SEC Form 424B4 filed by JIADE LIMITED

 Filed pursuant to Rule 424(b)(4)
 Registration No. 333-276283​

2,000,000 Ordinary Shares

JIADE LIMITED

This is an initial public offering of 2,000,000 ordinary shares, par value US$0.01 per share (“Ordinary Shares”) of JIADE LIMITED, a Cayman Islands exempted company (“we,” “us,” “our,” “Jiade Cayman,” “our Company,” or the “Company”). Prior to this offering, there has been no public market for our Ordinary Shares. The initial public offering price is US$4.00 per Ordinary Share. The offering is being made on a “firm commitment” basis by the underwriters. See “Underwriting.” Our Ordinary Shares have been approved for listing on the Nasdaq Capital Market (“Nasdaq”) under the symbol “JDZG.”

The registration statement on Form F-1 of which this prospectus forms a part also contains a resale prospectus to be used for the resale of 2,200,000 Ordinary Shares by the selling shareholder identified therein.

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 14 to read about factors you should consider before buying our Ordinary Shares.

Unless otherwise stated, as used in this prospectus, the terms “Jiadezhigao HK” refers to JIADEZHIGAO LIMITED, a Hong Kong corporation and a wholly owned subsidiary of Jiade Cayman; “Shenzhen Kebiao” refers to Shenzhen Kebiao Technology Co., Ltd., a limited liability company organized under the laws of the People’s Republic of China (the “PRC”), which is 99% owned by Jiadezhigao HK; “WISMASS HK” refers to WISMASS INTERNATIONAL HOLDINGS LIMITED, a Hong Kong corporation and a wholly owned subsidiary of Jiade Cayman; “Jiade Zhigao” refers to Sichuan Jiade Zhigao Technology Co., Ltd., a limited liability company organized under the laws of the PRC, which is 82% owned by Shenzhen Kebiao and 18% owned by WISMASS HK; and “Kebiao Technology” refers to Sichuan Kebiao Technology Co., Ltd., a PRC limited liability company, which is wholly owned by Jiade Zhigao.

We are an exempted company with limited liability incorporated in the Cayman Islands with no material operations of our own and are not a Chinese operating company. This corporate structure involves unique risks to investors, as we conduct substantially all of our operations through our PRC subsidiaries. The Ordinary Shares offered in this prospectus are shares of the Cayman Islands exempted company instead of shares of our operating entities in the PRC. Holders of our Ordinary Shares do not directly own any equity interests in our PRC subsidiaries, but will instead own shares of a Cayman Islands exempted company. The Chinese regulatory authorities could disallow our corporate structure, which would likely result in a material change in our operations and/or a material change in the value of our Ordinary Shares, including that it could cause the value of our Ordinary Shares to significantly decline or become worthless. See “Risk Factors — Risks Relating to Doing Business in the PRC — Chinese regulatory authorities could disallow our exempted company structure, which may result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless.”

We are subject to certain legal and operational risks associated with the business operations of our PRC subsidiaries being based in China, which could cause the value of our securities to significantly decline or become worthless. Applicable PRC laws and regulations governing such current business operations are sometimes vague and uncertain, and as a result these risks may result in material changes in the operations of our PRC subsidiaries, significant depreciation or a complete loss of the value of our Ordinary Shares, or a complete hindrance of our ability to offer, or continue to offer, our securities to investors. Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. On December 28, 2021, 13 governmental departments of the PRC, including the Cyberspace Administration of China (the “CAC”), issued the Cybersecurity Review Measures, which became effective on February 15, 2022. As of the date of this prospectus, neither we nor our subsidiaries have been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice, or sanction related to cybersecurity review under the Cybersecurity Review

Measures. As confirmed by our PRC counsel, China Commercial Law Firm, we are not subject to cybersecurity review or network data security review by the CAC under the Cybersecurity Review Measures, or if the draft Regulations on the Network Data Security Administration (Draft for Comments) (the “Security Administration Draft”) are enacted as proposed, because our PRC subsidiaries are not critical information infrastructure operators (“CIIOs”) or online platform operators that possess personal information of at least one million users or engage in data processing activities that affect or may affect national security. See “Risk Factors — Risks Relating to Doing Business in the PRC — Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our PRC subsidiaries’ business and our offering.” As of the date of this prospectus, our PRC counsel, China Commercial Law Firm, has advised us that we are required to obtain permission or approval from the China Securities Regulatory Commission (the “CSRC”) for the listing of our Ordinary Shares on any foreign stock exchange. On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the “Trial Measures,” and five supporting guidelines, which became effective on March 31, 2023. Pursuant to the Trial Measures, PRC domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following their submission of initial public offerings or listing applications. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. See “Regulations — Regulations Relating to Overseas Listings.” On August 8, 2023, our PRC subsidiaries filed with the CSRC in connection with this offering and listing pursuant to the Trial Measures, and on September 22, 2023, our PRC subsidiaries submitted supplemental documents and information in response to comments they received from the CSRC. On January 2, 2024, the CSRC approved the filings submitted by our PRC subsidiaries. Except for the requirement for such CSRC approval under the Trial Measures, as of the date of this prospectus, neither we nor our subsidiaries have received any inquiry, notice, warning, or sanction regarding our overseas listing from any other PRC governmental authorities. Since these statements and regulatory actions are newly published, however, official guidance and related implementation rules have not been issued. It is highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of our subsidiaries, our ability to accept foreign investments, and our listing on a U.S. exchange. The Standing Committee of the National People’s Congress (the “SCNPC”), the CSRC, the CAC, or other PRC regulatory authorities may in the future promulgate additional laws, regulations, or implementing rules that require us and our subsidiaries to obtain regulatory approval from Chinese authorities before listing or offering of our securities in the U.S or operating our business. If we do not receive or maintain the approval as mandated by current or future laws and regulations, or inadvertently conclude that such approval is not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation by competent regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a material adverse change in our operations and the value of our Ordinary Shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

In addition, our Ordinary Shares may be prohibited from trading on a national exchange under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditors for two consecutive years, as amended, beginning in 2022. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” ​(the “Consolidated Appropriations Act”) was signed into law by President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act, which reduced the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two, thus reducing the time period for triggering the delisting of our Company and the prohibition of trading in our securities if the PCAOB is unable to inspect our accounting firm at such future time. Our auditor, ZH CPA, LLC, is headquartered in Denver, Colorado, and has been inspected by the PCAOB on a regular basis, with the last inspection in February 2023. The PCAOB currently has access to inspect to the working papers of our auditor and our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our Ordinary Shares is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, Nasdaq may determine to delist our Ordinary Shares and trading in our Ordinary Shares could be prohibited. On August 26, 2022, the CSRC, the Ministry

of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the “Protocol”) governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange Commission (the “SEC”), the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination. See “Risk Factors — Risks Relating to Doing Business in the PRC — Recent joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing or future offerings of our securities in the U.S.”

As of the date of this prospectus, none of our subsidiaries have made any dividends or distributions to our Company and our Company has not made any dividends or distributions to our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. If we determine to pay dividends on any of our Ordinary Shares in the future, as an exempted company, we will be dependent on receipt of funds from Jiadezhigao HK, which is dependent on receipt of funds from Shenzhen Kebiao, which will in turn rely on payments made from Kebiao Technology to Jiade Zhigao, and the distribution of such payments from Jiade Zhigao to Shenzhen Kebiao. However, as the PRC government imposes control over currency conversion, it has the authority to conduct exchange transfer reviews, which may impose certain limitations on our ability to transfer cash between our Company, our subsidiaries, and our investors, primarily reflected in the following aspects: (i) we are restricted from providing capital or loans to our PRC subsidiaries, which may adversely affect the operations of our PRC subsidiaries; (ii) our PRC subsidiaries may be restricted from paying dividends to us; and (iii) if we are unable to obtain dividends from our PRC subsidiaries, it may adversely impact our dividends distribution to investors. See “Summary of Risk Factors,” “Risk Factors — Risks Relating to Doing Business in the PRC — PRC regulations relating to offshore investment activities by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us,” “Risk Factors — Risks Relating to Doing Business in the PRC — PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of offshore offerings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect their liquidity and their ability to fund and expand their business,” and “Risk Factors — Risks Relating to Doing Business in the PRC — Governmental control of currency conversion may affect the value of your investment and our payment of Dividends.” Further, to the extent cash or assets in the business are in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC/Hong Kong, due to interventions in or the imposition of restrictions and limitations on the ability of our Company or our subsidiaries by the PRC government to transfer cash or assets. There is no assurance the PRC government will not intervene in or impose restrictions on the ability of our Company or our subsidiaries to transfer cash or assets. See “Prospectus Summary — Dividends or Distributions Made to Our Company and U.S. Investors and Tax Consequences,” “Prospectus Summary — Business Overview — Summary of Risk Factors,” and “Risk Factors — Risks Relating to Doing Business in the PRC — To the extent cash or assets in the business are in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC/Hong Kong, due to interventions in or the imposition of restrictions and limitations on the ability of our Company or our subsidiaries by the PRC government to transfer cash or assets.” We have established controls and procedures for cash flows within our organization based on internal cash management policies established by our finance department, discussed, considered, and reviewed by the relevant departments in our Company, and approved by our Chairman of the Board of Directors. Specifically, our finance department supervises cash management, following the instructions of our management. Our finance department is responsible for establishing our cash operation plans and coordinating cash management matters among our subsidiaries and departments. Each subsidiary and department initiates a cash request by putting forward a cash demand plan, which explains the specific amount and timing of cash requested, and submitting it to our finance department. The finance department

reviews the cash demand plan and prepares a summary for the management of our Company. Management examines and approves the allocation of cash based on the sources of cash and the priorities of the needs. Other than the above, we currently do not have other cash management policies or procedures that dictate how funds are transferred. As of the date of this prospectus, no cash transfer or transfer of other assets has occurred between our Company and our subsidiaries. See “Prospectus Summary — Asset Transfers Between Our Company and Our Subsidiaries,” “Prospectus Summary — Dividends or Distributions Made to Our Company and U.S. Investors and Tax Consequences,” and our audited consolidated financial statements for the years ended December 31, 2022 and 2023.

We are an “emerging growth company” as defined under the federal securities laws and will be subject to reduced public company reporting requirements. Please read the disclosures beginning on page 11 of this prospectus for more information.

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Represents underwriting discounts equal to 7% per Ordinary Share. See “Underwriting” for a description of compensation payable to the underwriters.

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We have granted the underwriters an option for a period of 60 days from the day that the registration statement of which this prospectus forms a part is declared effective by the SEC, to purchase up to 15% of the total number of the Ordinary Shares to be offered by us pursuant to this offering, solely for the purpose of covering over-allotments, if any, at the public offering price less the underwriting discounts. If the underwriters exercise the option in full, the total underwriting discounts payable will be US$644,000, based on the initial public offering price of US$4.00 per Ordinary Share, and the total gross proceeds to us, before underwriting discounts and expenses, will be US$9,200,000.

The underwriters expect to deliver the Ordinary Shares against payment in U.S. dollars in New York, New York on or about May 17, 2024.

Neither the U.S. Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Prospectus dated May 14, 2024

 

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ABOUT THIS PROSPECTUS

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf or to which we have referred you. We take no responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the Ordinary Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. For the avoidance of doubt, no offer or invitation to subscribe for Ordinary Shares is made to the public in the Cayman Islands. The information contained in this prospectus is current only as of the date on the front cover of the prospectus. Our business, financial condition, results of operations, and prospects may have changed since that date.

Neither we nor the underwriters have taken any action to permit a public offering of the Ordinary Shares outside the United States or to permit the possession or distribution of this prospectus or any filed free-writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Ordinary Shares and the distribution of this prospectus or any filed free-writing prospectus outside the United States.

Conventions that Apply to this Prospectus

Unless otherwise indicated or the context requires otherwise, references in this prospectus to:

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“adult education institutions” are to training schools, institutions, or other organizations that offer a variety of educational programs or courses specifically tailored to meet the learning needs of individuals who are beyond traditional school age, including programs and courses related to Self-taught Higher Education Examinations (defined below), the National Unified Examination for College Admissions for Adults (defined below), and the Open University of China (defined below).

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“China” or the “PRC” are to the People’s Republic of China;

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“Renminbi” or “RMB” are to the legal currency of China;

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“Self-taught Higher Education Examinations,” “STHEE,” “self-study exams,” or “self-enrollment exams” are to a Chinese education system that allows individuals to study and take exams to earn higher education qualifications without attending formal college or university courses, whereby those who pass the Self-taught Higher Education Examinations are granted qualifications equivalent to those earned through traditional college or university courses, and these qualifications are recognized by the Chinese government and many employers in China;

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“shares,” “Shares,” or “Ordinary Shares” are to the ordinary shares of Jiade Cayman, par value US$0.01 per share;

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“The National Unified Examination for College Admissions for Adults” or “NUE” are to a standardized test in China for adults seeking admission to undergraduate programs in universities, where the NUE provides individuals who have not had the opportunity to pursue higher education with a chance to gain admission to universities and pursue further education, and the test covers a range of subjects, including Chinese language, mathematics, and English, and is administered annually by the PRC Ministry of Education (the “MOE”);

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“The Open University of China” or “OUC” are to a distance education institution in China that provides education to people who are unable to attend traditional universities, where the OUC offers undergraduate and graduate programs, as well as non-degree continuing education courses, by utilizing a variety of media, including television, radio, and the Internet, for program delivery;

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“the PRC subsidiaries” or “our PRC subsidiaries” are to Shenzhen Kebiao, Jiade Zhigao, and Kebiao Technology; and

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“U.S. dollars,” “US$,” and “dollars” are to the legal currency of the United States.

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RISK FACTORS

An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations, or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below and discussed in other parts of this prospectus are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment.

Risks Relating to Doing Business in the PRC

Changes in China’s economic, political, or social conditions or government policies could have a material adverse effect on our PRC subsidiaries’ business and operations.

Substantially all of our PRC subsidiaries’ assets and operations are currently located in China. Accordingly, our PRC subsidiaries’ business, financial condition, results of operations, and prospects may be influenced to a significant degree by political, economic, and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, including the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government, or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our PRC subsidiaries’ business and operating results, reduce demand for their products, and weaken their competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on our PRC subsidiaries. For example, our PRC subsidiaries’ financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth. These measures may cause decreased economic activities in China, which may adversely affect our PRC subsidiaries’ business and operating results.

Furthermore, our Company, our PRC subsidiaries, and our investors may face uncertainty about future actions by the government of China that could significantly affect our PRC subsidiaries’ financial performance and operations. As of the date of this prospectus, neither our Company nor our PRC subsidiaries have received or were denied permission from Chinese authorities to list on U.S. exchanges. However, there is no guarantee that our Company or our PRC subsidiaries will receive or not be denied permission from Chinese authorities to list on U.S. exchanges in the future.

Uncertainties in the interpretation and enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance notice, could limit the legal protection available to you and us.

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a

 

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comprehensive system of laws and regulations governing economic matters in general. The legislation over the past three decades has significantly increased the protection afforded to various forms of foreign or private-sector investment in China. Our PRC subsidiaries are subject to various PRC laws and regulations generally applicable to companies in China. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however, the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, however, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies, internal rules, and regulations (some of which are not published in a timely manner or at all) that may have retroactive effect and may change quickly with little advance notice. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope and effect of our contractual, property (including intellectual property), and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our directors and officers that reside outside the United States based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.

