( 6,963,546 ) Adjustments to reconcile net income to cash used in operating activities: Change in fair value of warrant liability ( 123,750 ) Equity (income) of subsidiaries ( 8,567,907 ) 6,961,513 Change in operating assets and liabilities Intercompany - ( 20,535,301 ) Net cash used in operating activities - ( 20,661,084 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash received from recapitalization - 20,661,356 Net cash provided by financing activities - 20,661,356 EFFECT OF EXCHANGE RATE ON CASH - - CHANGES IN CASH - 272 CASH AND CASH EQUIVALENTS, beginning of year - - CASH AND CASH EQUIVALENTS, end of year - 272 F- 44