As a company incorporated under the laws of the Cayman Islands, we conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, seven of our eight directors and officers, namely Yuan Li, Li Tan, Xiang Lan, Hangyu Dai, Kunqi Bai, Shuang Qiu, and Yaxuan Yang, reside in the PRC; another director, Shaoping Lu, resides in the United States. All or a substantial portion of the assets of our directors and officers are located outside the United States. As a result, it may be difficult for you to effect service of process upon those persons inside mainland China. It may be difficult for you to enforce judgments obtained in U.S. courts based on civil liability provisions of the U.S. federal securities laws against us and our officers and directors who do not currently reside in the U.S. or have substantial assets in the U.S. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the authorities in China may establish a regulatory cooperation mechanism with counterparts of another country or region to monitor and oversee cross border securities activities, such regulatory cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of a practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or “Article 177,” which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory of the PRC. Article 177 further provides that Chinese entities and individuals are not allowed to provide documents or

 

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materials related to securities business activities to foreign agencies without prior consent from the securities regulatory authority of the State Council and the competent departments of the State Council. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

Given the Chinese government’s significant oversight and discretion over the conduct of our PRC subsidiaries’ business, the Chinese government may intervene or influence their operations at any time, which could result in a material change in our PRC subsidiaries’ operations and/or the value of our Ordinary Shares.

The Chinese government has significant oversight and discretion over the conduct of our PRC subsidiaries’ business and may intervene or influence their operations at any time as the government deems appropriate to further regulatory, political, and societal goals, which could result in a material change in our PRC subsidiaries’ operations and/or the value of our Ordinary Shares.

The Chinese government has recently published new policies that significantly affected certain industries such as the education and Internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding the adult education supporting service industry that could adversely affect our PRC subsidiaries’ business, financial condition, and results of operations. Furthermore, if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities, our PRC subsidiaries’ may incur increased compliance costs or become subject to additional restrictions in their operations. Certain areas of the law, including intellectual property rights and confidentiality protections, in China may also not be as effective as in the United States or other countries. In addition, our PRC subsidiaries cannot predict the effects of future developments in the PRC legal system on their business operations, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit the legal protections available to us and our investors, including you.

Any actions by the Chinese government, including any decision to intervene or influence the operations of our PRC subsidiaries or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of our PRC subsidiaries, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The ability of our subsidiaries to operate in China may be impaired by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, foreign investment limitations, and other matters. The central or local governments of China may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts for our PRC subsidiaries to ensure their compliance with such regulations or interpretations. As such, our PRC subsidiaries may be subject to various government and regulatory interference in the provinces in which they operate. They could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. They may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

Furthermore, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be later denied or rescinded. Although we believe our Company and our PRC subsidiaries are currently not required to obtain permission from any Chinese authorities and have not received any notice of denial of permission to list on U.S. exchanges as of the date of this prospectus, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry, particularly in the event permission to list on U.S. exchanges may be later required, or withheld or rescinded once given.

Accordingly, government actions in the future, including any decision to intervene or influence the operations of our PRC subsidiaries at any time or to exert control over an offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the

 

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operations of our PRC subsidiaries, may limit or completely hinder our ability to offer or continue to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless.

Our PRC subsidiaries have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations, which may subject them to penalties.

According to the PRC Social Insurance Law and the Administrative Regulations on the Housing Funds, companies operating in China are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance (collectively known as “social insurance”), and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees. For more details, please see “Regulations — Regulations Relating to Social Welfare.” The requirement of social insurance and housing fund has not been implemented consistently by the local governments in China given the different levels of economic development in different locations.

Our PRC subsidiaries have not made adequate social insurance and housing fund contributions for all employees, and they may be required to make up for the shortfall in the social insurance contributions as well as to pay late fees at the rate of 0.05% per day of the outstanding amount from the due date. If they fail to make up for the shortfalls within the prescribed time limit, the relevant administrative authorities will impose a fine of one to three times the outstanding amount upon them. With respect to housing fund plans, our PRC subsidiaries may be required to pay and/or deposit housing funds in full and on time within the prescribed time limit. If they fail to do so, relevant authorities could impose a fine of not less than RMB10,000 nor more than RMB50,000 and file applications to competent courts for compulsory enforcement of payment and deposit. As of December 31, 2023, we estimate that the amount of outstanding social insurance premiums and housing funds was approximately RMB437,000 and the amount of late fees and potential fines was in the range of RMB354,000 and RMB958,000. We have not made accruals for the expected amounts owed, including late fees and fines that may be imposed by the relevant local government authorities in the financial statements. There are a number of policies providing that local governmental authorities shall act carefully to avoid burdensome measures over the small- and medium-size entities. For example, pursuant to the Emergency Notice on Practicing Principles of the State Council Executive Meeting and Stabilizing Work on Collecting Social Insurance Premiums, promulgated by the Ministry of Human Resources and Social Security on September 21, 2018, local authorities are prohibited from recovering the unpaid social insurance premiums from enterprises without permission in a centralized manner. Although we have not received any inquiry, notice, warning, or sanction regarding such late fees or fines, the interpretation and implementation of labor-related laws and regulations are still constantly evolving which may be further amended from time to time. Accordingly, if the relevant PRC authorities determine that our PRC subsidiaries shall make supplemental social insurance and housing fund contributions or that they are subject to fines and legal sanctions in relation to their failure to make social insurance and housing fund contributions in full for their employees, their business, financial condition, and results of operations may be adversely affected.

Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our PRC subsidiaries’ business and our offering.

On December 28, 2021, 13 governmental departments of the PRC, including the CAC, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures provide that, in addition to CIIO that intend to purchase Internet products and services, online platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing. The Cybersecurity Review Measures require that an online platform operator which possesses the personal information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.

On November 14, 2021, the CAC published the Security Administration Draft, which provides that data processing operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the relevant Cyberspace Administration of the PRC. According

 

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to the Security Administration Draft, data processing operators shall apply for a cybersecurity review by the relevant Cyberspace Administration of the PRC under certain circumstances, such as (i) mergers, restructurings, and divisions of Internet platform operators that hold large amount of data relating to national security, economic development, or public interest which affects or may affect the national security, (ii) overseas listings of data processors that process personal data for more than one million individuals, (iii) Hong Kong listings of data processors that affect or may affect national security, and (iv) other data processing activities that affect or may affect the national security. The deadline for public comments on the Security Administration Draft was December 13, 2021.

As of the date of this prospectus, we have not received any notice from any authorities identifying our PRC subsidiaries as CIIOs or requiring us to go through cybersecurity review or network data security review by the CAC. As confirmed by our PRC counsel, China Commercial Law firm, neither the operations of our PRC subsidiaries, nor our listing are expected to be affected, and that we are not subject to cybersecurity review by the CAC under the Cybersecurity Review Measures, nor will any such entity be subject to the Security Administration Draft, if it is enacted as proposed, because our PRC subsidiaries are not CIIOs or online platform operators that possess personal information of at least one million users or engage in data processing activities that affect or may affect national security. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we expect to take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee, however, that our PRC subsidiaries will not be subject to cybersecurity review and network data security review in the future. During such reviews, our PRC subsidiaries may be required to suspend their operations or experience other disruptions to their operations. Cybersecurity review and network data security review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect our business, financial conditions, and results of operations.

The Opinions, the Trial Measures, and the revised Provisions recently issued by the PRC authorities subject us to additional compliance requirements in the future.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. The Opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which became effective on March 31, 2023. Pursuant to the Trial Measures, PRC domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following their submission of initial public offerings or listing applications. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. See “Regulations — Regulations Relating to Overseas Listings”

On February 24, 2023, the CSRC, together with the MOF, National Administration of State Secrets Protection and National Archives Administration of China, promulged the Archive Provisions, which became effective on March 31, 2023 together with the Trial Measures. The Archive Provisions require that, among other things, (i) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (ii) a domestic company that

 

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plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As advised by our PRC counsel, China Commercial Law firm, the documents we have provided or disclosed, or plan to provide or disclose, do not contain any state secrets or working secrets of government agencies. However, there remains uncertainty as to how relevant competent authorities will define “state secrets or working secrets of government agencies.” If they recognize that the documents we have disclosed or provided, or plan to disclose or provide, contain “state secrets or working secrets of government agencies,” we or our PRC subsidiaries may be subject to the approval requirements of the Archive Provisions. Any failure or perceived failure by our Company or our PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.

The Opinions, the Trial Measures, the revised Provisions, and any related implementing rules to be enacted may subject us to additional compliance requirements in the future. As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that we our filing documents in connection with this offering and listing will meet the standards of the CSRC, or that we will be able to comply with any additional regulatory requirements, which may arise from the evolving interpretation of the Opinions, the Trial Measures, or any related implementing rules to be enacted, with respect to our future overseas capital-raising activities.

Recent joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the HFCA Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing or future offerings of our securities in the U.S.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a “Restrictive Market,” ​(ii) adopt a new requirement relating to the qualification of management or the board of directors for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditor. On October 4, 2021, the SEC approved Nasdaq’s revised proposal for the rule changes.

On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years (two consecutive years as amended under the Consolidated Appropriations Act, as discussed below), the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.

On March 24, 2021, the SEC announced the adoption of interim final amendments to implement the submission and disclosure requirements of the HFCA Act. In the announcement, the SEC clarified that before any issuer will have to comply with the interim final amendments, the SEC must implement a process for identifying covered issuers. The announcement also stated that the SEC staff is actively assessing how best to implement the other requirements of the HFCA Act, including the identification process and the trading prohibition requirements.

 

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On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the delisting of our Company and the prohibition of trading in our securities if the PCAOB is unable to inspect our accounting firm at such future time.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the board of directors of a company is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.

On December 16, 2021, the PCAOB issued a report on its determinations that the Board is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.

The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in our Ordinary Shares to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

Our auditor, ZH CPA, LLC, the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is headquartered in Denver, Colorado, and has been inspected by the PCAOB on a regular basis, with the last inspection in February 2023. The PCAOB currently has access to inspect the working papers of our auditor and our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021. However, the recent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us since we are an emerging growth company and substantially all of our operations are conducted in China. Furthermore, if the PCAOB is unable to inspect our accounting firm in the future, the HFCA Act, which requires that the PCAOB be permitted to inspect an issuer’s public accounting firm within two years, as amended, will prohibit trading in our securities, and, as a result, an exchange may determine to delist our securities and trading in our securities could be prohibited.

On August 26, 2022, the CSRC, the MOF, and the PCAOB signed the Protocol governing inspections and investigations of accounting firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination.

 

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To the extent cash or assets in the business are in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC/Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our Company or our subsidiaries by the PRC government to transfer cash or assets.

Relevant PRC laws and regulations permit the companies in the PRC to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, each of the companies in the PRC are required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. The companies in the PRC are also required to further set aside a portion of their after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at their discretion. These reserves are not distributable as cash dividends. Furthermore, in order for us to pay dividends to our shareholders, we will rely on payments made from Kebiao Technology to Jiade Zhigao as dividends and the distribution of such payments to Shenzhen Kebiao or WISMASS HK as dividends from Jiade Zhigao, the distribution of such payments to Jiadezhigao HK as dividends from Shenzhen Kebiao, and then the distribution of such payments to our Company as dividends from Jiadezhigao HK and WISMASS HK. If any of our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

Our cash dividends, if any, will be paid in U.S. dollars. If we are considered a tax resident enterprise of the PRC for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax. See “— Risks Relating to Doing Business in the PRC — Under the PRC Enterprise Income Tax Law, we may be classified as a PRC ‘resident enterprise’ for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.”

The PRC government also imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. The majority of our PRC subsidiaries’ income is received in Renminbi and shortages in foreign currencies may restrict our ability to pay dividends or other payments, or otherwise satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments, and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”) as long as certain procedural requirements are met. Approval from appropriate government authorities is required if Renminbi is converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends in foreign currencies to our shareholders.

As of the date of this prospectus, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into, and out of Hong Kong (including funds from Hong Kong to mainland China), except for the transfer of funds involving money laundering and criminal activities. However, there is no guarantee that the Hong Kong government will not promulgate new laws or regulations that may impose such restrictions in the future. There is no assurance the PRC government will not intervene in or impose restrictions on our ability to transfer cash or assets.

As a result of the above, to the extent cash or assets in the business are in the PRC/Hong Kong or a PRC/ Hong Kong entity, such funds or assets may not be available to fund operations or for other use outside of the PRC/Hong Kong, due to interventions in or the imposition of restrictions and limitations on the ability of our Company or our subsidiaries by the competent government to the transfer of cash or assets.

Increases in labor costs in the PRC may adversely affect our PRC subsidiaries’ business and profitability.

China’s economy has experienced increases in labor costs in recent years. China’s overall economy and the average wage in China are expected to continue to grow. The average wage level for our PRC subsidiaries’ employees has also increased in recent years. The average monthly wage level of our PRC

 

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subsidiaries increased from RMB7,800 in 2021 to RMB7,900 in 2022, and further to RMB8,700 in 2023. For the years ended December 31, 2022 and 2023, our PRC subsidiaries’ employee salaries and benefits were approximately RMB1,701,000 and 2,188,000 (US$308,000), respectively, representing a growth rate of approximately 29%. We expect that their labor costs, including wages and employee benefits, will continue to increase. Unless our PRC subsidiaries are able to pass on these increased labor costs to their customers by increasing prices for their products or services, their profitability and results of operations may be materially and adversely affected.

In addition, our PRC subsidiaries have been subject to stricter regulatory requirements in terms of entering into labor contracts with their employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance to designated government agencies for the benefit of their employees. Pursuant to the PRC Labor Contract Law, or the “Labor Contract Law,” that became effective in January 2008 and its implementing rules that became effective in September 2008 and its amendments that became effective in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation, and unilaterally terminating labor contracts. In the event that our PRC subsidiaries decide to terminate some of their employees or otherwise change their employment or labor practices, the Labor Contract Law and its implementation rules may limit their ability to effect those changes in a desirable or cost-effective manner, which could adversely affect their business and results of operations.

As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our PRC subsidiaries’ employment practices do not and will not violate labor-related laws and regulations in China, which may subject our PRC subsidiaries to labor disputes or government investigations. If our PRC subsidiaries are deemed to have violated relevant labor laws and regulations, they could be required to provide additional compensation to their employees and their business, and, in such case, our financial condition, and results of operations could be materially and adversely affected.

PRC regulations relating to offshore investment activities by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

On July 4, 2014, SAFE issued the Circular on Issues Concerning Foreign Exchange Control over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or “SAFE Circular 37.” According to SAFE Circular 37, prior registration with the local SAFE branch is required for PRC residents, (including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose), in connection with their direct or indirect contribution of domestic assets or interests to offshore special purpose vehicles, or “SPVs.” SAFE Circular 37 further requires amendments to the SAFE registrations in the event of any changes with respect to the basic information of the offshore SPV, such as change of a PRC individual shareholder, name, and operation term, or any significant changes with respect to the offshore SPV, such as an increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. In February 2015, SAFE promulgated a Circular on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or “SAFE Circular 13,” effective in June 2015. Under SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

In addition to SAFE Circular 37 and SAFE Circular 13, our ability to conduct foreign exchange activities in China may be subject to the interpretation and enforcement of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007 (as amended and supplemented, the “Individual Foreign Exchange Rules”). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance

 

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or trading of negotiable securities or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions, the failure of which may subject such PRC individual to warnings, fines, or other liabilities.

As of the date of this prospectus, our current shareholders who are subject to the SAFE Circular 37 have completed the initial registrations with the qualified banks as required by the regulations. We may not be informed of the identities of all the PRC residents holding direct or indirect interest in our Company, however, and we have no control over any of our future beneficial owners. Thus, we cannot provide any assurance that our current or future PRC resident beneficial owners will comply with our request to make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations. Such failure or inability of our PRC resident beneficial owners to comply with these SAFE regulations may subject us or our PRC resident beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiaries’ ability to distribute dividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.

PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of offshore offerings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect their liquidity and their ability to fund and expand their business.

We are an exempted company with limited liability incorporated in the Cayman Islands conducting our operations in China through our PRC subsidiaries, to which we can make loans and make additional capital contributions. Most of these loans or contributions are subject to PRC regulations and approvals or registration. For example, any loans to Shenzhen Kebiao, which is treated as a foreign-invested enterprise under PRC law, are subject to PRC regulations and foreign exchange loan registrations. Furthermore, loans made by us to Shenzhen Kebiao to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE, or filed with SAFE in its information system. Pursuant to relevant PRC regulations, we may provide loans to Shenzhen Kebiao up to the larger amount of (i) the balance between the registered total investment amount and registered capital of Shenzhen Kebiao, or (ii) twice the amount of the net assets of Shenzhen Kebiao calculated in accordance with the Circular on Full-Coverage Macro-Prudent Management of Cross-Border Financing (the “PBOC Circular 9”), subsequently amended to 250% of the net asset of Shenzhen Kebiao calculated in accordance with the Circular on Foreign Exchange Adjusting Parameters of Full-coverage Macro-prudent Management of Cross-border Financing (the “Circular 64”). Moreover, any medium or long-term loan to be provided by us to Shenzhen Kebiao or other domestic PRC entities must also be filed and registered with the National Development and Reform Commission (the “NDRC”). We may also decide to finance Shenzhen Kebiao by means of capital contributions. These capital contributions are subject to registration with the SAMR or its local branch, reporting of foreign investment information with the Ministry of Commerce of the PRC (the “MOFCOM”), or registration with other governmental authorities in China.

On March 30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Administrative Approach Regarding the Settlement of the Foreign Exchange Capital of Foreign-invested Enterprises, or “SAFE Circular 19,” which took effect and replaced previous regulations effective on June 1, 2015, and was amended on December 30, 2019. Pursuant to SAFE Circular 19, up to 100% of foreign currency capital of a foreign-invested enterprise may be converted into RMB capital according to the actual operation, and within the business scope, of the enterprise at its will. Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in the PRC, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond their business scope, for entrusted loans or for inter-company RMB loans. On June 9, 2016, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or “SAFE Circular 16,” effective on June 9, 2016, which reiterates some rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-affiliated enterprises. SAFE Circular 19 and SAFE Circular 16 may

 

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significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our offshore offerings, to Shenzhen Kebiao, which may adversely affect our liquidity and our ability to fund and expand our business in China. On October 23, 2019, SAFE issued the Notice of the State Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment, or “SAFE Circular 28,” which, among other things, expanded the use of foreign exchange capital to domestic equity investment area. Non-investment foreign-funded enterprises are allowed to lawfully make domestic equity investments by using their capital if (i) such investments do not violate the prevailing Special Administrative Measures for Access of Foreign Investments (Edition 2022), or the “Negative List,” and (ii) the domestic investment projects are authentic and are in compliance with relevant regulations. However, since SAFE Circular 28 is newly promulgated, it is unclear how SAFE and competent banks will carry it out in practice.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, including SAFE Circular 19, SAFE Circular 16, and other relevant rules and regulations, we cannot assure you that we will be able to complete the necessary registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or capital contributions to Shenzhen Kebiao, Jiade Zhigao, and Kebiao Technology. As a result, uncertainties exist as to our ability to provide prompt financial support to Shenzhen Kebiao, Jiade Zhigao, and Kebiao Technology when needed. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received or expect to receive from our offshore offerings and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our PRC subsidiaries’ business, including their liquidity and their ability to fund and expand their business.

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

The value of the RMB, which is the currency of the PRC, against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.

Our business is conducted in the PRC through our PRC subsidiaries, and their books and records are maintained in RMB. The financial statements that we file with the SEC and provide to our shareholders are partly presented in U.S. dollars. Changes in the exchange rates between the RMB and U.S. dollar affect the value of our PRC subsidiaries’ assets and results of operations, when presented in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue, and financial condition. Further, our Ordinary Shares offered in the U.S. are offered in U.S. dollars, we need to convert the net proceeds we receive into RMB in order to use the funds for our PRC subsidiaries’ business. Changes in the conversion rate among the U.S. dollar and the RMB will affect the amount of proceeds we will have available for our PRC subsidiaries’ business.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

 

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Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.

Under the PRC Enterprise Income Tax Law (the “EIT Law”), which became effective in January 2008, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances, and properties of an enterprise. In April 2009, the State Administration of Taxation (the “SAT”) issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the Actual Standards of Organizational Management, or “SAT Circular 82,” which was amended in December 2017. SAT Circular 82 specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision-making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. In addition to SAT Circular 82, the SAT issued the Measures for the Administration of Enterprise Income Tax of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises (for Trial Implementation), or “SAT Bulletin 45,” which took effect in September 2011 and was amended in April 2015, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups, or by PRC or foreign individuals.

If the PRC tax authorities determine that the actual management body of Jiade Cayman is within the territory of China, Jiade Cayman may be deemed to be a PRC resident enterprise for PRC enterprise income tax purposes and a number of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Finally, dividends payable by us to our investors and gains on the sale of our shares may become subject to PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our shares. Although up to the date of this prospectus, Jiade Cayman has not been notified or informed by the PRC tax authorities that it has been deemed to be a resident enterprise for the purpose of the EIT Law, we cannot assure you that it will not be deemed to be a resident enterprise in the future.

Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.

We are an exempted company with limited liability incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

 

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Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of their respective after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. These limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments, or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Governmental control of currency conversion may affect the value of your investment and our payment of dividends.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenue in RMB. Under our current corporate structure, Jiade Cayman may indirectly rely on dividend payments from Shenzhen Kebiao, Jiade Zhigao, and Kebiao Technology to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate shareholders of our corporate shareholders who are PRC residents. Approval from or registration with appropriate government authorities is, however, required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demand, we may not be able to pay dividends in foreign currencies to our shareholders.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of Shenzhen Kebiao, and dividends payable by Shenzhen Kebiao to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

Under the EIT Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside the PRC, will be subject to a withholding tax rate of 10%. Pursuant to the Double Tax Avoidance Arrangement, a withholding tax rate of 10% may be lowered to 5% if the enterprise in mainland China is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws.

However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the “SAT Circular 81,” which became effective on February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According to the Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which became effective as of April 1, 2018, when determining an applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further requires any applicant who intends to be proved of being the “beneficial owner” to file relevant documents with the relevant tax authorities. Our PRC subsidiaries are owned by Jiadezhigao HK and WISMASS HK, our Hong Kong subsidiaries. However, we cannot assure you that our determination

 

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regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will be able to complete the necessary filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by our Shenzhen Kebiao to Jiadezhigao HK, in which case, we would be subject to the higher withdrawing tax rate of 10% on dividends received.

If we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price, and reputation.

U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial commentators, and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, have become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity will have on us, our business, and the price of our Ordinary Shares. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our Company. This situation will be costly and time consuming and could distract our management from developing our business. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our Ordinary Shares.

The approval of the CSRC may be required in connection with this offering under a regulation adopted in August 2006, and, if required, we cannot assure you that we will be able to obtain such approval, in which case we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek the CSRC approval for this offering.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the “M&A Rules,” adopted by six PRC regulatory agencies in 2006 and amended in 2009, require an overseas SPV formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC, prior to the listing and trading of such SPV’s securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by an SPV seeking the CSRC approval of its overseas listings. The application of the M&A Rules remains unclear.

On December 18, 2008, the Foreign Investment Department of the Ministry of Commerce promulgated the Guidelines for the Administration of Foreign Investment Access (2008 Edition), or the Guidelines, which became effective on December 18, 2008. The Guidelines stipulate that the transfer of equity from established foreign-invested enterprises from Chinese parties to foreign parties does not refer to the M&A Rules, regardless of whether there is a related relationship between the Chinese and foreign parties nor whether the foreign parties are existing shareholders or new investors, and the domestic enterprises as the target company of the merger only includes domestic enterprises.

Our PRC legal counsel, China Commercial Law Firm, has advised us, based on their understanding of the current PRC law, rules, and regulations that neither we nor our subsidiaries are required to submit such approval application to the CSRC under the M&A Rules, because we acquired the controlling equity interests in domestic operating subsidiaries through the acquisition of Jiade Zhigao, which is a foreign-invested enterprise.

Our PRC legal counsel, however, has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the same conclusion as we have. If it is determined that the

 

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CSRC approval is required for our offerings in the U.S., we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek the CSRC approval for our offerings in the U.S. These sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from our offerings in the U.S. into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiaries, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation, and prospects, as well as the trading price of our Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt our offerings in the U.S. before the settlement and delivery of the Ordinary Shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

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

The M&A Rules and recently adopted PRC regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Mergers or acquisitions that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to MOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the “Prior Notification Rules,” issued by the State Council in August 2008 is triggered. In addition, the Provisions of the Ministry of Commerce on the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “Security Review Rules”) issued by MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and the Security Review Rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is clear that our PRC subsidiaries’ business would not be deemed to be in an industry that raises “national defense and security” or “national security” concerns. MOFCOM or other government agencies, however, may publish explanations in the future determining that our PRC subsidiaries’ business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our PRC subsidiaries’ ability to expand their business or maintain or expand their market share through future acquisitions would as such be materially and adversely affected.

Chinese regulatory authorities could disallow our holding company structure, which may result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless.

We indirectly hold the equity of our PRC subsidiaries through Jiadezhigao HK and WISMASS HK, and thus our PRC subsidiaries are directly or indirectly foreign-invested enterprises. Although the PRC government has increasingly open attitude towards absorbing foreign investment in general, it still implements the Negative List, which restricts or prohibits overseas enterprises from holding the equity of Chinese companies whose operations are included in the Negative List. As the boundaries stipulated in the Negative List are relatively vague, they are subject to further determination and clarification by the Chinese

 

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government. As of the date of this prospectus, the business operated by our PRC subsidiaries has not been included in the Negative List, but we cannot fully guarantee that the Chinese government will not make a different interpretation, so as to disallow our holding corporate structure. Moreover, the Chinese government revises the Negative List from time to time; although the scope of the Negative List is narrowing as a whole, it remains uncertain whether our existing business or future business will be included in future revisions. If the business of our PRC subsidiaries is deemed as a restricted or prohibited business based on the Negative List, our existing corporate structure may be considered illegal and required to be restructured by the Chinese government, which may adversely affect our operations and the value of the securities we are registering for sale.

On July 4, 2014, SAFE issued the SAFE Circular 37, which requires PRC residents, including PRC individuals and institutions, to register with SAFE or its local branches in connection with their direct establishment or indirect control of an offshore special purpose vehicle, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. In addition, such PRC residents must update their foreign exchange registrations with SAFE or its local branches when the offshore special purpose vehicles in which such residents directly hold equity interests undergo material events relating to any changes of basic information (including changes of such PRC individual shareholders, names, and operation terms), increases or decreases in investment amount, share transfers or exchanges, or mergers or divisions. As of the date of this prospectus, our current shareholders who are subject to the SAFE Circular 37 have completed the initial registrations with the qualified banks as required by the regulations. However, we may not be fully informed of the identities of all our shareholders or beneficial owners who are PRC residents, and therefore, we may not be able to identify all our shareholders or beneficial owners who are PRC residents to ensure their compliance with the SAFE Circular 37 or other related rules. In addition, we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain, or update any applicable registrations or comply with other requirements required by the SAFE Circular 37 or other related rules in a timely manner. Even if our shareholders and beneficial owners who are PRC residents comply with such request, we cannot provide any assurance that they will successfully obtain or update any registration required by the SAFE Circular 37 or other related rules in a timely manner. If any of our shareholders who is a PRC resident, as determined by SAFE Circular 37, fails to fulfill the required foreign exchange registration, it will be deemed illegal for such shareholder to directly or indirectly hold our equity under the PRC laws. Furthermore, if PRC authorities disallow such shareholder to own our equity, our PRC subsidiaries may be prohibited from distributing dividends to us or from carrying out other subsequent cross-border foreign exchange activities, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries, which may adversely affect our operations and our values of the securities we are registering for sale.

Furthermore, if future laws, administrative regulations, or provisions mandate further actions to be taken by us or our PRC subsidiaries with respect to our existing corporate structure, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, resulting in a material change in our operations and/or a material change in the value of our Ordinary Shares, including that it could cause the value of our Ordinary Shares to significantly decline or become worthless.

Risks Relating to Our Businesses and Industry

Our PRC subsidiaries may be unable to maintain or raise the quality of their software platform and auxiliary solutions.

Our PRC subsidiaries provide one-stop comprehensive education supporting services to adult education institutions, through a wide range of software platform and auxiliary solutions. As of the date of this prospectus, our PRC subsidiaries’ services are primarily offered through their self-developed KB Platform, which facilitates streamlined information and data management throughout the teaching cycle of adult education services. Our PRC subsidiaries also expect to promote and utilize their other self-developed software systems among their current and future customers, along with the KB Platform. Our PRC subsidiaries’ ability to retain existing customers and attract new customers depends on the consistency and

 

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quality of their software platform and auxiliary solutions. If our PRC subsidiaries are unable to maintain or raise the quality of their software platform and auxiliary offerings, hire or train qualified technical support personnel, gather or allocate sufficient technical support resources, or respond quickly to accommodate the increases in demand for product functionality, customer services, and technical support, it could adversely affect our business, results of operations, and financial condition.

Our PRC subsidiaries may be unable to adequately respond to students’ expectations and help students achieve their learning objectives.

Our PRC subsidiaries generate revenue from providing one-stop comprehensive education supporting services to adult education institutions, and they receive service fees primarily based on the number of students serviced and the types of services they provide. Our PRC subsidiaries are responsible for maintaining the software systems provided by them and ensuring their reliability and functionality, including timely addressing any technical issues, raised by customers or their students, related to various aspects, such as live streaming, video replay, and document downloads. As such, the success of our PRC subsidiaries’ business largely depends on their ability to respond to students’ expectations and help students achieve their learning objectives. The adult education supporting service industry is characterized by rapid changes in the students’ requirements and preferences, frequent introductions of new technologies, and the emergence of new standards and practices for standardized tests. Our PRC subsidiaries may be unable to (i) respond to changes in the students’ requirements and preferences in a cost-effective and timely way; (ii) identify, develop, or acquire leading technologies useful to their business; or (iii) adapt to emerging standards and practices for standardized tests. If our PRC subsidiaries fail to adequately respond to students’ expectations or help students achieve their learning objectives, it may lead to reduced student engagement or increased challenges in attracting prospective customers, which in turn may materially and adversely affect our business, financial condition, and results of operations.

Our business, financial condition, and results of operations could be materially and adversely affected if our PRC subsidiaries face interruptions associated with their technology platforms.

The successful development and maintenance of our PRC subsidiaries’ systems, software, applications, and other platforms are crucial to the attractiveness of our PRC subsidiaries’ services to their customers. In order to achieve our PRC subsidiaries’ strategic objectives and remain competitive, our PRC subsidiaries must continue to develop and enhance their technology. However, our PRC subsidiaries’ efforts may prove to be unsuccessful. Our PRC subsidiaries’ software, systems, platforms, or applications may become inaccessible in the event of system errors, significant traffic increases, power outages, disruption or failure in the national backbone network, or damage from fire, flood, power loss, or telecommunications failure. In addition, our PRC subsidiaries’ technology platforms upon which the management systems and online programs operate, and our PRC subsidiaries’ other databases, products, systems, and source codes, could contain undetected errors or “bugs” that could adversely affect their performance. Our PRC subsidiaries’ computer networks may also be vulnerable to unauthorized access, hacking, computer viruses, and other security breaches. A user who circumvents our PRC subsidiaries’ security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations. Moreover, our PRC subsidiaries may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems caused by these breaches. We have taken several measures to assess, identify, and manage material risks from cybersecurity threats. Specifically, the information technology (“IT”) department of Kebiao Technology, one of our PRC subsidiaries, is responsible for the daily operation and maintenance of network equipment and infrastructure. The IT department identifies and responds to risk incidents based on the technical standards and workflows established by the department. Additionally, if the IT department cannot make independent decisions regarding a risk incident, it will report the incident to our board of directors for discussion and resolution. Our board of directors, which currently consists of one director, Mr. Yuan Li, who is also our Chief Executive Officer and 100% owner of our largest shareholder, and will consist of Yuan Li, Kunqi Bai, Shuang Qiu, Shaoping Lu, and Yaxuan Yang, upon the effectiveness of our registration statement of which this prospectus forms a part, is responsible for reviewing reports from personnel with reporting obligations, such as the head of the IT department, regarding any significant risks impacting the software operation and data security of our PRC subsidiaries that they cannot independently assess or manage. See “Management.” Our board of directors is also responsible for inquiring about the status and progress of significant matters related to such cybersecurity threats, and consulting with relevant

 

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departments and personnel in order to conduct timely, accurate, and thorough analyses, discussions, and actions pertaining to such cybersecurity threats, if any. If there are risks that may threaten national security, public interests, or the students’ lives and property, the board of directors proactively report to relevant authorities and cooperate with them in addressing the related risks. Both the IT department and the general administrative department of Kebiao Technology are responsible for overseeing, managing, and documenting data acquired during routine software operations. While the IT department is in charge of maintaining and managing basic data logs and reports related to the daily operation of the software network system, as well as the storage of personal information of students, the general administrative department is responsible for overall record management, particularly concerning the storage and management of documents related to corporate strategic development, production and operation, corporate management, and company secrets, if applicable.

As of the date of this prospectus, our PRC subsidiaries’ technology has not encountered any material error or technical issue that could have adversely affected or disrupted our PRC subsidiaries’ operations. However, any network interruption or inadequacy in the future that causes interruptions in the availability of our PRC subsidiaries’ software, systems, applications, or other platforms could reduce customer satisfaction. If sustained or repeated, these performance issues could reduce the attractiveness of our PRC subsidiaries’ service offerings to their customers, which in turn may materially and adversely affect our business, financial condition, and results of operations.

Our PRC subsidiaries may face disruptions in technology infrastructure.

The business of our PRC subsidiaries relies on the uninterrupted functioning of their technology infrastructure. For example, our PRC subsidiaries maintain a server in Beijing, which form the backbone of their operations, facilitating the storage, processing, and delivery of data and information. Any disruption or failure of the server could result in a significant impact on the availability and performance of their software platform and service offerings, potentially affecting their reputation and financial performance. The implementation, support, development, and upgrades of our PRC subsidiaries’ technology infrastructure may incur significant costs. In addition, such technology infrastructure is potentially vulnerable to damages or interruptions as a result of a variety of events beyond control, such as natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses, malicious cyberattacks, criminal acts, and similar events. See “— Our business, financial condition, and results of operations could be materially and adversely affected if our PRC subsidiaries face interruptions associated with their technology platforms.” These and other events may lead to the disruption of our PRC subsidiaries’ technology infrastructure, the interruption of online course delivery, and the unavailability of our PRC subsidiaries’ tools and services. Any material interruption or failure in the technology infrastructure could cause disruptions in business operations and may require a significant investment to update, remediate or replace with alternatives, which may have a material adverse effect on our business, financial condition, and results of operations.

Our PRC subsidiaries may fail to protect confidential information of their users.

Our PRC subsidiaries’ business involves the collection, storage, processing, and transmission of significant amounts of data. Our PRC subsidiaries’ encryption of data and other protective measures may not prevent unauthorized access or use of sensitive data. Any failure or perceived failure by our PRC subsidiaries to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, could reduce customer satisfaction, harm our PRC subsidiaries’ reputation, expose our PRC subsidiaries to legal claims and liabilities, increase their risk of regulatory scrutiny, and result in the imposition of material penalties and fines under applicable laws or regulations.

Our PRC subsidiaries may fail to comply with the regulations that govern their business operations.

Our PRC subsidiaries are required under PRC laws and regulations to obtain and maintain permits and licenses to conduct their business, including business licenses. Our PRC subsidiaries are also subject to certain supervision from the PRC government authorities, such as the SAMR. The PRC regulatory authorities

 

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have broad powers to adopt regulations and other requirements affecting or restricting our PRC subsidiaries’ operations. Moreover, these regulatory authorities possess significant powers to enforce applicable regulatory requirements in case of non-compliance by our PRC subsidiaries, including the imposition of fines, sanctions, or the revocation of licenses or permits to operate our PRC subsidiaries’ business. As of the date of this prospectus, our PRC subsidiaries have maintained all the permits, approval, licenses, or other qualifications required for their operations and have not been subject to any review, investigation, fine, or penalty from any PRC regulatory authority. However, there can be no assurance that our PRC subsidiaries will not face administrative fines or penalties concerning their operations in the future, which, if imposed, may materially and adversely affect our business, financial condition, and results of operations.

Our PRC subsidiaries face competition in the market for adult education supporting services, and we expect competition from existing competitors and other companies that may enter the market or introduce new solutions in the future, which could result in pricing pressures and a decline in both our market share and revenue.

The adult education supporting service industry in the PRC is competitive and rapidly evolving, with new companies increasingly joining the competition in recent years. We compete with other companies that offer software and technical support services to adult education institutions. Competition may result in pricing pressures, declining revenue and profitability, or a loss of market share. Our PRC subsidiaries face competitors who are constantly seeking appealing ideas and introducing competitive products and services. Many of the existing competitors may have strong competitive advantages, including longer operating histories, larger and broader customer bases, lower operating costs, more established relationships with a broader set of suppliers and customers, greater brand recognition, and greater financial, research and development, marketing, distribution, and other resources than our PRC subsidiaries do. In addition, new companies may enter the market with innovative business models or more appealing service offerings, and disrupt the competitive landscape, making it even more challenging for us to maintain our market position. We may lose customers if our PRC subsidiaries fail to compete successfully, which could adversely affect our financial performance and business prospects. We cannot guarantee that our PRC subsidiaries’ strategies will remain competitive or successful in the future. Increasing competition may result in pricing pressures and loss of our PRC subsidiaries’ market share, either of which could have a material adverse effect on our financial condition and results of operation.

Our business, financial condition, and results of operations could be materially and adversely affected if our PRC subsidiaries are unable to enhance existing software platform and auxiliary solutions or develop new systems or platforms in order to keep pace with rapid changes in technology.

Since April 2020, our PRC subsidiaries have successfully developed and acquired software copyrights for 31 software systems or platforms, including the KB Platform, the Enrollment Information Automation Management System, the Backend Management System for Academic Administration, and the Education Service Management System. However, the adult education supporting service industry is subject to rapid technological changes, evolving industry standards, and new product and service introductions, which may render our PRC subsidiaries’ technologies insufficient or obsolete. There can be no assurance that our PRC subsidiaries will be able to anticipate technological developments, develop new enhancements for existing software platforms and services, improve existing functionality to meet rapidly evolving demands, or offer new software, systems, applications, and related services that garner market acceptance. New software products and services require significant upfront investments and there can be no assurance that our PRC subsidiaries will be able to recover such investments in new products and services. If our PRC subsidiaries fail to adapt to the rapidly changing technologies or develop suitable products and services to meet the evolving requirements, it may materially and adversely affect our business, financial condition, and results of operations.

Our PRC subsidiaries’ business may rely on a few customers that account for more than 10% of their total revenue, and interruption in their operations may have an adverse effect on our business, financial condition, and results of operations.

During the years ended December 31, 2022 and 2023, our PRC subsidiaries derived most of their revenue from a few adult education institution customers. Specifically, for the year ended December 31, 2022, the top three customers of our PRC subsidiaries, Chengdu Jinjiang New Vision Training School, New

 

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Vision Huoda (Chengdu) Educational Technology Co., Ltd., and Shenzhen Jiawen Management Consulting Co., Ltd., accounted for 50%, 19%, and 8% of our total revenue, respectively.

For the year ended December 31, 2023, the top three customers of our PRC subsidiaries, Chengdu Jinjiang New Vision Training School, New Vision Huoda (Chengdu) Educational Technology Co., Ltd., and Sichuan Action Education & Technology Co., Ltd., accounted for 40%, 29%, and 18% of our total revenue, respectively. Pursuant to a typical service agreement entered into between Kebiao Technology, one of our PRC subsidiaries, and a major customer, Kebiao Technology is required to (i) provide a range of auxiliary solutions to the customer’s students, including enrollment, question and answer (“Q&A”) support, and tutoring services related to their courses and studies, (ii) timely respond to any question and request raised by the customer’s students regarding the enrollment, courses, and examinations; (iii) maintain the software platforms provided by Kebiao Technology and ensure their reliability and functionality, including timely responding to various technical issues raised by the customer’s students regarding live streaming, video replay, and document downloads; and (iv) keep and handle with care all information, data, and materials provided by the customer, and are prohibited from using such information outside the scope of the service agreement or disclose it to any third party. Pursuant to the service agreement, the customer is required to pay service fees, within three months after settlement confirmation by both parties, based on the actual number of students served and the type of services provided. The service agreement typically has a term of one year and may be terminated by Kebiao Technology if the customer fails to make payments or a bankruptcy, liquidation, or other similar procedure occurs with respect to the customer, or by the customer if Kebiao Technology fails to the provide the services specified by the agreement and does not rectify the issues after receiving written notice from the customer, or fails to maintain the confidentiality of the customer’s information. See “Business — Customers.”

We believe that, in the foreseeable future, our PRC subsidiaries will continue to derive a significant portion of their revenue from a limited number of major customers. If one or more of such major customers fail to make payments, do not honor their contractual commitments, or experience a downturn in their business, our revenue and results of operations may be materially and adversely affected. Our PRC subsidiaries may lose a major customer due to a variety of factors, including their capacity to deliver reliable and stable software platforms, the quality of their customer service, as well as their competitiveness in pricing strategies. Even though our PRC subsidiaries have a strong record of performance, we cannot guarantee that they will continue to maintain their business cooperation with these major customers at the same level, or at all. If any significant customer terminates its relationship with our PRC subsidiaries, we cannot assure you that our PRC subsidiaries will be able to secure an alternative arrangement with a comparable customer in a timely manner, or at all. Losing one or more of these major customers could adversely affect our revenue and profitability.

Our PRC subsidiaries derive a majority of revenue from a limited number of cities and any event negatively affecting the adult education market in these cities could have a material adverse effect on our business and results of operations.

For the years ended December 31, 2022 and 2023, our PRC subsidiaries derived approximately 91.7% and 100.0% of the total revenue from Sichuan Province, respectively, while 90.7% and 98.1% was derived specifically from Chengdu City, respectively. These cities are expected to continue to be important sources of our PRC subsidiaries’ revenue. If any of these cities experience any event that would negatively affect the adult education market, including (i) the occurrence of a significant economic downturn, natural calamities, or a widespread outbreak of contagious diseases, (ii) the implementation of regulations by local governments that affect the adult education market and impose additional restrictions on our PRC subsidiaries, and (iii) intensified competition due to increasing numbers of companies offering similar software and technology services in these cities, our business and results of operations may be materially and adversely affected.

If our PRC subsidiaries fail to manage their growth or execute their strategies and future plans effectively, they may not be able to take advantage of market opportunities or meet the demand of their customers.

Our PRC subsidiaries’ business has grown substantially since their inception, and they expect to continue to grow in terms of the scale and diversity of operations. For example, our PRC subsidiaries endeavor to

 

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further diversify their product and service offerings to include production safety training and related examination services, by developing software for production safety training and relevant exams, providing training and examination support services, and venturing into the vocational skills training and examination market. These endeavors increase the complexity of their operations and may cause strain on their managerial, operational, and financial resources. Our PRC subsidiaries must continue to hire, train, and effectively manage new employees. In the event that their new hires fail to perform as expected, or if our PRC subsidiaries fail to hire, train, manage, and integrate new employees, their business, financial condition, and results of operations may be materially adversely affected. Their expansion will also require them to maintain consistency in the quality of their existing adult education supporting services so that their reputation is not damaged by any deviations in quality, whether actual or perceived.

Our PRC subsidiaries’ future results of operations also depend largely on their ability to execute their future plans successfully. In particular, their continued growth may subject them to the following additional challenges and constraints:

•

our PRC subsidiaries face challenges in ensuring the productivity of a large employee base and recruiting, training, and retaining highly skilled personnel, including areas of sales and marketing and information technology for their growing operations;

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•

our PRC subsidiaries face challenges in responding to evolving industry standards and government regulations that impact their business and the adult education supporting service industry in general;

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•

technological or operational challenges may arise from the expansion of business operations;

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•

the execution of their future plans will be subject to the availability of funds to support the relevant capital investment and expenditures; and

​

•

the successful execution of our PRC subsidiaries’ strategies is subject to factors beyond their control, such as general market conditions, and economic and political developments in China and globally.

​

All of these endeavors involve risks and will require significant management, financial, and human resources. We cannot assure you that our PRC subsidiaries will be able to effectively manage their growth or implement their strategies successfully. There is no assurance that the investment to be made by our PRC subsidiaries as contemplated under their future plans will be successful and generate the expected return. If our PRC subsidiaries are not able to manage their growth or execute their strategies effectively, or at all, their business, results of operations, and prospects may be materially and adversely affected.

Our PRC subsidiaries have a limited source of working capital and may need substantial additional financing. If we do not obtain substantial additional financing, our ability to execute our business plan as outlined in this prospectus will be impaired.

Our PRC subsidiaries currently have limited cash and working capital. As of December 31, 2021, 2022 and 2023, our PRC subsidiaries had cash of approximately RMB6,000, RMB2,604,000, and RMB7,082,000 (US$997,000), respectively, and had working (deficit)/capital of approximately (RMB492,000), RMB6,589,000, and RMB15,403,000 (US$2,170,000), respectively. We reported cash provided by operating activities of approximately RMB1,199,000, RMB495,000, and RMB10,377,000 (US$1,462,000) for the years ended December 31, 2021, 2022 and 2023, respectively. Given our PRC subsidiaries’ history of limited sources of working capital, they may need substantial additional financing, including bank borrowing and advances from shareholders. However, there is no assurance that our PRC subsidiaries will obtain financing on acceptable terms in a timely manner, or at all. In the event they are unable to obtain additional financing, our PRC subsidiaries may have to significantly limit, or even terminate, their primary operations, or delay, reduce, or eliminate certain of their planned operations (including expanding our PRC subsidiaries’ business into new markets and diversifying their product and service offerings to include production safety training and related examination services), resulting in a complete loss of investment for our stockholders. Our PRC subsidiaries’ inability to obtain financing on acceptable terms when needed may have a material adverse effect on our business, results of operations, financial condition, and prospects.

Our PRC subsidiaries’ brand image and reputations may be adversely impacted by the misuse of our PRC subsidiaries’ platforms.

Our PRC subsidiaries’ current or future service offering may include software platforms, systems, and applications that facilitate communication between the teaching staff and students. Because our PRC

 

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subsidiaries do not have full control over how the teaching staff and students will use these platforms, systems, and applications to communicate, our PRC subsidiaries’ platforms, systems, and applications may from time to time be misused to engage in immoral, disrespectful, fraudulent or illegal activities, such as intentionally failing to comply with government regulations and improper disclosure of sensitive or classified information. Although our PRC subsidiaries are not aware of any material incidents on their platforms and such incidents have not been covered by media reports or Internet forums, any such exposure or coverage could generate negative publicity about our PRC subsidiaries’ brands and platforms. There is no guarantee that the control procedures implemented, or to be implemented, by our PRC subsidiaries will prove sufficient to prevent all such content or activities from being posted or carried out. Moreover, because our PRC subsidiaries have limited control over the real-time and offline behavior of the students and teaching staff, to the extent such behavior is associated with our PRC subsidiaries’ software platforms, systems, or applications, our PRC subsidiaries’ ability to protect their brand image and reputation may be limited. Our PRC subsidiaries’ business and the public perception of their brands may be materially and adversely affected by the misuse of their platforms. In addition, in the event that any students or teaching staff of the customers of our PRC subsidiaries experience or claim to have experienced financial, emotional, or other types of harm resulting from commutation or interaction initiated on our PRC subsidiaries’ platforms, our PRC subsidiaries may face civil lawsuits or other liabilities initiated by the affected student or teaching staff, or governmental or regulatory actions against our PRC subsidiaries.

Our PRC subsidiaries may be the subject of detrimental conducts by third parties, which could have a negative impact on their reputation.

Our PRC subsidiaries may be the target of anti-competitive, harassing, or other detrimental conduct by third parties including their competitors. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies regarding our PRC subsidiaries’ operations, accounting, business relationships, business prospects, and business ethics. Additionally, anyone may post false allegations online against our PRC subsidiaries on an anonymous basis. Our PRC subsidiaries may be subject to government or regulatory investigation as a result of such third-party conduct and may be required to expend significant time and incur substantial costs to address such third-party conduct, and there can be no assurance that each of the allegations will be refuted conclusively within a reasonable period of time, or at all. Our business may also be materially negatively affected as a result of such public dissemination of anonymous allegations or malicious statements.

Any negative publicity about our PRC subsidiaries, their services, and their management may materially and adversely affect their reputation and business.

Our PRC subsidiaries may from time to time receive negative publicity about them, or their management or business. Certain of such negative publicity may be the result of malicious harassment or unfair competition acts by third parties. Our PRC subsidiaries may even be subject to government or regulatory investigation as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to defend themselves against such third-party conduct, and our PRC subsidiaries may not be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Harm to their reputation can also arise for other reasons, including misconduct of their employees or any third-party business partners with whom they conduct business. Our PRC subsidiaries may be materially and adversely affected as a result of any negative publicity, which in turn may cause them to lose market share, marketing customers, industry partners, and other business partnerships.

Our PRC subsidiaries may fail to protect their intellectual property.

Our PRC subsidiaries consider their copyrights, trademarks, trade names, domain names, and other intellectual property rights invaluable to their ability to continue to develop and enhance their brand recognition. In particular, as of the date of this prospectus, our PRC subsidiaries have already acquired 36 software copyrights since their incorporation in April 2020. See “Business — Technology.” Our PRC subsidiaries rely on a combination of copyright, trademark, and trade secret laws to protect their intellectual property rights. Nevertheless, the measures our PRC subsidiaries take to protect their intellectual property rights may be inadequate to prevent improper or unauthorized uses. The improper or unauthorized uses of our PRC subsidiaries’ intellectual property rights may decrease the brand value and cause a decline in

 

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sales. Our PRC subsidiaries could, even if by omission, fail to renew an intellectual property right in a timely manner, or third parties may challenge, and succeed in obtaining the invalidation of, any existing or future intellectual property issued to, or licensed to our PRC subsidiaries. Monitoring and preventing the improper or unauthorized uses of intellectual property rights requires significant effort, and could result in substantial costs and diversion of our PRC subsidiaries’ management’s attention and resources. There can be no assurance that the steps that have been, or will be, taken to protect intellectual property rights will be sufficient or that third parties will not infringe upon or misappropriate our PRC subsidiaries’ proprietary rights. Failure to adequately protect our PRC subsidiaries’ intellectual property could materially and adversely affect our business, financial condition, and results of operations.

Litigation may also be necessary to defend against claims of infringement or invalidity by others as our PRC subsidiaries actively pursue innovation and enhance the value of their intellectual property portfolio. An adverse outcome in litigation or any similar proceedings could adversely affect our business, financial condition, and results of operation. In addition, the diversion of management’s attention and resources while addressing any intellectual property litigation claim, regardless of whether the claim is valid, could significantly affect our business, financial condition, and results of operation.

Our PRC subsidiaries may be subject to intellectual property infringement disputes from time to time based on their alleged use of third-party intellectual property.

There can be no assurance that the software, technology systems, platforms, applications or other intellectual property developed or utilized by our PRC subsidiaries do not or will not infringe upon valid intellectual property rights held by third parties. Our PRC subsidiaries may encounter disputes from time to time over rights and obligations concerning intellectual property rights held by third parties, and our PRC subsidiaries may not prevail in those disputes. There could also be existing intellectual property of which we are not aware that our products and services may inadvertently infringe. There can be no assurance that our PRC subsidiaries’ personnel or other affiliates will not use third-party copyrighted materials or intellectual property without proper authorization, on our PRC subsidiaries’ websites, platforms, or applications, and users may also post unauthorized third-party content on our PRC subsidiaries’ platforms, systems, or applications without authorization. As a result, our PRC subsidiaries may incur liability for unauthorized duplication or distribution of the materials posted. As of the date of this prospectus, our PRC subsidiaries have not been involved in claims against them alleging infringement of third-party intellectual property rights. However, our PRC subsidiaries may be subject to such claims in the future. Any such intellectual property infringement claim could result in costly litigation, harm our PRC subsidiaries’ reputation, divert their management attention and resources, and subject them to substantial financial harm. As a result, our business and financial performance may be materially and adversely affected.

Our PRC subsidiaries may face increased labor costs, inability to retain suitable employees, or unfavorable labor relations.

Our PRC subsidiaries devote significant resources to recruiting and training employees. Their ability to manage and control labor costs is subject to numerous external factors beyond control, including market pressures with respect to prevailing wage rates, unemployment levels, health and insurance expenses, as well as the impact of wage and employee benefits legislation and regulations. Any changes in these external factors could significantly increase labor costs, which would reduce our PRC subsidiaries’ net income and cash flows.

Our PRC subsidiaries aim to motivate and retain qualified employees. If the employees are unsatisfied with what our PRC subsidiaries offer, such as remuneration packages or working environment, our PRC subsidiaries may not be able to retain qualified employees or replace them with personnel of appropriate skill sets and personal attributes at comparable costs. If such an event, our PRC subsidiaries may need to expend additional resources to retain or replace suitable employees.

As of the date of this prospectus, our PRC subsidiaries have not been subject to any employment-related claims. However, from time to time, our PRC subsidiaries may be subject to various employment-related claims, such as individual actions or government enforcement actions relating to wage-hour, labor

 

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standards, or healthcare and benefits issues. Such actions, if brought against our PRC subsidiaries and successful in whole or in part, may materially and adversely affect our business, financial condition, and results of operations.

If we fail to attract, recruit, or retain our key personnel, including our executive officers, senior management, and key employees, our ongoing operations and growth could be affected.

Our success depends, to a large extent, on the efforts of our key personnel, including Yuan Li, our founder and Chief Executive Officer, our other executive officers, senior management, and other key employees who have valuable experience, knowledge, and connections in the adult education supporting service industry. There is no assurance that these key personnel will not voluntarily terminate their employment with us. We do not carry, and do not intend to procure, key person insurance on any of our senior management team. The loss of any of our key personnel could be detrimental to our ongoing operations. Our success will also depend on our ability to attract and retain qualified personnel to manage our existing operations as well as our future growth. We may not be able to successfully attract, recruit, or retain key personnel, and this could adversely impact our financial condition, operating results, and business prospects.

Our PRC subsidiaries face risks related to natural disasters, health epidemics, and other outbreaks, which could significantly disrupt their operations.

Our PRC subsidiaries’ business may be negatively impacted by the fear of, exposure to, or actual effects of, a disease outbreak, epidemic, pandemic, or similar widespread public health concern, including travel restrictions or recommendations or mandates from governmental authorities as a result of the COVID-19 pandemic, the threat of the virus, or the emergence of any variants. These impacts include, but are not limited to, (i) significant reductions in demand or significant volatility in demand for our PRC subsidiaries’ one-stop comprehensive education supporting services, (ii) failure of third parties on which our PRC subsidiaries rely, which may include suppliers and external business partners, (iii) periods of disruption that limit the ability to access the financial markets or which increase the cost of liquidity, and (iv) significant changes in the political conditions in regions in which our PRC subsidiaries operate.

During the years ended December 31, 2021 and 2022, our PRC subsidiaries’ business was moderately impacted by the COVID-19 pandemic. For example, the COVID-19 pandemic caused an economic downturn in the PRC, prompting adult education institutions to curtail their budgets for information technology related services, including those from our PRC subsidiaries. Furthermore, the preventive measures implemented by the PRC government discouraged many prospective students from enrolling in adult education institutions, due to the risk of not being able to attend classes. The reduced demand for adult education services, in turn, adversely affect our PRC subsidiaries’ business, as their service fees depend largely on the number of students served. Additionally, the impact of the COVID-19 pandemic on logistics and supply chains also posed challenges for the daily operations of our PRC subsidiaries. Overall, the combination of budgetary constraints among customers, reduced demand for adult education training and examinations, and disrupted logistics, moderately affected our PRC subsidiaries’ business, financial condition, and results of operations. As a result of the combined effect of the foregoing, the demand for our PRC subsidiaries’ auxiliary services, such as in-person courses, decreased, resulting in a decrease in the average service price per student from RMB811 for the year ended December 31, 2021 to RMB364 for the year ended December 31, 2022. Nevertheless, the COVID-19 pandemic had a less significant impact on the overall number of students served, which is less dependent on offline activities. The number of students served increased from 6,200 for the year ended December 31, 2021 to 28,122 for the year ended December 31, 2022, mainly due to the increased enrollment scale of each adult education institution. As a result, our total revenue increased by approximately RMB5,213,000, or 103.7%, from approximately RMB5,026,000 for the year ended December 31, 2021 to approximately RMB10,239,000 (US$1,484,000) for the year ended December 31, 2022. Since the end of 2022, the Chinese government has eased the COVID-19 restrictions. As a result, our PRC subsidiaries gradually recovered from the negative impact of the COVID-19 pandemic on their results of operations. For the year ended December 31, 2023, the COVID-19 pandemic did not have a material net impact on our PRC subsidiaries’ financial position and operating results. However, the emergence of regional recurrences of the COVID-19 pandemic and the corresponding restrictive measures are beyond our control. The extent to which the COVID-19 pandemic, or similar natural disasters and health epidemics and outbreaks, may impact our PRC subsidiaries will depend on future developments, which are

 

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highly uncertain and cannot be predicted, including the duration, severity, and recurrence of any such outbreak, the effectiveness of mitigation strategies, and third-party actions taken to contain its spread and mitigate its public health effects. Any of these factors may materially and adversely affect our business, financial condition, and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — COVID-19 Affecting Our Results of Operations.”

Uncertain economic or social conditions may adversely impact our PRC subsidiaries’ business.

Our PRC subsidiaries’ business could be negatively impacted by reduced demand for their one-stop comprehensive education supporting services related to one or more significant local, regional, or global economic or social disruptions. These disruptions may include: a slow-down, recession or inflationary pressures in the general economy; reduced market growth rates; tighter credit markets for our PRC subsidiaries’ suppliers, vendors, or customers; a significant shift in government policies; significant social unrest; or the deterioration of economic relations between countries or regions. Additionally, these and other economic conditions may cause our PRC subsidiaries’ suppliers, distributors, contractors or other third-party partners to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide our PRC subsidiaries with the needed materials and services, in which case our business and results of operations could be adversely affected.

Fluctuations in interest rates could negatively affect our reported results of operations.

Our business and financial performance could be negatively impacted by the fluctuations in interest rates. Elevated interest rates may result in increased borrowing costs, potentially diminishing our PRC subsidiaries’ profitability. For example, we observed an increase in borrowing costs in the PRC from 2020 to 2022. Such increasing borrowing costs had a direct impact on our operational expenses and, if sustained, may have the potential to reduce our overall profitability. While we strive to maintain competitive pricing for our PRC subsidiaries’ one-stop comprehensive adult education supporting services, an increase in interest rates may necessitate price adjustments. However, the competitive landscape within our industry may limit our ability to pass on these increased costs to customers. Our customers, primarily educational institutions and organizations, often operate within budget constraints, and any price increases may result in reduced demand or a shift towards more cost-effective alternatives. As of the date of this prospectus, interest rates have historically shown fluctuations. While our PRC subsidiaries actively manage interest rate risks through various financial strategies, such as diversifying their debt portfolio and closely monitoring market trends, there is no guarantee that these measures will fully mitigate the potential adverse effects of interest rate fluctuations. If our PRC subsidiaries are unable to do so, our financial condition and profitability could also be materially and adversely affected.

Our PRC subsidiaries may be involved in legal and other disputes and claims arising out of their operations.

Our PRC subsidiaries may, from time to time, be involved in disputes with and subject to claims by users, customers, and students, or other parties involved in their business. There can be no assurance that when legal actions arise in the ordinary course of our PRC subsidiaries’ business, any of the legal actions will be resolved in their favor. Our PRC subsidiaries are subject to uncertainties as to the outcome of such legal proceedings and our PRC subsidiaries’ business operations may be disrupted. Legal or other proceedings involving our PRC subsidiaries may, among others, result in our PRC subsidiaries incurring significant costs, divert management’s attention and other resources, negatively affect our PRC subsidiaries’ operations, cause negative publicity against our PRC subsidiaries, or damage their reputation, regardless of whether they are successful in defending such claims or proceedings. As a result, our business, financial condition, and results of operations may be materially and adversely affected.

Our historical financial and operating results are not indicative of our future performance and our financial and operating results may fluctuate.

During the years ended December 31, 2022 and 2023, our revenue was approximately RMB10,239,000 and RMB15,571,000 (US$2,193,000), respectively. For the same years, our net income was approximately RMB5,360,000 and RMB9,562,000 (US$1,347,000), respectively. While we have achieved strong financial results in the past, these results may not be sustainable or indicative of future results, and we cannot assure

 

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you that we will achieve or maintain profitability on a consistent basis. The results of operations may vary from period to period in response to a variety of factors beyond control, including the general economic conditions, regulatory actions, changes in demand for adult education supporting services, increased competition, constantly changing industry trend, or our failure to capitalize on growth opportunities. Due to these and other factors, our historical financial performance, growth rates, profitability and operating results may not indicate future performance and you should not rely on them to predict our future performance.

Our PRC subsidiaries may not maintain adequate insurance, which could expose them to significant costs and business disruption.

We believe our PRC subsidiaries maintain insurance coverage that is customary for businesses of their sizes and types. See “Business — Insurance.” However, there can be no assurance that such insurance coverage will always be available or will always be sufficient to cover any damages resulting from any kind of claims. In addition, there are certain types of risks that may not be covered by our PRC subsidiaries’ insurance policies, such as war, force majeure events, or certain business interruptions. In addition, there can be no assurance that when the current insurance policies expire, our PRC subsidiaries will be able to renew them at sufficient and favorable terms. Claims that are not covered by the policies or the failure to renew the insurance policies may materially adversely affect our PRC subsidiaries’ business, financial condition, and results of operations.

Future acquisitions may have an adverse effect on our PRC subsidiaries’ ability to manage their business.

Our PRC subsidiaries may acquire businesses, technologies, services, or products that are complementary to their existing adult education supporting service businesses. Future acquisitions may expose them to potential risks, including risks associated with the integration of new operations, services, and personnel, the diversion of resources from their existing businesses, failure to achieve expected growth by the acquired businesses, and the inability to generate sufficient revenue to offset the costs and expenses of acquisitions, or the potential loss of or harm to relationships with both employees and customers resulting from their integration of new businesses.

In addition, our PRC subsidiaries may be unable to identify appropriate acquisition or strategic investment targets when it is necessary or desirable to make such acquisition or investment to remain competitive or to expand our PRC subsidiaries’ business. Even if our PRC subsidiaries identify an appropriate acquisition or investment target, they may face challenges in successfully negotiating favorable terms of the acquisition or investment and financing the proposed transaction. Our PRC subsidiaries may need to raise additional debt funding or sell additional equity securities to make such acquisitions. The raising of additional debt funding by our PRC subsidiaries, if required, would result in increased debt service obligations and could result in additional operating and financing covenants, or liens on their assets, that would restrict their operations. The sale of additional equity securities could result in additional dilution to our stockholders. If any one or more of the aforementioned risks associated with acquisitions or investments materialize, the acquisitions or investments may not be beneficial to our PRC subsidiaries, which in turn may materially and adversely affect our business, financial condition, and results of operations.

We may require additional financing in the future and our PRC subsidiaries’ operations could be curtailed if we are unable to obtain required additional financing when needed.

In addition to the proceeds to be raised in this offering, we may need to obtain additional debt or equity financing to fund our PRC subsidiaries’ future capital expenditures. While we do not anticipate seeking additional financing in the immediate future, any additional equity financing may result in dilution to the holders of our outstanding Ordinary Shares. Additional debt financing may impose affirmative and negative covenants that restrict our freedom to operate our business. There can be no assurance that we will be able to raise proceeds in this offering or obtain additional financing on favorable terms, or any financing at all, and the failure to obtain sufficient financing could adversely affect our business operations.

Risks Relating to this Offering and the Trading Market

There has been no public market for our Ordinary Shares prior to this offering, and you may not be able to resell our Ordinary Shares at or above the price you pay for them, or at all.

Prior to this offering, there has not been a public market for our Ordinary Shares. Our Ordinary Shares have been approved for listing on the Nasdaq Capital Market. In addition, an active public market

 

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for our Ordinary Shares may not develop or be sustained after the offering, in which case the market price and liquidity of our Ordinary Shares will be materially and adversely affected.

The Initial public offering price for our Ordinary Shares may not be indicative of prices that will prevail in the trading market and such market prices may be volatile.

The initial public offering price for our Ordinary Shares was determined by negotiations between us and the underwriters and may not bear a direct relationship to our earnings, book value, or any other indicia of value. We cannot assure you that the market price of our Ordinary Shares will not decline significantly below the initial public offering price. The financial markets in the United States and other countries have experienced significant price and volume fluctuations in the last few years. Volatility in the price of our Ordinary Shares may be caused by factors outside of our control and may be unrelated or disproportionate to changes in our results of operations.

You will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased.

The initial public offering price of our Ordinary Shares is substantially higher than the (pro forma) net tangible book value per share of our Ordinary Shares. Consequently, when you purchase our Ordinary Shares in the offering, upon completion of the offering you will incur immediate dilution of US$3.67 per share, based on the initial public offering price of US$4.00. See “Dilution.” In addition, you may experience further dilution to the extent that additional Ordinary Shares are issued upon exercise of outstanding options we may grant from time to time.

If we fail to implement and maintain an effective system of internal controls or fail to remediate the material weaknesses in our internal control over financial reporting that have been identified, we may fail to meet our reporting obligations or be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected.

Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the years ended December 31, 2022 and 2023, we and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting, as defined in the standards established by the PCAOB, and other control deficiencies. The material weaknesses identified included inadequate segregation of duties resulting from limited accounting staff and resource (specifically, as a company with limited accounting resources, a significant amount of management’s attention and time has been and will be diverted from our business to work toward compliance with these regulatory requirements, which may have a material adverse effect on our business, financial condition, and results of operations).

Following the identification of the material weaknesses and control deficiencies, we have taken the following remedial measures: (i) engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (ii) adopting directors’ resolutions to appoint independent directors, establish an audit committee, and strengthen corporate governance.

We plan to take additional remedial measures, including (i) hiring more qualified accounting personnel with relevant U.S. generally accepted accounting principles (“U.S. GAAP”) and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; and (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel.

However, the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting. Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition,

 

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results of operations, and prospects, as well as the trading price of our Ordinary Shares, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

Upon completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 will require that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2024. In addition, once we cease to be an “emerging growth company,” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified, if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.

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

Upon consummation of this offering, we will incur significant legal, accounting, and other expenses as a public company that we did not incur as a private company. These additional costs could negatively affect their financial results. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies.

Compliance with these laws, rules, and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costlier. These laws, regulations, and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers.

We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least US$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds US$700 million as of the prior June 30, and (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

After we are no longer an “emerging growth company,” or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures.

We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

 

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Because we are an “emerging growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence in us and our Ordinary Shares.

For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. Further, we elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile. See “Implications of Our Being an Emerging Growth Company.”

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

Sales of substantial amounts of our Ordinary Shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our Ordinary Shares to decline. An aggregate of 22,235,471 Ordinary Shares are outstanding before the consummation of this offering. An aggregate of 24,235,471 Ordinary Shares will be outstanding immediately after the consummation of this offering, assuming no exercise of the over-allotment option, and 24,535,471 Ordinary Shares will be outstanding immediately after the consummation of this offering, assuming the full exercise of the over-allotment option. Sales of these shares into the market could cause the market price of our Ordinary Shares to decline.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.

The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

The initial public offering price for our Ordinary Shares was determined through negotiations between the underwriters and us and may vary from the market price of our Ordinary Shares following our initial public offering. If you purchase our Ordinary Shares in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our Ordinary Shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our initial public offering. The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

•

actual or anticipated fluctuations in our revenue and other operating results;

​

•

the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

​

•

actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our Company, or our failure to meet these estimates or the expectations of investors;

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•

announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

​

•

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

​

•

lawsuits threatened or filed against us; and

​

•

other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

​

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

The price of our Ordinary Shares could be subject to rapid and substantial volatility.

There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with a relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-ups, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares.

In addition, if the trading volumes of our Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence the price of our Ordinary Shares. This low volume of trades could also cause the price of our Ordinary Shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our Ordinary Shares. As a result of this volatility, investors may experience losses on their investment in our Ordinary Shares. A decline in the market price of our Ordinary Shares also could adversely affect our ability to issue additional Ordinary Shares or other of our securities and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Ordinary Shares will develop or be sustained. If an active market does not develop, holders of our Ordinary Shares may be unable to readily sell the shares they hold or may not be able to sell their shares at all.

Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance our results of operations or the price of our Ordinary Shares.

We anticipate that we will use the net proceeds from this offering to expand sales and operation teams and enhance marketing efforts, acquire vocational education and training institutions authorized by the PRC government and establish 8 to 10 examination centers, and invest in technology research and development, and for working capital and other general corporate purposes. Our management will have significant discretion as to the use of the net proceeds to us from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the market price of our Ordinary Shares.

Our largest shareholder, Mr. Yuan Li, will own a significant percentage of our Ordinary Shares and may be able to exert significant influence over matters subject to shareholder approval.

Immediately following the completion of this offering, our largest shareholder, Mr. Yuan Li, will hold approximately 47.80% of the aggregate voting power of the issued and outstanding Ordinary Shares,

 

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assuming no exercise of the underwriters’ over-allotment option. Mr. Yuan Li would have the ability to have substantial influence on our Company and matters submitted to our shareholders for approval, including the election and removal of directors and the approval of any merger, consolidation, or sale of all or substantially all of our assets. As a result, our other shareholders may have little or no influence over matters submitted for shareholder approval. In addition, the ownership of our largest shareholder could preclude any unsolicited acquisition of us, and consequently, adversely affect the price of our Ordinary Shares. Our largest shareholder may make decisions that are adverse to your interests.

If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.

We expect to qualify as a foreign private issuer upon the completion of this offering. As a foreign private issuer, we will be exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and we will not be required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. While we currently expect to qualify as a foreign private issuer immediately following the completion of this offering, we may cease to qualify as a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse effect on our results of operations.

Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.

Nasdaq listing rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we may follow home country practice in lieu of the above requirements, or we may choose to comply with the above requirement within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors. Thus, although a director must act in the best interests of our Company, it is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of our Company may decrease as a result. In addition, Nasdaq listing rules also require U.S. domestic issuers to have a compensation committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. Nasdaq listing rules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote on all equity compensation plans and material revisions to those plans, certain ordinary share issuances. We intend to comply with the requirements of Nasdaq listing rules in determining whether shareholder approval is required on such matters and to appoint a nominating and corporate governance committee. We may, however, consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect to certain corporate governance standards which may afford less protection to investors.

If we cannot satisfy, or continue to satisfy, the initial listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them.

We will seek to have our securities approved for listing on the Nasdaq Capital Market upon consummation of this offering. We cannot assure you that we will be able to meet those initial listing requirements at that time. Even if our securities are listed on the Nasdaq Capital Market, we cannot assure you that our securities will continue to be listed on the Nasdaq Capital Market.

In addition, following this offering, in order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum shareholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. Even if we initially meet the listing requirements and other applicable rules

 

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of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

If the Nasdaq Capital Market does not list our securities, or subsequently delists our securities from trading, we could face significant consequences, including:

•

a limited availability for market quotations for our securities;

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•

reduced liquidity with respect to our securities;

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•

a determination that our Ordinary Shares are a “penny stock,” which will require brokers trading in our Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares;

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•

limited amount of news and analyst coverage; and

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•

a decreased ability to issue additional securities or obtain additional financing in the future.

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Anti-takeover provisions in our amended and restated memorandum and articles of association may discourage, delay, or prevent a change in control.

Some provisions of our amended and restated memorandum and articles of association, which will become effective on or before the completion of this offering, may discourage, delay, or prevent a change in control of our Company or management that shareholders may consider favorable, including, among other things, the following:

•

provisions that authorize our board of directors to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by our shareholders; and

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•

provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings.

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The laws of the Cayman Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.

We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands, or the “Cayman Companies Act,” and by the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law, the decisions of the English courts are generally of persuasive authority but are not binding in the courts of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty protecting their interests in the face of actions by our management, directors, or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association, the register of mortgages and charges and any special resolutions passed by shareholders) or to obtain copies of the register of members of these companies. Our directors have discretion under our amended and restated articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors, or controlling

 

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shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Cayman Companies Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”

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

The Cayman Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. These rights, however, may be provided in a company’s articles of association. Our amended and restated articles of association allow our shareholders holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition a general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least five clear days is required for the convening of our annual general shareholders’ meeting and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third of the total issued shares carrying the right to vote at a general meeting of our Company. For these purposes, “clear days” means that period excluding (a) the day when the notice is given or deemed to be given and (b) the day for which it is given or on which it is to take effect.

If we are classified as a PFIC, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as us will be classified as a PFIC, which is known as a PFIC, for any taxable year if, for such year, either

•

At least 75% of our gross income for the year is passive income; or

​

•

The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.

​

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our 2022 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any particular tax year. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see “Material Income Tax Consideration — United States Federal Income Taxation — PFIC.”

Our pre-IPO shareholders will be able to sell their shares upon completion of this offering subject to restrictions under Rule 144 under the Securities Act and the lock-up agreements.

All of our directors and officers and our shareholders owning 1% or more of our Ordinary Shares have agreed with the Representative not to sell, transfer, or dispose of, directly or indirectly, any of our Ordinary Shares or securities convertible into or exercisable or exchangeable for our Ordinary Shares for a period of six months from the date of this prospectus. See “Underwriting — Lock-up Agreements.” Our pre-IPO shareholders may be able to sell their Ordinary Shares under Rule 144 after the completion of this offering and following the expiration of that lock-up period, if applicable. See “Shares Eligible for Future Sale”

 

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below. Because these shareholders have paid a lower price per Ordinary Share than participants in this offering, when they are able to sell their pre-IPO shares under Rule 144 and following the expiration of the lock-up period, if applicable, they may be more willing to accept a lower sales price than the IPO price. This fact could impact the trading price of the Ordinary Shares following the completion of the offering, to the detriment of participants in this offering. Under Rule 144, before our pre-IPO shareholders can sell their shares, in addition to meeting other requirements, they must meet the required holding period. We do not expect any of the Ordinary Shares to be sold pursuant to Rule 144 during the pendency of this offering.

Nasdaq may apply additional and more stringent criteria for our initial and continued listing since we plan to have a relatively small public offering and insiders will hold a large portion of our listed securities.

Nasdaq Listing Rule 5101 provides Nasdaq with broad discretionary authority over the initial and continued listing of securities on Nasdaq and Nasdaq may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to deny initial or continued listing or to apply additional and more stringent criteria in the instances, including: (i) where the company engaged an auditor that has not been subject to an inspection by the PCAOB, an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company’s audit; (ii) where the company planned a small public offering, which would result in insiders holding a large portion of the company’s listed securities. Nasdaq was concerned that the offering size was insufficient to establish the company’s initial valuation, and there would not be sufficient liquidity to support a public market for the company; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S. shareholders, operations, or members of the board of directors or management. Since we plan to have a relatively small public offering and our insiders will hold a large portion of our listed securities, Nasdaq may apply additional and more stringent criteria for our initial and continued listing, which may cause delay or even denial of our listing application.

 

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

•

assumptions about our future financial and operating results, including revenue, income, expenditures, cash balances, and other financial items;

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•

our ability to execute our growth, and expansion, including our ability to meet our goals;

​

•

current and future economic and political conditions;

​

•

our capital requirements and our ability to raise any additional financing which we may require;

​

•

our ability to attract clients and further enhance our brand recognition;

​

•

our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business;

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•

trends and competition in the adult education supporting service industry; and

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•

other assumptions described in this prospectus underlying or relating to any forward-looking statements.

​

We describe certain material risks, uncertainties and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.

Industry Data and Forecasts

This prospectus contains data related to the adult education supporting service industry in China that we obtained from various government and private entity publications, including the industry report of Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. (“Frost & Sullivan”), which we commissioned. This industry data includes projections that are based on a number of assumptions which have been derived from industry and government sources which we believe to be reasonable. The adult education supporting service industry may not grow at the rate projected by industry data, or at all. The failure of the industry to grow as anticipated is likely to have a material adverse effect on our business and the market price of our Ordinary Shares. In addition, the rapidly changing nature of the adult education supporting service industry subjects any projections or estimates relating to the growth prospects or future condition of our industry to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the industry data turns out to be incorrect, actual results may, and are likely to, differ from the projections based on these assumptions.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated under the laws of the Cayman Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services. The Cayman Islands, however, has a less developed body of securities laws as compared to the United States and provides significantly less protection for investors than the United States. Additionally, Cayman Islands companies may not have standing to sue in the Federal courts of the United States.

Substantially all of our assets are located in the PRC. In addition, seven of our eight directors and officers, namely Yuan Li, Li Tan, Xiang Lan, Hangyu Dai, Kunqi Bai, Shuang Qiu, and Yaxuan Yang are nationals or residents of the PRC. All or a substantial portion of the assets of our directors and officers are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. See “Risk Factors — Risks Relating to Doing Business in the PRC — You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our directors and officers that reside outside the United States based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.”

We have appointed Cogency Global Inc. as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

Maples and Calder (Hong Kong) LLP, our counsel with respect to the laws of the Cayman Islands, and China Commercial Law Firm, our counsel with respect to PRC laws, have advised us that the courts of the Cayman Islands or the PRC are unlikely (i) to recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state in the United States, or (ii) in original actions brought in the Cayman Islands or the PRC to impose liabilities against us or our directors or officers that are predicated upon the civil liability provisions of U.S. federal securities laws or the securities laws of any state in the United States so far as the liabilities imposed by those provisions are penal in nature.

Maples and Calder (Hong Kong) LLP has further advised us that there is currently no statutory enforcement or treaty between the United States and the Cayman Islands providing for enforcement of judgments. A judgment obtained in the United States, however, may be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination on the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment: (i) is given by a foreign court of competent jurisdiction; (ii) is final and conclusive; (iii) is not in respect of taxes, a fine or a penalty; and (iv) is not impeachable on the grounds of fraud and was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or public policy of the Cayman Islands.

China Commercial Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedure Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedure Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. There are no treaties or other forms of reciprocity between China and the United States for the mutual recognition and enforcement of court judgments. China Commercial Law Firm has further advised us that under PRC law, PRC courts will not enforce a foreign judgment against us or our officers and directors if the court decides that such judgment violates the basic principles of PRC law or national sovereignty, security or public interest, thus making the recognition and enforcement of a U.S. court judgment in China difficult.

 

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of 2,000,000 Ordinary Shares in this offering will be approximately US$5,821,000, after deducting the underwriting discounts, non-accountable expense allowance, and estimated offering expenses payable by us, based on the initial public offering price of US$4.00 per Ordinary Share. If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds to us from this offering will be approximately US$6,937,000, after deducting the underwriting discounts and estimated offering expenses payable by us.

We plan to use the net proceeds we receive from this offering for the following purposes:

•

approximately 30% for developing our existing business, such as expanding sales and operation teams, diversifying service offerings, and enchanting marketing efforts;

​

•

approximately 40% for acquiring vocational education and training institutions authorized by the PRC government and establishing 8 to 10 examination centers. As of the date of this prospectus, we have not entered into any binding agreement for any acquisition or identified any definite acquisition target;

​

•

approximately 12% for investing in technology research and development to develop and update existing and new software; and

​

•

The balance to fund working capital and for other general corporate purposes.

​

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

In using the proceeds of this offering, we are permitted under PRC laws and regulations to utilize the proceeds from this offering to fund our PRC subsidiaries by making loans or additional capital contributions, subject to applicable government registration and approval requirements. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors — Risks Relating to Doing Business in the PRC — PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

 

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DIVIDEND POLICY

As of the date of this prospectus, none of our PRC subsidiaries have made any dividends or distributions to our Company and our Company has not made any dividends or distributions to our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Subject to the PFIC rules, the gross amount of distributions we make to investors with respect to our Ordinary Shares (including the amount of any taxes withheld therefrom) will be taxable as a dividend, to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.

If we determine to pay dividends on any of our Ordinary Shares in the future, as an exempted company incorporated in the Cayman Islands, we will be dependent on receipt of funds from our Hong Kong subsidiaries, Jiadezhigao HK and WISMASS HK.

Current PRC regulations permit our PRC subsidiaries to pay dividends to Jiadezhigao HK and WISMASS HK only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. For instance, SAFE Circular 3 issued on January 26, 2017, provides that banks shall, when dealing with dividend remittance transactions from a domestic enterprise to its offshore shareholders of more than US$50,000, review the relevant board resolutions, original tax filing form, and audited financial statements of such domestic enterprise based on the principle of genuine transaction. Furthermore, if our PRC subsidiaries incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our PRC subsidiaries are unable to receive all of the revenue from our operations, we may be unable to pay dividends on our Ordinary Shares.

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. Jiadezhigao HK and WISMASS HK may be considered non-resident enterprises for tax purposes, so that any dividends Shenzhen Kebiao pays to Jiadezhigao HK, or any dividends Jiade Zhigao pays to WISMASS HK, may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%. See “Material Income Tax Consideration — People’s Republic of China Enterprise Taxation.”

In order for us to pay dividends to our shareholders, we will rely on payments made from Kebiao Technology to Jiade Zhigao as dividends and the distribution of such payments to Shenzhen Kebiao or WISMASS HK as dividends from Jiade Zhigao, the distribution of such payments to Jiadezhigao HK as dividends from Shenzhen Kebiao, and then the distribution of such payments to our Company as dividends from Jiadezhigao HK or WISMASS HK. If any of our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

Pursuant to the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. The 5% withholding tax rate, however, does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation

 

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Arrangement with respect to any dividends paid by Shenzhen Kebiao to its immediate holding company, Jiadezhigao HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Jiadezhigao HK intends to apply for the tax resident certificate if and when Shenzhen Kebiao plans to declare and pay dividends to Jiadezhigao HK. See “Risk Factors — Risks Relating to Doing Business in the PRC — There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of Shenzhen Kebiao, and dividends payable by Shenzhen Kebiao to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

 

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CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2023:

•

on an actual basis; and

​

•

on an as adjusted basis to reflect the issuance and sale of the Ordinary Shares by us in this offering based on the initial public offering price of US$4.00 per Ordinary Share, after deducting the estimated discounts to the underwriters, non-accountable expense allowance, and the estimated offering expenses payable by us.

​

You should read this capitalization table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.

(1)

Bank loans are working capital loans while Kebiao Technology and Mr. Yuan Li, our Chairman of the Board of Directors, Chief Executive Officer, and 100% owner of our largest shareholder, act as co-borrowers.

​

(2)

Reflects the sale of Ordinary Shares in this offering based on the initial public offering price of US$4.00 per share, and after deducting the estimated underwriting discounts, non-accountable expense allowance, and estimated offering expenses payable by us. Additional paid-in capital reflects the net proceeds we expect to receive, after deducting the underwriting discounts, non-accountable expense allowance, and estimated offering expenses payable by us. We estimate that such net proceeds will be approximately US$5.8 million (US$8.0 million gross offering proceeds, less underwriting discounts and non-accountable expense allowance of US$0.7 million, and offering expenses of approximately US$1.5 million).

​

 

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DILUTION

If you invest in our Ordinary Shares, your ownership interest will be diluted to the extent of the difference between the initial public offering price per Ordinary Share and our net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.

Our net tangible book value as of December 31, 2023 was approximately US$2,230,000, or US$0.10 per Ordinary Share. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting the net tangible book value per Ordinary Share (as adjusted for the offering) from the initial public offering price per Ordinary Share and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us.

After giving effect to our sale of 2,000,000 Ordinary Shares offered in this offering based on the initial public offering price of US$4.00 per Ordinary Share after deduction of the estimated underwriting discounts and the estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2023, would have been US$8,071,073, or US$0.33 per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of US$0.23 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of US$3.67 per Ordinary Share to investors purchasing Ordinary Shares in this offering.

The following table illustrates such dilution:

The following tables summarize, on an as adjusted basis as of December 31, 2023, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per Ordinary Share before deducting the estimated underwriting discounts and the estimated offering expenses payable by us.

 

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CORPORATE HISTORY AND STRUCTURE

Our Corporate History

Kebiao Technology was established on April 28, 2020, as a limited liability company organized under the laws of the PRC. On December 14, 2022, Kebiao Technology was acquired by Jiade Zhigao, a limited liability company organized on May 6, 2022 under the laws of the PRC, from Yuan Li and Zhirong Zhou, two previous owners of Kebiao Technology for a total consideration of RMB2,000,000. On December 2, 2022, WISMASS HK, a company incorporated in Hong Kong on October 24, 2022 and then a wholly owned subsidiary of WISMASS BVI, entered into a share transfer agreement with Yuan Li, who was then the 51.33% owner of Jiade Zhigao, to acquire 9% of the equity interests in Jiade Zhigao from Yuan Li for a total consideration of RMB180,000. Consequently, Jiade Zhigao became a foreign-invested enterprise in the PRC. On May 26, 2023, WISMASS HK entered into a share subscription agreement with Jiade Zhigao to purchase newly issued 9.8901% of the equity interests in Jiade Zhigao, for a total consideration of RMB751,648. As of the date of this prospectus, WISMASS HK owns 18% of the equity interests in Jiade Zhigao.

In connection with this offering, we have undertaken a reorganization of our corporate structure in the following steps:

•

on February 20, 2023, we incorporated Jiade Cayman under the laws of the Cayman Islands;

​

•

on March 30, 2023, we incorporated Jiadezhigao HK in Hong Kong as a wholly owned subsidiary of Jiade Cayman;

​

•

on May 23, 2023, Shenzhen Kebiao was incorporated pursuant to PRC laws as a wholly owned subsidiary of Jiadezhigao HK; and

​

•

on June 7, 2023, Shenzhen Kebiao acquired an aggregate of 82% of the equity interests in Jiade Zhigao from Yuan Li, Zhirong Zhou, Sichuan Zhongtaizhigao Information Technology Consulting Partnership, and Sichuan Jiaduozhigao Information Technology Consulting Partnership in exchange for newly issued 1% of the equity interest in Shenzhen Kebiao, through an equity transfer agreement. As a result, Shenzhen Kebiao was 99% owned by Jiadezhigao HK, with the remaining 1% collectively owned by Yuan Li, Zhirong Zhou, Sichuan Zhongtaizhigao Information Technology Consulting Partnership, and Sichuan Jiaduozhigao Information Technology Consulting Partnership. On June 30, 2023, Jiade Cayman entered into a share swap agreement with WISMASS BVI to acquire 100% of the equity interests in WISMASS HK from WISMASS BVI in exchange for 4,035,471 newly issued Ordinary Shares of Jiade Cayman. Consequently, Jiade Cayman, through a restructuring, which is accounted for as a reorganization of entities under common control, became the ultimate holding company of all other entities mentioned above.

​

 

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Our Corporate Structure

The following diagram illustrates our corporate structure as of the date of this prospectus and upon completion of this offering based on 2,000,000 Ordinary Shares being offered, assuming no exercise of the underwriters’ over-allotment option.

Notes:

(1)

Represents 8,416,500 Ordinary Shares indirectly held by Yuan Li, the 100% owner of JD LIYUAN LIMITED, as of the date of this prospectus.

​

(2)

Represents 6,616,500 Ordinary Shares indirectly held by Zhirong Zhou, the 100% owner of ZHOUZHIRONG LIMITED, as of the date of this prospectus.

​

(3)

Represents 1,067,000 Ordinary Shares held by JDJDZG LIMITED, which is 16.82% owned by Yuan Li and 83.18% owned by 13 other shareholders, as of the date of this prospectus.

​

(4)

Represents 2,100,000 Ordinary Shares held by JDZTZG LIMITED, which is 79.72% owned by Yuan Li and 20.28% owned by six other shareholders, as of the date of this prospectus.

​

(5)

Represents 4,035,471 Ordinary Shares held by WISMASS BVI, as of the date of this prospectus.

​

(6)

As of the date of this prospectus, Shenzhen Kebiao is 99% owned by Jiadezhigao HK. The remaining 1% of the company is collectively owned by Yuan Li, Zhirong Zhou, Sichuan Zhongtaizhigao Information Technology Consulting Partnership, and Sichuan Jiaduozhigao Information Technology Consulting Partnership.

​

For details of our principal shareholders’ ownership, please refer to the beneficial ownership table in the section captioned “Principal Shareholders.”

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.” All amounts included in the years ended December 31, 2022 and 2023 have been prepared in accordance with U.S. GAAP.

Overview

We are an exempted company with limited liability incorporated in the Cayman Islands and not a Chinese operating company, and this corporate structure involves unique risks to investors. As an exempted company with no material operations of our own, we conduct all of our operations primarily through our PRC subsidiaries. Our PRC subsidiaries are companies that specialize in providing one-stop comprehensive education supporting services to adult education institutions, through a wide spectrum of software platform and auxiliary solutions, to meet the evolving needs of their customers in the rapidly changing adult education industry.

Our PRC subsidiaries’ services are primarily offered through the KB Platform, which facilitates streamlined information and data management throughout the teaching cycle of adult education services, from pre-enrollment to post-graduation. The KB Platform has enabled adult education institutions to improve student management efficiency, save labor costs, and reduce human errors in data management. The KB Platform supports a broad range of functions, such as enrollment consultation, student information collection, enrollment status management, learning progress management, grade inquiry, and graduation management.

As part of the one-stop comprehensive education supporting services, our PRC subsidiaries also provide auxiliary solutions to adult education institutions, which encompass teaching support services throughout the entire teaching cycle and related exam administration services. Specifically, our PRC subsidiaries offer pre-enrollment guidance on school/major selection and application strategy development, training for entrance exams, as well as assistance in the application process. They also provide offline tutoring, exam administration services, and guidance on graduation thesis preparation.

Our PRC subsidiaries place a great premium on technology research and development. As of the date of this prospectus, our PRC subsidiaries have acquired 36 software copyrights since their incorporation in April 2020. In November 2022, Kebiao Technology, one of our PRC subsidiaries, was designated an HNTE (No. GR202251000919) by Sichuan Provincial Department of Science and Technology, Sichuan Provincial Department of Finance, and Sichuan Provincial Tax Bureau of the State Taxation Administration. This certification is awarded to companies that have engaged in continuous research and development and technology commercialization leading to significant independent intellectual property rights within certain high-tech sectors.

Our PRC subsidiaries’ business has experienced rapid growth since their inception. For the years ended December 31, 2022 and 2023, we had total revenue of approximately RMB10,239,000 and RMB15,571,000 (US$2,193,000), respectively. Our net income was approximately RMB5,360,000 and RMB9,562,000 (US$1,347,000) for the respective years. Our PRC subsidiaries have had a history of limited cash and sources of working capital. As of December 31, 2022 and 2023, our PRC subsidiaries had cash of approximately RMB2,604,000 and RMB7,082,000 (US$997,000), respectively, and had working capital of approximately RMB6,589,000 and RMB15,403,000 (US$2,170,000), respectively. As of December 31, 2023, our PRC subsidiaries had accumulatively provided technological support services to over 17 adult education institutions and had accumulatively provided support services to approximately 57,000 students.

Factors Affecting Our Results of Operations

In addition to the general factors affecting the Chinese and global economy and our industry, our results of operations and financial condition are affected by a number of industry- and company-specific factors, including those set out below:

 

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Relationships with Partner Education Institutions:   Our revenue will depend significantly on our PRC subsidiaries’ ability to manage their relationships with partner education institutions. The success of our PRC subsidiaries’ business primarily depends on the number of students they serve. Therefore, their ability to continue to attract partner education institutions to purchase their services to serve students is critical to our PRC subsidiaries’ sustainable growth and continued success. This in turn depends on the reputation of our PRC subsidiaries and their ability to develop new offerings or adapt existing education supporting services to meet evolving market trends and student demands.

Competition in the Adult Education Supporting Service Industry:   The adult education supporting service industry in China is highly fragmented, with a large number of service providers throughout the country. Our PRC subsidiaries compete primarily with adult education supporting service providers in China and new entrants to the market, and some of their competitors may have better access to market resources, lower cost structures, more advanced technologies or longer operating histories. If our PRC subsidiaries are unable to improve their service quality, diversify their product and service range, or manage their costs, they may not be able to compete effectively against their existing or new competitors, and their sustainability and growth opportunities may be limited, which will materially and adversely affect their revenue and profitability.

COVID-19 Affecting Our Results of Operations

During the years ended December 31, 2021 and 2022, our PRC subsidiaries’ business was moderately impacted by the COVID-19 pandemic. For example, the COVID-19 pandemic caused an economic downturn in the PRC, prompting adult education institutions to curtail their budgets for information technology related services, including those from our PRC subsidiaries. Furthermore, the preventive measures implemented by the PRC government discouraged many prospective students from enrolling in adult education institutions, due to the risk of not being able to attend classes. The reduced demand for adult education services, in turn, adversely affect our PRC subsidiaries’ business, as their service fees depend largely on the number of students served. Additionally, the impact of the COVID-19 pandemic on logistics and supply chains also posed challenges for the daily operations of our PRC subsidiaries. Overall, the combination of budgetary constraints among customers, reduced demand for adult education training and examinations, and disrupted logistics, moderately affected our PRC subsidiaries’ business, financial condition, and results of operations. As a result of the combined effect of the foregoing, the demand for our PRC subsidiaries’ auxiliary services, such as in-person courses, decreased, resulting in a decrease in the average service price per student from RMB811 for the year ended December 31, 2021 to RMB364 for the year ended December 31, 2022. Nevertheless, the COVID-19 pandemic had a less significant impact on the overall number of students served, which is less dependent on offline activities. The number of students served increased from 6,200 for the year ended December 31, 2021 to 28,122 for the year ended December 31, 2022, mainly due to the increased enrollment scale of each adult education institution. As a result, our total revenue increased by approximately RMB5,213,000, or 103.7%, from approximately RMB5,026,000 for the year ended December 31, 2021 to approximately RMB10,239,000 for the year ended December 31, 2022.

In early December 2022, the PRC government announced a nationwide relaxation of its zero-COVID policy, resulting in a surge in COVID-19 infections across the PRC after related restrictions were lifted. For the year ended December 31, 2023, the COVID-19 pandemic did not have a material net impact on our PRC subsidiaries’ financial position and operating results. As of the date of this prospectus, although the spread of COVID-19 appears to be under control, the extent to which the COVID-19 pandemic may impact our future financial results will depend on future developments which are uncertain and unpredictable, including the duration, spread, severity, and recurrence of COVID-19 and any COVID-19 variants, the effectiveness of efforts to contain or treat cases, and future actions that may be taken in response to these developments. In addition, the COVID-19 pandemic has also caused heightened uncertainty in the global economy. The global spread of COVID-19 pandemic in major countries of the world, including China, may also result in global economic distress, and the extent to which it may affect our results of operations will depend on future developments of the COVID-19 pandemic, which are highly uncertain and difficult to predict. There may be potential impacts on our results of operations if the pandemic and the resulting disruption were to extend over a prolonged period. Consequently, the COVID-19 pandemic may continue to adversely affect our business, financial condition, and results of operations in the current and future years. See “Risk

 

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Factors — Risks Relating to Our Business and Industry — Our PRC subsidiaries face risks related to natural disasters, health epidemics, and other outbreaks, which could significantly disrupt their operations.”

Results of Operations

The following is a summary of our consolidated statements of income as derived from our consolidated financial statements included elsewhere in this prospectus, and this summary should be read in conjunction therewith.

Comparison of Results of operations for the years ended December 31, 2022 and 2023

Revenue

Our PRC subsidiaries generate revenue from providing adult education supporting services. Our PRC subsidiaries enter into service contracts with adult education institutions to provide education supporting services through (i) software platform solutions, which facilitate streamlined information and data management throughout the teaching cycle of adult education services, from pre-enrollment to post- graduation, and (ii) auxiliary solutions to students designated by adult education institutions, which encompass teaching support services throughout the entire teaching cycle and related exam administration services. Total revenue increased by approximately RMB5,332,000 (US$751,000), or 52%, to approximately RMB15,571,000 (US$2,193,000) for the year ended December 31, 2023 from approximately RMB10,239,000

 

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for the year ended December 31, 2022. The significant increase in revenue was mainly attributable to: (i) the increased revenue generated from third parties that amounted to approximately RMB9,638,000 (US$1,357,000), due to the growing scale of adult education institutions served by our PRC subsidiaries (for the year ended December 31, 2023, our PRC subsidiaries served 12 adult education institutions with an aggregate of 49,496 students, compared to 16 adult education institutions with approximately 28,122 students for the year ended December 31, 2022); (ii) partially offset by decreased revenue generated from a related party that amounted to approximately RMB4,305,000 (US$606,000), as the related party became to a third party from February 20, 2023,while the overall revenue generated from the former related party, Chengdu Jinjiang New Vision Training School, increased by approximately RMB1,069,000 (US$151,000) for the year ended December 31, 2023 compared to the year ended December 31, 2022; and (iii) partially offset by a decrease in the average service price per student from RMB364 for the year ended December 31, 2022 to RMB315 for the year ended December 31, 2023, primarily due to discounts provided by our PRC subsidiaries to certain customer in 2023.

The following table sets forth the breakdown of our net revenue for the periods presented:

Revenue from providing services related to National Unified Examination for College Admissions increased by approximately RMB1,207,000 (US$170,000), or 31%, primarily due to (i) the increased number of students served from 11,509 for the year ended December 31, 2022 to 17,171 for the year ended December 31, 2023, mainly as a result of our stronger business relationships with existing adult education institution customers and (ii) partially offset by a decrease in the average service price per student (for services related to National Unified Examination for College Admissions for Adults) from RMB334 for the year ended December 31, 2022 to RMB294 for the year ended December 31, 2023, primarily due to the enhanced competition and the discounts granted by the PRC subsidiaries to certain customer and the termination of services with one high-margin customer.

Revenue from providing services related to the Open University of China increased by approximately RMB4,685,000 (US$660,000), or 99%, primarily due to (i) the increased number of students served from 13,287 for the year ended December 31, 2022 to 29,227 for the year ended December 31, 2023, mainly as a result of our stronger business relationships with adult education institutions and the increase in the enrollment scale, (ii) partially offset by the decrease in the average service price per student (for services related to the Open University of China) from RMB358 for the year ended December 31, 2022 to RMB323 for the year ended December 31, 2023. The reduction in the service price per student was mainly due to the enhanced competition and the discounts granted by the PRC subsidiaries to certain customer and the termination of services with one customer who requires training services for its students, which we were able to charge higher fees.

Revenue from providing services related to Self-taught Higher Education Examinations remained stable for the year ended December 31, 2023 compared to the same period in 2022.

Revenue from providing services related to online education decreased by approximately RMB572,000 (US$81,000), or 89%, primarily due to the decreased number of students served from 640 for the year ended December 31, 2022 to 67 for the year ended December 31, 2023, mainly because during the year ended

 

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December 31, 2023, certain PRC universities suspended the provision of online education extracurricular learning centers, as a result of which our PRC subsidiaries suspended the services for the online education for them.

Costs and expenses

Our costs and expenses consist of direct cost of revenue, selling expenses, general and administrative expenses, and research and development expenses.

Direct Cost of revenue

The following table sets forth the breakdown of our direct cost of revenue for the years ended December 31, 2022 and 2023:

Direct cost of revenue decreased by approximately RMB587,000 (US$83,000), or 42%, from approximately RMB1,400,000 for the year ended December 31, 2022 to approximately RMB813,000 (US$114,000) for the year ended December 31, 2023, primarily due to fewer customized services, such as training services purchased by our PRC subsidiaries in 2023.

Cost of services decreased by approximately RMB642,000 (US$90,000), or 85%, from approximately RMB756,000 for the year ended December 31, 2022 to approximately RMB114,000 (US$16,000) for the year ended December 31, 2023, primarily due to fewer examination costs and fewer training services purchased by our PRC subsidiaries to meet their students’ specific requirements, such as in-person courses.

Employee benefit costs increased by approximately RMB64,000 (US$9,000), or 11%, from approximately RMB585,000 for the year ended December 31, 2022 to approximately RMB650,000 (US$92,000) for the year ended December 31, 2023, primarily because our PRC subsidiaries increased the staff salaries and the addition of one employee to our services department.

Other costs primarily represented short rental expenses related to exams, student card photo production fees, travelling expenses, business taxes and surcharges and others.

Selling expenses

Selling expenses increased by approximately RMB124,000 (US$17,000), or 38%, to approximately RMB453,000 (US$64,000) for the year ended December 31, 2023, compared to approximately RMB329,000 for the year ended December 31, 2022. The increase in selling expenses was mainly due to increased

 

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employee benefits and increased depreciation for motor vehicles, such as Company-owned cars utilized for business purposes, partially offset by the decrease in entertainment and travelling expenses. The increased employee benefits were mainly due to the addition of two employees to our marketing team. The decreased entertainment expenses were due to the Company’s implementation of cost control measures and operational expenses management.

General and administrative expenses

General and administrative expenses slightly decreased by approximately RMB40,000 (US$6,000), or 2%, to approximately RMB2,041,000 (US$287,000) for the year ended December 31, 2023 from approximately RMB2,081,000 for the year ended December 31, 2022. As a percentage of revenue, general and administrative expenses was approximately 20% and 13% of our total revenue for the years ended December 31, 2022 and 2023, respectively. The slight decrease in general and administrative expenses was primarily attributable to: (i) the increase in salary and employee benefits of our PRC subsidiaries’ management department resulting from the increase in salaries of existing staff and the recruitment of additional employees for our management department, and the increase in consulting expenses resulting from increased financial consulting services, and (ii) partially offset by the decrease in rental expenses, depreciation, and property management expenses resulting from early termination of a property lease, the decrease in office and travelling expenses resulting from the Company’s implementation of cost control measures and operational expenses management, and the decrease in repairs and maintenance expenses resulting from reduced maintenance frequency.

Research and development expenses

 

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Research and development expenses increased by approximately RMB317,000 (US$45,000), or 84%, to approximately RMB696,000 (US$98,000) for the year ended December 31, 2023 from approximately RMB379,000 for the year ended December 31, 2022. The increase in research and development expenses was primarily due to the increase in salary and employee benefits of our PRC subsidiaries’ R&D department resulting from the addition of one employee to our R&D department and the increase in consulting expenses of approximately RMB236,000 related to a safety production training project in 2023. As a percentage of revenue, research and development expenses was approximately 4% and 4% of our total revenue for the year ended December 31, 2022 and 2023, respectively. Our PRC subsidiaries will continue to invest in research and development to maintain their competitive edge against other market participators.

Other income (expenses)

Our other income (expenses) primarily represented interest income, interest expenses, rent subsidy, tax relief, and net loss on disposal of property and equipment. Other income decreased significantly by approximately RMB654,000 (US$92,000), or 331%, from approximately RMB197,000 net income for the year ended December 31, 2022 to approximately RMB456,000 (US$64,000) net expenses for the year ended December 31, 2023, primarily because (i) a rent subsidy was provided by the lessor as a result of the COVID-19 pandemic in 2022 and such subsidy was not provided in 2023; (ii) the increase in interest expenses of approximately RMB53,000 (US$7,000) from approximately RMB12,000 for the year ended December 31, 2022 to RMB65,000 (US$9,000) for the year ended December 31,2023; and (iii) the net loss on disposal of property and equipment amounted to approximately RMB251,000 (US$35,000) resulting from the disposal of leasehold improvement in 2023.

Income before income taxes

Income before income taxes was approximately RMB11,113,000 (US$1,565,000) for the year ended December 31, 2023, an increase of approximately RMB4,865,000 (US$685,000) as compared to approximately RMB6,248,000 for the year ended December 31, 2022. The increase was primarily attributable to the increased revenue.

Provision for income taxes

Our provision for income taxes was approximately RMB1,551,000 (US$218,000) for the year ended December 31, 2023, an increase of RMB664,000 (US$94,000) from RMB887,000 for the year ended December 31, 2022. The increased income tax provision was mainly due to increased taxable income in 2023.

Under the EIT Law, domestic enterprises and Foreign Investment Enterprises (“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 a case-by-case basis. The EIT Law grants preferential tax treatment to 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. Kebiao Technology, one of our PRC subsidiaries, was approved as an HNTE on November 2, 2022. As a result, Kebiao Technology was entitled to a reduced income tax rate of 15% in 2022 and 2023.

According to the Announcement of the State Taxation Administration on the Implementation of Income Tax Preferential Policies to Support the Development of Small Low Profit Enterprises and Individual Businesses, 25% of the annual taxable income of small low profit enterprises that does not exceed RMB1 million will be included in the taxable income, and the enterprise income tax will be paid at the rate of 20%. Jiade Zhigao is eligible for the above preferential tax policies for small and micro enterprises in 2023.

The impact of the tax holidays noted above decreased taxes by approximately RMB625,000 and RMB1,146,000 (US$161,000) for the years ended December 31, 2022 and 2023, respectively. The impact of the benefit of the tax holidays on net income per share (basic and diluted) was RMB0.03 and RMB0.05 for the years ended December 31, 2022 and 2023, respectively.

 

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The following table reconciles the China statutory rates to our effective tax rate for the years ended December 31, 2022 and 2023:

*

Non-deductible expenses mainly represent expenditures not deductible for PRC tax purpose.

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Net income

Our net income was approximately RMB9,562,000 (US$1,347,000) for the year ended December 31, 2023, an increase of approximately RMB4,202,000 (US$592,000) from approximately RMB5,360,000 for the year ended December 31, 2022. The increase in net income was primarily due to the higher revenue in 2023, as discussed above under revenue sections.

Liquidity and Capital Resources

The following table sets forth our current assets and current liabilities as of the dates indicated:

Accounts receivable

Our accounts receivable represent receivables from adult education institutions of comprehensive education supporting services. Billings to the customers are made generally on an annual basis over the

 

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contract term.Our accounts receivable balance increased by approximately RMB1,422,000 (US$200,000) from approximately RMB6,397,000 as of December 31, 2022 to approximately RMB7,819,000 (US$1,101,000) as of December 31, 2023. These increases were mainly due to increased education supporting services rendered.

Prepayment and other current assets

Prepayment and other current assets consist of deposits made to a partner for the proposed vocational training project, prepaid expenses and others. Our prepayment and other current assets decreased by approximately RMB283,000 (US$40,000) from approximately RMB317,000 as of December 31, 2022 to approximately RMB34,000 (US$5,000), mainly due to the deposits being refunded.

Loans

As of December 31, 2022 and 2023, we had total loans of approximately RMB596,000 and RMB3,000,000 (US$423,000), respectively. The following table sets forth the breakdown of our loans as of the dates indicated:

The long-term loans (including the current portion) outstanding as of December 31, 2022 carried a fixed interest rate of 11.52% per annum, and was denominated in RMB. The long-term loans were fully repaid by our PRC subsidiaries.

Bank loan outstanding as of December 31, 2023, carried a fixed interest rate of 3.45% per annum, and was denominated in RMB with a term of August 30, 2023 to August 29, 2024.

Lease Liabilities

We recognized total lease liabilities of approximately RMB2,412,000 and RMB153,000 (US$21,000) as of December 31, 2022 and 2023, respectively. As compared with the balance as of December 31, 2022, our lease liabilities as of December 31, 2023 decreased by approximately RMB2,259,000 (US$318,000) as our PRC subsidiaries terminated a lease contract in 2023 and the gain from termination of the lease amounted to approximately RMB51,000.

Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2022:

 

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The following table sets forth our contractual obligations as of December 31, 2023: