UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 20222023

OR

☐

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report：report：

For the transition period from _____________ to _____________.

Commission file number: 001-38208

Dragon Victory InternationalMetalpha Technology Holding Limited

(Exact Name of Registrant as Specified in its Charter)

N/A

(Translation of Registrant’s Name into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Suite 1508, Central Plaza

18 Harbour Road, Wan Chai,

Hong Kong, China

(Address of Principal Executive Offices)

Limin Liu, Chief Executive Officer

Suite 1508, Central Plaza

18 Harbour Road, Wan Chai,

Hong Kong, China

Tel: 852-35652920

(Name, Telephone, and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

An aggregate of 23,598,37131,048,371 ordinary shares, par value US$0.0001 per share, were outstanding as of March 31, 2022.2023.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☐ No ☐☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☐ No ☐☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

TABLE OF CONTENTS

INTRODUCTION

“We,” “us,” or the “Company” are to Dragon Victory International Limited, a Cayman Islands company. UnlessExcept where the context otherwise requires, inindicates and for the purpose of this annual report on Form 20-F references to:only:

DiscrepanciesOur reporting currency is U.S. dollars. This annual report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, the conversions between U.S. dollars and Hong Kong dollars were made at the rate of HK$7.8499 to US$1.00, the exchange rate on March 31, 2023 set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve Board. We make no representation that any Hong Kong dollars or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Hong Kong dollars, as the case may be, at any particular rate, or at all. Any discrepancies in any table between the amounts identified as total amountstotals and the sumsums of the amounts listed therein are due to rounding.

This annual report on Form 20-F includes our audited consolidated financial statements for the fiscal years ended March 31, 2022, 2021, and 2020. In this annual report, we refer to assets, obligations, commitments, and liabilities in our consolidated financial statements in United States dollars. These dollar references are based on the exchange rate of RMB to United States dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars which may result in an increase or decrease in the amount of our obligations and the value of our assets.

This annual report contains translations of certain RMB amounts into U.S. dollars at specified rates. Unless otherwise stated, the following exchange rates are used in this annual report:

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. These statements involve known and unknown risks, uncertainties, and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue,” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements include statements relating to:

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Other sections of this annual report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should read thoroughly this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from, or worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we refer to in this annual report and exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PartPART I

ItemITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ItemITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ItemITEM 3. KEY INFORMATION

Corporate Structure

Metalpha Technology Holding Limited is a Cayman Islands holding company. It does not engage in operations itself but rather conducts its operations through its subsidiaries incorporated in the British Virgin Islands, Panama and Hong Kong.

The following diagram illustrates our corporate structure as of the date of this annual report, including our significant subsidiaries.

A. [Reserved]

A. Reserved

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Summary of Risk Factors

Investing in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our Ordinary Shares. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully below in this sectionsection.

Risks Relating to Our Business and Industry

Risks and uncertainties related to our business and industries include, but are not limited to, the following:

Risks RelatingRelated to Doing Business in the PRCJurisdictions Where We Operate

Risks and uncertainties related to doing business in the PRCjurisdictions we operate include, but are not limited to, the following:

Risks Relating to Our Corporate Structure

Risks and uncertainties related to our corporate structure include, but are not limited to, the following:

Risks Relating to Our Ordinary Shares and the Trading Market

Risks and uncertainties related to our Ordinary Shares and the trading market include, but are not limited to, the following:

Risks Relating to Our Business and Industry

The operating entitiesWe have a limited operating history and are subject to the risks encountered by early-stage companies.

The PRC operating entities havehad been in business since October 2014 until all business operations in mainland China were ceased and did not generate any revenue until the fiscal year ended March 31, 2016. They launched their auto-parts service operation in January 2018 and then suspended it in April 2019. They launched their incubation service operation in September 2015 and then suspended itsold to third parties in March 2019. The PRC operating entities commenced their current supply chain2023. We have been a provider of wealth management platform service in October 2019. Metalpha commenced its current cryptocurrency derivative products services insince December 2021.

As a fairly new operation, the operating entities’our business strategies and model are constantly being tested by the market, and they endeavor to adjust their allocation of resources among their current two business segments (namely, Metalpha’s cryptocurrency derivative product services, and the PRC operating entities’ supply chain management platform services) accordingly.market. As such, theirour business may be subject to significant fluctuations in operating results, in terms of amounts of revenue and percentages of total with respect to the business segments.results.

Accordingly, you should consider the operating entities’our prospects in light of the costs, uncertainties, delays, and difficulties frequently encountered by companies with a limited operating history. In particular, you should consider that there is a significant risk that:

Our future growth will depend substantially on the operating entities’our ability to address these and the other risks described in this annual report. If the operating entities do not successfully address these risks, their, and consequentially, our business would be significantly harmed.

The PRC operating entities’ supply chain management platform service is dependent on their business partnership with the limited logistic partners, auto parts suppliers, and auto repair shops with which they currently work. Any disruptions in the PRC operating entities’ relationship with such partners may have an adverse effect on their profitability and operating results.

The PRC operating entities’ supply chain management platform service currently relies upon their partnership with limited logistic partners, auto parts suppliers, and auto repair shops. Although we believe the number of the logistic partners, auto parts suppliers, and auto repair shops the PRC operating entities work with is steadily increasing, the PRC operating entities could suffer significant disruption in business in the event of the loss of their business partnership with such partners, suppliers, and shops, which may further damage the PRC operating entities’ supply chain service network and their reputation. The PRC operating entities plan to further expand the number of logistic partners, auto parts suppliers, and auto repair shops they work with and establish a platform for their auto parts suppliers to sell the suppliers’ products online to attract more suppliers and partners. However, there is no guarantee that such plans will be successful.

We may need additional capital to fund the operating entities’our future operations and, if it is not available when needed, the operating entitieswe may need to reduce theirour planned expansion and marketing efforts, which may reduce their revenue.our income.

We believe that our existing working capital and cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from the PRC operating entities’our future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated purposes, we may need additional capital. In addition, if the operating entitieswe fail to generate sufficient net revenueincome from Metalpha’s cryptocurrency derivative product services, and the PRC operating entities’ supply chain management platform services, theyour business, it may continue to expend significant amounts of capital. As a result, we could be required to raise additional capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution of the shares held by existing shareholders. If additional funds are raised through the issuance of debt or equity securities, such securities may provide the holders certain rights, preferences, and privileges senior to those of shareholders holding our Ordinary Shares, and the terms of any such debt securities could impose restrictions on the operating entities’ operations. We cannot assure you that additional capital, if required, will be available on acceptable terms, or at all. If we are unable to obtain sufficient amounts of additional capital, the operating entitieswe may be required to reduce theirour scope of planned product development and marketing efforts, which could harm their, and consequentially, our business, financial condition and operating results.

The PRC operating entities face significant competition in an industry experiencing rapid technological change, andOur auditor has indicated that there is a possibility that their competitors may achieve regulatory approval and develop new online supply chain management platform service before them, which may harm their financial condition and theirsubstantial doubt about our ability to successfully marketcontinue as a going concern.

To date, we had net loss for the year, accumulated deficits and cash used in operating activities. For the fiscal year ended March 31, 2023, we recorded loss for the year of $20.2 million and net cash used in operating activities of $1.1 million. As of March 31, 2023, we had an aggregate accumulated deficit of $40.2 million. We anticipate that we will continue to report losses as well as negative operating cash flow. As a result of these net losses and other factors, our independent auditor issued an audit opinion with respect to our financial statements for the three years ended March 31, 2023 that indicated that there is a substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These audited consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or commercialize anythe classification of their services.the liabilities that might be necessary should we be unable to continue as a going concern.

There can be no assurance that we will ever be able to achieve or sustain profitability or positive cash flow. Our ability to continue as a going concern is dependent upon improving operational efficiency and cost reductions, generating sufficient cash flow from operations and obtaining additional capital and financing. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business.

The Chinese supply chain industry is highly competitive and is characterized by rapidly changing technologies, significant competition, and a strong emphasis on client attraction. Even though the PRC operating entities have found business opportunities in a niche market, they will very likely face competition with respect to their integrated supply chain management platform services from major supply chain management service suppliers in China.

The PRC operating entities’ commercial opportunities could be reduced or eliminated if their competitors develop and commercialize services that are more effective, more convenient, or less expensive than the supply chain services they currently offer. The PRC operating entities’ competitors also may obtain regulatory approval for their services more rapidly than the PRC operating entities may obtain approval for any services that they develop, which could result in the competitors establishing a strong market position before the PRC operating entities’ new services are able to enter the market. The availability of the competitors’ services could limit the demand, and the price the PRC operating entities are able to charge, for any services that they currently offer.

The PRC operating entities may be subject to damages resulting from unauthorized access or hacking and other cyber risks.

Hacking is the process of attempting to gain or successfully gaining unauthorized access to a computer system. As with any website, the PRC operating entities’ websites and online platforms may be subject to hacking, regardless of whether they have in place securities systems which limit access to their platform. Hacking can result in the loss of or tampering with confidential information, the editing of information so that it is not in the form maintained by the sponsor, using password information to take funds from the user’s account or to charge cash advances or purchases to the unknowing user’s account. Both the PRC operating entities and their website or platform users can suffer significant monetary losses as a result of hacking.

Despite the PRC operating entities’ disclaimers, which the website or platform users must acknowledge in order to gain access, and their efforts to protect their platform, injured parties may seek to obtain damages from the PRC operating entities for the loss as a result of hacking should that occur. Thus, in additional to any financial or reputation losses that the PRC operating entities may sustain, it is possible that a court or administrative body may hold the PRC operating entities liable for damages sustained by others. Any such losses could materially impair the PRC operating entities’ financial condition and their ability to conduct business.

The successful operation of the PRC operating entities’ business depends on the performance and reliability of the Internet infrastructure and fixed telecommunications networks in China.

The PRC operating entities’ business depends on the performance and reliability of the Internet infrastructure in China. Almost all access to the Internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology (the “MIIT”). In addition, the national networks in China are connected to the Internet through international gateways controlled by the PRC government. These international gateways are the only channels through which a domestic user can connect to the Internet. Although the PRC government has pledged to increase overall internet coverage in the PRC and increase Internet infrastructure investment, a more sophisticated Internet infrastructure may not be developed in China. The PRC operating entities or the users of their platform may not have access to alternative networks in the event of disruptions, failures, or other problems with China’s Internet infrastructure.

The PRC operating entities’Our success depends substantially on the continued retention of certain key personnel and theirour ability to hire and retain qualified personnel in the future to support theirour growth and execute theirour business strategy.

If one or more of the PRC operating entities’our senior executives or other key personnel are unable or unwilling to continue in their present positions, theirour business may be disrupted and theirits financial condition and results of operations may be materially and adversely affected. While the PRC operating entitieswe depend on the abilities and participation of theirour current management team generally, theywe rely particularly upon Mr. Limin Liu, our chairman and chief executive officer, who is responsible for the development and implementationconsultant team, consisting of the PRC operating entities’ business plan.11 consultants. The loss of the services of Mr. Limin Liuour consultant team for any reason could significantly adversely impact the PRC operating entities’our business and results of operations. Competition for senior management and senior technology personnel is intense and the pool of qualified candidates is very limited. We cannot assure you that the services of the PRC operating entities’our senior executives, consultant team and other key personnel will continue to be available to them,us, or that the PRC operating entitieswe will be able to find a suitable replacement if any of them were to leave.

The PRC operating entities may not be able to adequately protect their intellectual property rights, and their competitors may be able to offer similar products and services, which would harm their competitive position.

The PRC operating entities’ success depends in part upon their intellectual property rights. They rely primarily on trademark, copyright, service mark, and trade secret laws, confidentiality procedures, license agreements, and contractual provisions to establish and protect their proprietary rights over their products, procedures, and services. Other persons could copy or otherwise obtain and use the PRC operating entities’ technology without authorization, or develop similar intellectual property independently. The PRC operating entities may also pursue the registration of their domain names, trademarks, and service marks in other jurisdictions, including the United States. Although the protection afforded by copyright, trade secret, and trademark law, written agreements, and common law may provide some advantages, these statutory protections along with non-disclosure agreement with their employees may not be adequate to enable the PRC operating entities to protect their intellectual property. However, the intellectual property laws in China are not considered as strong as comparable laws in the United States or the European Union. The enforcement of intellectual property rights in China is difficult and, if the PRC operating entities seek to commence litigation against any alleged infringer, there is no assurance that they will prevail. We cannot assure you that the PRC operating entities will be able to protect their proprietary rights. Further, their competitors may be able to independently develop similar or more advanced technology, duplicate their products and services, or design around any intellectual property rights the PRC operating entities hold.

The PRC operating entities’ business, financial condition, and results of operations have been and are likely to continue to be adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. Substantially all of the PRC operating entities’ operations are concentrated in China. In connection with efforts to contain the spread of COVID-19, the Chinese government took a number of measures, which included extending the Chinese New Year holiday, quarantining individuals infected with or suspected of having COVID-19, restricting residents from travel, encouraging employees of enterprises to work remotely from home, and cancelling public activities, among others. Normal economic life throughout China was sharply curtailed.

 Between January and March 15 of 2020, the PRC operating entities’ staff and employees were instructed to work remotely. As a result, they were not able to perform business operations on the supply chain management platform effectively during such period, resulting in a substantial impact upon their business performance.

Consequently, the COVID-19 pandemic has materially adversely affected the PRC operating entities’ business operations, condition, and operating results for 2022, including, but not limited to, having a material negative impact on their total revenue and net income. Although the PRC operating entities were able to resume their normal operation since March 2020, the COVID-19 pandemic materially adversely affected their business operations and financial results for 2020 and 2021, including material negative impacts on their revenue, slower collection of accounts receivables, and additional allowance for doubtful accounts. Localities in China have also been employing strict lock-down policies periodically to manage the recent trend of rapid outbreaks. In December 2021, January 2022, and March 2022, Hangzhou City implemented travel restrictions that had substantial impact on the PRC operating entities’ operations. In March 2022, logistics and transportation industry experienced temporary shutdown because of heightened COVID-19 exposure risk, which had negative impact on the PRC operating entities’ operations. Future development of the COVID-19 pandemic and the consequential local policies may adversely affect the PRC operating entities result of operations.

The PRC operating entities face risks related to natural disasters, health epidemics, and other outbreaks, which could significantly disrupt our operations.

In addition to COVID-19, the PRC operating entities’ business could be materially and adversely affected by natural disasters, other health epidemics, or other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures, or Internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect the PRC operating entities’ ability to provide products and services on their platform.

The PRC operating entities’ business could also be adversely affected by the effects of epidemics. In recent years, there have been breakouts of epidemics in and outside China, such as Ebola virus disease, H1N1 flu, avian flu and the COVID-19 pandemic. The PRC operating entities’ business operations could be disrupted if any of their employees is suspected of having the COVID-19 virus, since it could require their employees to be quarantined and/or their offices to be disinfected. In addition, the PRC operating entities’, and consequentially, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy in general.

The PRC operating entities currently do not have any business insurance coverage.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Consistent with customary industry practice in China, the PRC operating entities do not maintain business interruption insurance, nor do they maintain key-man life insurance. The PRC operating entities have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for them to have such insurance. Any uninsured business disruptions may result in incurring substantial costs and the diversion of resources, which could have an adverse effect on the PRC operating entities’ results of operations and financial condition.

Increases in labor costs in the PRC may adversely affect the PRC operating entities’ business and their 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 the PRC operating entities’ employees has also increased in recent years. We expect that their labor costs, including wages and employee benefits, will continue to increase. Unless the PRC operating entities 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, the PRC operating entities 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 amendments that became effective in July 2013 and its implementing rules that became effective in September 2008, 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 the PRC operating entities 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 the PRC operating entities’ employment practices do not and will not violate labor-related laws and regulations in China, which may subject the PRC operating entities to labor disputes or government investigations. If the PRC operating entities 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.

Metalpha rely on certain related party for products subscription and any shortage or interruption in subscription could slow our growth and reduce our profitability.

On December 23, 2021, Metalpha entered into a product purchase agreement (the “Product Purchase Agreement”) and a trading account management agreement (the “Trading Account Management Agreement”) with Antalpha, pursuant to which Antalpha purchased from Metalpha various cryptocurrency derivative products. The underlying assets of the cryptocurrency derivative products included Bitcoin, Ethereum, Binance Coin, Tether, etc. As of March 31, 2022, the aggregate value of the products Antalpha purchased is $8,735,145. All revenue Metalpha recognized in the reporting period were generated from the subscription from Antalpha.

Antalpha is a 49%substantial shareholder of Metalpha,the Company and hence it is a related party of the Company. If Antalpha were to stop or slow down subscriptionsis one of our key customers who subscribe to our issued cryptocurrency derivative products. For the fiscal year ended March 31, 2023, the aggregate notional amount of products we issued was approximately $382 million, among which Antalpha subscribed to products with a notional amount of approximately $326 million, accounting for any reason, our revenue and net income would be materially and adversely affected.approximately 85.6% of the total amount for the same fiscal year.

In addition, Antalpha provides significant support to our operations through its subsidiaries. These subsidiaries deliver technical management services and customer referral services, contributing significantly to our business growth and operational efficiency.

If our relationship with Antalpha deteriorates for any reason, Antalpha may slow down or even stop subscriptions to our products and/or terminate the services provided to us through its subsidiaries. As a result, our business, results of operations, financial condition and prospects could be materially and adversely affected.

TheOur wealth management business of Metalpha is subject to customer concentration risk.

Metalpha depends on oneFor the fiscal year ended March 31, 2023, the aggregate notional amount of the products we issued was approximately $382 million, among which our top three customers subscribed to products of an aggregate notional amount of approximately $360 million, representing approximately 94.2% of the total amount for the same fiscal year. Our largest customer, Antalpha, subscribed to generate allproducts with a notional amount of its revenue. Fromapproximately $326 million, accounting for approximately 85.6% of the commencement of Metalpha’s operations in December 2021 untiltotal amount for the date of this annual report, Metalpha’s sole customer, Antalpha, contributed approximately 100% of Metalpha’s revenue and profit.same fiscal year. There is no assurance that we will be able to maintain or expand our relationships with Antalpha,our top customers, or that wethey will be able to continue to serve them atsubscribe to our products in current levels,subscription amounts or at all. If Antalphaour top customers significantly reducesreduce or even ceases its subscriptioncease their subscriptions to our products, we are unablemay not be able to timely find alternative customers atwith comparable levels,subscription amounts, or at all, and we may experience a significant decline in our revenue, which, in turn, would adversely affect our results of operations. Theincome as a result. Moreover, the business and financial condition of Antalphaour top customers may deteriorate, which may in turn, have a materialmaterially and adverse effect onadversely affect their subscriptions to our financial conditionproducts. Any of the foregoing, if materializes, may materially and adversely affect our business, results of operations.operations and financial condition.

ItThe acceptance and widespread use of digital assets are subject to a variety of factors beyond our control. A decline in the acceptance and use of digital assets may beadversely affect the investment in our securities.

Digital assets have only recently become accepted as a means of payment for goods and services by certain major retail and commercial outlets. There is currently limited use of digital assets, such as Bitcoin, in the retail and commercial markets, thus contributing to price volatility that could adversely affect an investment in our securities. In contrast, a significant portion of demand for digital assets is generated by speculators and investors seeking to profit from the short- or become illegallong-term holding of tokens. The relative lack of acceptance and use of digital assets in the retail and commercial markets, or a reduction of such use, limits the ability of end users to acquire, own, hold, selluse digital assets to pay for goods and services. Such lack of acceptance or contraction in acceptance or use cryptocurrencies, participateof digital assets may increase the price volatility or affect the value of digital assets we acquire or hold, which could materially and adversely affect our business operations, financial performance and prospects, as well as the investment in the blockchain, or transfer or utilize similar cryptocurrency assets in international markets where we operate due to adverse changes in the regulatory and policy environment in different jurisdictions.our securities.

Our cryptocurrency business operations significantly depend on several key partners in the crypto industry for trading and asset custody. If these key partners experience operational disruptions due to fraud, security failures, mismanagement or regulatory sanctions resulting from non-compliance, their services may be interrupted or we may lose our assets which materially and adversely affect our business operations, financial condition and future growth.

Operational disruptions of crypto asset trading venues and asset custody providers due to fraud, business failures, hackers or malware, or regulatory sanctions may reduce confidence in the crypto assets market and result in our loss of assets which could be significantly affectedhave a material adverse effect on our business operations, financial condition and future growth.

In particular, Binance serves as our primary trading service provider with the majority of our hedging trades taking place on their platform. Simultaneously, Binance also acts as a crucial subscriber to our products. In June 2023, the SEC leveled legal charges against two of the largest exchanges, Binance and Coinbase, consecutively. Both lawsuits involve the listing and trading of tokens deemed by among other things, the regulatorySEC as unregistered securities, and policy developmentsthe claim that the profit and pledge services offered by both exchanges also violate securities law. In the allegations against Binance, the SEC further extended the scope of the charges, asserting that the exchange engaged in international markets where we operate, such as Hong Kong, BVIsettlement trading and Panama. Governmental authorities are likelymixed client funds between its domestic and overseas entities. If the legal proceedings between Binance and the SEC result unfavorably for Binance, rendering it incapable of providing trading services or leading to continue to issue new laws, rules and regulations governing the blockchain and cryptocurrency industry we operate in and enhance enforcement of existing laws, rules and regulations.significant asset losses, it may have a severe adverse impact on our business.

We are subject to a highly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, reputation, prospects or operations.

Until recently, relatively little regulatory attention has been directed toward the crypto assets market by U.S. federal and state governments, non-U.S. governments and self-regulatory agencies. As crypto assets have grown in popularity and in market size, the U.S. regulatory regime  -  namely the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the SEC, the U.S. Commodity Futures Trading Commission (the “CFTC”), the Financial Crimes Enforcement Network (the “FinCEN”) and the Federal Bureau of Investigation), and local and foreign governmental organizations, consumer agencies and public advocacy groups have been examining the operations of crypto networks, users and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and the safety and soundness of platforms and other service providers that hold crypto assets for users. Many of these entities have called for heightened regulatory oversight, and have issued consumer advisories describing the risks posed by crypto assets to users and investors. For instance, in March 2022, Federal Reserve Chair Jerome Powell expressed the need for regulation to prevent “cryptocurrencies from serving as a vehicle for terrorist finance and just general criminal behavior.” On March 8, 2022, President Biden announced an executive order on cryptocurrencies which seeks to establish a unified federal regulatory regime for cryptocurrencies. The complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto assets industry requires us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied with such laws, rules and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.

Additionally, the recent bankruptcy filings of FTX, the third largest digital asset exchange by volume at the time of its filing, and its affiliated hedge fund Alameda Research LLC, in addition to other bankruptcy filings of crypto companies throughout calendar year 2022, will likely attract heightened regulatory scrutiny from U.S. regulatory agencies such as the SEC and CFTC. Increasing regulation and regulatory scrutiny may result in additional costs for us and our management having to devote increased time and attention to regulatory matters, change aspects of our business or result in limits on the utility of Bitcoin. In addition, regulatory developments and/or our business activities may require us to comply with certain regulatory regimes. Increasingly strict legal and regulatory requirements and any regulatory investigations and enforcement may result in changes to our business, as well as increased costs, supervision and examination. Moreover, new laws, regulations, or interpretations may result in additional litigation, regulatory investigations, and enforcement or other actions. Adverse changes to, or our failure to comply with, any laws and regulations may have, an adverse effect on our reputation and brand and our business, operating results, and financial condition.

In addition, cryptocurrencies may be used by market participants for black market transactions, to conduct fraud, money laundering and terrorism-funding, tax evasion, economic sanction evasion or other illegal activities. As a result, governments may seek to regulate, restrict, control or ban the mining, using, holding and transferring of cryptocurrencies. We may not be able to eliminate all instances where other parties use cryptocurrencies in money laundering or other illegal or improper activities. We cannot assure you that we will successfully detect and prevent all money laundering or other illegal or improper activities which may adversely affect our reputation, business, financial condition and results of operations.

Any failure to obtain or renew any required approvals, licenses, permits or certifications could materially and adversely affect our business and results of operations.

As of the date of this annual report, allthe entirety of our cryptocurrency business operatesis operated outside of mainland China and the mainland China.United States. In accordance with the laws and regulations in the jurisdictions in which we operate, we may be required to maintain various approvals, licenses, permits and certifications in order to operate our cryptocurrency business. Complying with such laws and regulations may require substantial expense, and any non-compliance may expose us to liability. In the event of non-compliance, we may have to incur significant expenses and divert substantial management time to rectify the incidents. In the future, if we fail to obtain all the necessary approvals, licenses, permits and certifications, we may be subject to fines or the suspension of operations of any business that do not have all the requisite approvals, licenses, permits and certifications, which could materially and adversely affect our business and results of operations. We may also experience adverse publicity arising from non-compliance with government regulations, which would negatively impact our reputation.

We have adopted the development strategy to focus on the expansion of our business products of issuing cryptocurrency derivative products in international markets. As such, we are subject to regulations applicable to operators of cryptocurrency business and derivative products business in these jurisdictions. WeTo our best knowledge, we do not believe we need to obtain relevant governmental approval and license required for issuing cryptocurrency derivative products to Antalphacustomers in these jurisdictions. However, we cannot assure youryou that we will be able to obtain, maintain or renew any required government approval, permit, licenses for our future operations on commercially reasonable terms and in a timely manner or at all. Failure to maintain or renew these government approvals, permit or licenses for our international operations may cause us to suspend or terminate our cryptocurrency derivative product operations in such jurisdictions, and may subject us to regulatory investigations or legal proceedings and fines in these jurisdictions, which could disrupt our international operations and materially and adversely affect our business, financial condition and results of operations.

More broadly, we cannot assure you that we will be able to fulfill all the conditions necessary to obtain the required government approvals in the jurisdictions where we operate, or that relevant government officials in these jurisdictions will always, if ever, exercise their discretion in our favor, or that we will be able to adapt to any new laws, regulations or policies. There may also be delays on the part of government authorities in reviewing our applications and granting approvals, whether due to the lack of administrative resources or the imposition of new rules, regulations, government policies or their implementation, interpretation and enforcement, or for no discernible reason at all. If we are unable to obtain, or experience material delays in obtaining, necessary government approvals, our operations may be substantially disrupted, which could materially and adversely affect our business, financial condition and results of operations.

We may face several risks due to disruptions in the crypto asset markets, including but not limited to the risk from depreciation in our stock price, loss of customer demand, financing risk, risk of increased losses or impairments in our investments or other assets, risks of legal proceedings and government investigations, and risks from price declines or price volatility of crypto assets.

In the first half of 2022, some of the well-known crypto asset market participants, including Celsius Network, Voyager Digital Ltd. and Three Arrows Capital, declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, FTX, the third largest digital asset exchange by volume at the time, halted customer withdrawals and shortly thereafter, FTX and its subsidiaries filed for bankruptcy.

In response to these events, the digital asset markets have experienced extreme price volatility and several other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital assets markets. These events have also negatively impacted the liquidity of the digital assets markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital assets markets continues to be negatively impacted by these events, digital asset prices may continue to experience significant volatility and confidence in the digital asset markets may be further undermined. These events are continuing to develop and it is not possible to predict at this time all of the risks that they may pose to us or on the digital asset industry as a whole.

We had no direct exposure to FTX or any of the above-mentioned cryptocurrency companies. We do not have material assets that may not be recovered or may otherwise be lost or misappropriated due to the bankruptcies. However, the failure or insolvency of large exchanges like FTX may cause decreases in the prices of cryptocurrencies and investor confidence in the ecosystem, which could adversely affect investments in our products. The high volatility and downturns in cryptocurrency prices generally do not directly impact our business, and heightened volatility in cryptocurrency prices can even increase our trading profits. However, high volatility and downturns in cryptocurrency prices may impact our customers’ confidence in the market, thereby adversely affecting our operations and financial condition. We will timely adjust our strategies to expand our business and optimize our operating efficiency in the current dynamic market conditions.

We cannot assure that the price of cryptocurrencies will remain high enough to sustain our operation or that the price of cryptocurrencies will not decline significantly in the future. Fluctuations in the price of cryptocurrencies have had and are expected to continue to have an immediate impact on the trading price of our Ordinary Shares even before our financial performance is affected, if at all. To the extent investors view our Ordinary Shares as linked to the value of our cryptocurrency derivative product services, the decline of cryptocurrency value may have a material adverse effect on the market value of our Ordinary Shares.

In addition, a perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in digital asset networks and result in greater volatility in cryptocurrency values. These potential consequences of a digital asset exchange’s failure could adversely affect an investment in us or the loss of customer demand for our products and services with respect to our cryptocurrency business.

As of the date of this annual report, we are not subject to any legal proceedings or government investigations in the United States or in other jurisdictions. However, in the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type may be expensive to defend and may divert our management’s attention and resources from the operation of our business.

Political or economic crises may result in large-scale sales of digital assets, which could cause a reduction in the value of some or all digital assets and adversely affect the investment in our securities.

As a relatively new alternative to fiat currencies that are backed by central governments, digital assets are subject to supply and demand forces based upon the desirability of an alternative and decentralized means of buying and selling goods and services. It is also unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may result in large-scale acquisitions or sales of digital assets either globally or locally. Large-scale sales of digital assets would cause a reduction in their value and could adversely affect the investment in our securities.

Changes in digital asset networks and blockchain vulnerabilities could adversely affect the investment in our securities.

Various technical issues and changes in the underlying digital asset networks or blockchains may adversely affect the value of digital assets and could adversely affect the investment in our securities, including:

The recent disruption in the crypto asset markets may harm our reputation.

Due to the recent disruption in the crypto asset markets, our customer, suppliers and other business partners may deem our business to be risky and lose confidence in entering into business transactions with us. It may be difficult for us to reach the same business terms with such business partners like we did before. For example, our suppliers may require more deposits or advance payments from us.

In addition, additional regulations may subject us to investigation, administrative or regulatory proceedings, and civil or criminal litigations, all of which could harm our reputation and affect our business operation and the value of our Ordinary Shares. If we have difficulties to comply with such additional regulatory and registration requirements, we may have to cease certain or all of our operations. As of the date of this annual report, there is no material impact on our operations or financial conditions associated with any reputational harm that we may face in light of the recent disruption in the crypto asset markets. However, there is no guarantee that there will not be any material adverse effect on our business, financial condition and results of operations associated with the reputational harm that we may face in light of the recent disruption in the crypto asset markets.

Our offering of wealth management services may be subject to U.S. jurisdiction if it is not able to avoid offering or selling cryptocurrency derivative products to U.S. customers. Additionally, the offering of wealth management services may be deemed as securities offerings in other jurisdictions where it is offered.

To the extent that we are appropriately restricting U.S. persons from obtaining our cryptocurrency derivative products, such business should not be subject to U.S. securities laws. However, whether we are effective in avoiding U.S. jurisdiction by actually not offering or selling our cryptocurrency derivative products to U.S. customers would depend on, among others, the existence and effectiveness of measures adopted in practice against U.S. persons obtaining its services, such as screening mechanisms and/or contractual restrictions over transfers of the contracts to U.S. persons in the secondary market. If certain U.S. customers, or customers from other jurisdictions where our offering of cryptocurrency derivative products may be deemed as securities offerings, end up obtaining access to our cryptocurrency derivative products, and we have not registered the offering of such products, we may be deemed in breach of applicable securities laws. Such breach may result in sizable fines, reputational harms, restrictions of certain businesses, and materially adversely affect our business operation and financial conditions.

Because there has been limited precedent set for financial accounting for cryptocurrencies, the determinations that we have made for how to account for cryptocurrency-related transactions may be subject to change.

The accounting rules and regulations that we must comply with are complex and subject to interpretation by the International Accounting Standards Board, or the IASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. Further, there has been limited precedents for the financial accounting of cryptocurrencies and related valuation and revenue recognition, and no official guidance has been provided by the IASB or the SEC. As such, there remains significant uncertainty on how companies can account for cryptocurrency transactions, cryptocurrencies, and related income. Uncertainties in or changes to in regulatory or financial accounting standards could result in the need to changing our accounting methods and restate our financial statements and impair our ability to provide timely and accurate financial information, which could adversely affect our financial statements, result in a loss of investor confidence, and more generally impact our business, operating results, and financial condition.

The loss or destruction of private keys required to access any digital assets held by us may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any digital assets, it could cause regulatory scrutiny, reputational harm, and other losses.

Cryptocurrencies are generally controllable only by the possessor of the unique private key relating to the digital wallet in which the digital assets are held. While blockchain protocols typically require public addresses to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the digital assets held in such a wallet. We will publish the public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network, but we will need to safeguard the private keys relating to such digital wallets. We safeguard and keep private the private keys relating to our digital assets by primarily utilizing enterprise multi-signature storage solution provided by an established third-party digital asset financial services platform.

To the extent that any of the private keys relating to our wallets containing digital assets held by us is lost, destroyed, or otherwise compromised or unavailable, and no backup of the private key is accessible, we will be unable to access digital assets held in the related wallet. Furthermore, as currently our digital wallet is maintained by a third-party digital asset financial services platform, we cannot provide assurance that our wallet will not be hacked or compromised, or that any information leakage and data security breach of such platform will not compromise the security of our digital wallet. Digital assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious activities. Any loss of private keys relating to, or hack or other compromise of, digital wallets used to store our digital assets could subject us to significant financial losses, and we may be unable to distribute mining rewards to customers of our mining pool services, or adequately compensate our customers for damages caused by such security breach. As such, any loss of private keys due to a hack, employee or service provider misconduct or error, or other compromise by third parties could hurt our brand and reputation, result in significant losses, and adversely impact our business, results of operations and/or financial condition.

We may not have adequate sources of recovery if the cryptocurrencies held by us are lost, stolen or destroyed, which could have a material adverse effect on our business, financial condition and results of operations.

Our portfolio of digital assets is held under the custodianship of various cryptocurrency service providers, including but not limited to Binance, Ceffu, Cobo and Antalpha. We believe that the security procedures that the cryptocurrency service providers utilize, such as issuing username, password, hardware tokens and manual review of the transactions inflow and outflow, are reasonably designed to safeguard the cryptocurrencies from theft, loss, destruction or other issues relating to hackers and technological attack. Nevertheless, the security procedures cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by us. If such cryptocurrencies are lost, stolen or destroyed under circumstances rendering a third party liable to us, we may not have the financial resources or insurance sufficient to satisfy any or all of our claims against the third party, or have the ability to retrieve, restore or replace the lost, stolen or destroyed cryptocurrencies due to governing network protocols and the strength of the cryptographic systems associated with such cryptocurrencies. To the extent that we are unable to recover on any of our claims against any such third party, such loss could have a material adverse effect on our business, financial condition and results of operations.

If such services are commercially available, we will consider adding regulated banks, rather than solely relying on crypto custodian, as the custodian for a material amount of our cryptocurrencies. Obtaining cryptocurrency custody services from a regulated bank may confer benefits such as improved security and reduced fraud. Nevertheless, until now, banks have generally declined to provide custody services for cryptocurrencies and other virtual assets, due to the absence of clarity on permissibility and on regulators’ views of these activities generally. On July 22, 2020, the U.S. Office of the Comptroller of the Currency released publicly an interpretive letter confirming the authority of a national bank to provide cryptocurrency custody services for customers, providing that a national bank engaging in such activities should develop and implement those activities consistent with sound risk management practices and align them with the bank’s overall business plans and strategies as set forth in the guidance. On January 27, 2023, the Board of Governors of the Federal Reserve System released publicly a policy statement to interpret section 9(13) of the Federal Reserve Act, clarifying that the state member banks are not prohibited under the policy from providing safekeeping services for crypto-assets in a custodial capacity, if such activities are conducted in a safe and sound manner and in compliance with consumer, anti-money-laundering, and anti-terrorist-financing laws. However, it will take time for banks to start offering cryptocurrencies custodian services, and before then, we may have to continue to rely on crypto custodians for our crypto custodian needs.

A particular digital asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if we are unable to properly characterize a digital asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, results of operations and/or financial condition.

The SEC and its staff have taken the position that certain digital assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given digital asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular digital asset as a security. Additionally, the SEC’s views in this area have evolved over time, and it is difficult to predict the direction or timing of any continuing evolution. Furthermore, it is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum, in their current form, are securities. However, Bitcoin and Ethereum are the only digital assets as to which senior officials at the SEC have publicly expressed such a view. Such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court, and cannot be generalized to any other digital asset, such as Dogecoin. With respect to all other digital assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our assessment regarding the likelihood that a particular digital asset could be deemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given digital asset is a security in April 2019, this framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.

Several foreign jurisdictions have taken a broad-based approach to classifying digital assets as “securities,” while other foreign jurisdictions have adopted a narrower approach. As a result, certain digital assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of digital assets as “securities.”

The classification of a digital asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets. For example, a digital asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in digital assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade digital assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an alternative trading system (“ATS”), in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration, and qualification requirements.

We have adopted risk-based policies and procedures to analyze whether the digital assets that we hold and sell for our own account could be deemed to be a “security” under applicable laws. Our policies and procedures do not constitute a legal standard, but rather represent our management’s assessment, based on advice of our securities counsel, regarding the likelihood that a particular digital asset could be deemed a “security” under applicable laws. Regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC, a foreign regulatory authority, or a court were to determine that a digital asset currently held by us is a “security” under applicable laws. If the digital assets mined and held by us are deemed as securities, it could limit distributions, transfers, or other actions involving such digital assets in the global markets.

The loss or destruction of private keys required to access any digital assets held by us may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any digital assets, it could cause regulatory scrutiny, reputational harm, and other losses.

Cryptocurrencies are generally controllable only by the possessor of the unique private key relating to the digital wallet in which the digital assets are held. While blockchain protocols typically require public addresses to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the digital assets held in such a wallet. We will publish the public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network, but we will need to safeguard the private keys relating to such digital wallets. We safeguard and keep private the private keys relating to our digital assets by primarily utilizing enterprise multi-signature storage solution provided by an established third-party digital asset financial services platform.

To the extent that any of the private keys relating to our wallets containing digital assets held by us is lost, destroyed, or otherwise compromised or unavailable, and no backup of the private key is accessible, we will be unable to access digital assets held in the related wallet. Furthermore, as currently our digital wallet is maintained by a third-party digital asset financial services platform, we cannot provide assurance that our wallet will not be hacked or compromised, or that any information leakage and data security breach of such platform will not compromise the security of our digital wallet. Digital assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious activities. Any loss of private keys relating to, or hack or other compromise of, digital wallets used to store our digital assets could subject us to significant financial losses, and we may be unable to distribute mining rewards to customers of our mining pool services, or adequately compensate our customers for damages caused by such security breach. As such, any loss of private keys due to a hack, employee or service provider misconduct or error, or other compromise by third parties could hurt our brand and reputation, result in significant losses, and adversely impact our business, results of operations and/or financial condition.

Because cryptocurrencies may be determined to be investment securities, we may inadvertently violate the Investment Company Act of 1940, as amended, and we may incur substantial losses and become subject to such act as a result.

We believe that we are not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. However, under the Investment Company Act of 1940, as amended (the “Investment Company Act”), a company may be deemed an investment company under section 3(a)(1)(C) thereof if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on an unconsolidated basis.

The cryptocurrency we own, acquire may be deemed an investment security by the SEC, although we do not believe any of the cryptocurrencies we own, acquire are securities.

Current and future legislation and the SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which cryptocurrencies are treated for classification and clearing purposes. The SEC’s July 25, 2017 Report expressed its view that digital assets may be securities depending on the facts and circumstances. As of the date of this prospectus, we are not aware of any rules that have been proposed to regulate cryptocurrencies as securities. We cannot be certain as to how future regulatory developments will impact the treatment of cryptocurrency under the applicable U.S. federal or state laws. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in us. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in us.

Classification as an investment company under the Investment Company Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would require a restructuring of our operations, and we would be very constrained in the kind of business we could do as a registered investment company. Furthermore, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the Investment Company Act regime. The cost of such compliance would result in substantial additional expenses, and the failure to complete the required registration would have a materially adverse impact to conduct our operations.

We do not maintain insurance for our digital assets, which may expose us and our shareholders to the risk of loss of our digital assets, and there will be limited rights of legal recourse available to us to recover our losses.

We do not maintain insurance for the digital assets held by us. Banking institutions will not accept our digital assets, and they are therefore not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Therefore, we may suffer loss with respect to our digital assets which is not covered by insurance, and we may not be able to recover any of our carried value in these digital assets if they are lost or stolen or suffer significant and sustained reduction in conversion spot price. If we are not otherwise able to recover damages from a malicious actor in connection with these losses, our business, results of operations and share price may be adversely affected.

Risks RelatingWe may not be able to Doing Businessadequately protect our intellectual property rights, and our competitors may be able to offer similar products and services, which would harm our competitive position.

Our success depends in part upon our intellectual property rights. The algorithms we use in providing the wealth management services are all self-developed. As of March 31, 2023, we held three domain names relating to our business, including our current and previous corporate websites. As of March 31, 2023, the affiliates of our shareholder, Antalpha, held 21 registered trademarks and 33 pending trademark applications and the relevant rights to the logo of Metalpha in various jurisdictions, including Hong Kong, China Taiwan, Bangladesh, Europe and the United States, among others. We have use and other relevant rights related to the “Metalpha” registered trademark and logo for our business operations. We rely primarily on trademark, copyright, service mark and trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights over our products, procedures, algorithms and services. Other persons, including our competitors, could copy or otherwise obtain and use our technology without authorization, or develop similar intellectual property independently, and thus may be able to duplicate our products and services or design around any intellectual property rights we hold. We may also pursue the registration of our domain names, trademarks and service marks in various jurisdictions, including the United States. Although the protection afforded by copyright, trade secret and trademark law, written agreements and common law may provide some advantages, these statutory protections along with non-disclosure agreements with their employees may not be adequate to enable us to protect our intellectual property. Moreover, the intellectual property laws in certain jurisdictions are not considered as strong as comparable laws in the PRC

Our current corporate structure and business operations may be affected by the Foreign Investment Law.

The Ministry of Commerce of the PRC (“MOFCOM”) and the National Development and Reform Commission,United States or the “NDRC,” promulgated the Special Measures for Foreign Investment Access (2021 version), or the “Negative List,” on December 27, 2021, which became effective on January 1, 2022. PursuantEuropean Union. The enforcement of intellectual property rights in certain jurisdictions is difficult and, if we seek to the current and the updated Negative Lists, the supply chain management platform services, in which the PRC operating entities engage, fall within the permitted catalogue.

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the PRC, which came into effect on January 1, 2020, repealing simultaneously the Law of the PRC on Sino-foreign Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned Enterprises, and the Law of the PRC on Sino-foreign Cooperative Joint Ventures, together with their implementation rules and ancillary regulations. Pursuant to the Foreign Investment Law, foreign investment refers tocommence litigation against any investment activity directly or indirectly carried out by foreign natural persons, enterprises, or other organizations, including investment in new construction project, establishment of foreign funded enterprise or increase of investment, merger and acquisition, and investment in any other way stipulated under laws, administrative regulations, or provisions of the State Council of the PRC (the “State Council”). The Foreign Investment Law does not explicitly stipulate the contractual arrangements as a form of foreign investment. On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law, which came into effect on January 1, 2020. However, the Implementation Regulations on the Foreign Investment Law still remain silent on whether contractual arrangements should be deemed as a form of foreign investment. Though these regulations do not explicitly classify contractual arrangements as a form of foreign investment, there is still uncertainty regarding whether the VIE would be identified as a foreign-invested enterprise in the future. As a result,alleged infringer, there is no assurance that foreign investment via contractual arrangements would not be interpreted as a type of indirect foreign investment activities under the definition in the future. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on Foreign Investment.”

While the Foreign Investment Law does not define VIE agreements as a form of foreign investment explicitly, wethey will prevail. We cannot assure you that future laws and regulationswe will not provide for VIE agreements as a form of foreign investment. Therefore, there can be no assurance thatable to protect our relationship the VIE through the VIE Agreements will not be deemed as foreign investment in the future. If we are deemed to have a non-PRC entity as a controlling shareholder, the provisions regarding control through contractual arrangements could apply to the VIE Agreements, and as a result Long Yun could become subject to restrictions on foreign investment, which may materially impact the viability of its current and future operations. Specifically, we may be required to modify our corporate structure, change the PRC operating entities’ current scope of operations, obtain approvals, or face penalties or other additional requirements, compared to entities which do have PRC controlling shareholders. Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance, and business operations.proprietary rights.

It is uncertain whether we would be considered as ultimately controlled by Chinese parties. If future revisions or implementation rules ofWe face risks related to natural disasters, health epidemics, and other outbreaks, including the Foreign Investment Law mandate further actions, such as the MOFCOM market entry clearance or certain restructuring ofCOVID-19 pandemic, which could significantly disrupt our corporate structure and operations, there may be substantial uncertainties as to whether we can complete these actions in a timely manner, if at all, and ouroperations.

Our business and financial condition maycould be materially and adversely affected.affected by natural disasters, health epidemics, or calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures, or Internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services.

Our business could also be adversely affected by the effects of epidemics. In recent years, there have been breakouts of epidemics around the world, such as Ebola virus disease, H1N1 flu, avian flu and the COVID-19 pandemic. Our business operations could be disrupted if any of their employees gets or is suspected of getting infected, since it could require its employees to be quarantined and/or its offices to be closed and disinfected. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the global economy in general.

Furthermore, two recently published regulations,Our management and compliance personnel have limited experience handling a listed cryptocurrency-related services company, and our compliance program has a recent history only.

Our management and compliance personnel have limited experience in handling regulatory and compliance matters relating to a listed cryptocurrency-related services company. Our key compliance documents and compliance programs, such as anti-money laundering and know-your-client procedures, also have a recent history only. We believe that we have measures designed to limit our counterparty risks. In order to further limit our exposure to counterparty risk, we adopted a two-pronged strategy. First, we carefully select our counterparties and only partner with industry-leading entities renowned for their robust operations, strong capabilities and impeccable reputation. Second, to mitigate the Draft Rules Regarding Overseas Listings (see “—The Draft Rules Regarding Overseas Listings were released by the CSRC for public consultation. While such rulesconcentration risk, we strategically opt to work with multiple counterparties rather than relying on a single entity. Moreover, we also have not yet come into effect, the Chinese government may exert more oversighta dedicated team of compliance experts and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our shares to investors and could cause the valueall of our sharessignificant business decisions are made following in-depth consultations with legal advisors and industry veterans. While we have been devoting a substantial amount of time and resources to significantly declinevarious compliance initiatives and risk management measures, we cannot assure you the practical application and effectiveness of our compliance program and risk management measures, nor that there will not be a failure in detecting regulatory compliance issues or become worthless”)managing risk exposure, which may adversely affect our reputation, business, financial condition and the Filing Measures (defined below) (see “—The failureresults of operations.

Risks Related to comply with PRC regulations relating to mergers and acquisitions of domestic projects by offshore special purpose vehicles may subject us to severe fines or penalties and create other regulatory uncertainties regarding our corporate structure.”), which have not yet been formally implemented, have initially indicated that the Chinese government does not prohibit enterprises from listing abroad through indirect means such as VIE structures and red chips through these regulations. However, it is indicated that the VIE structures and red chips listings will be subject to the filing regulations and face stricter controlDoing Business in the future.Jurisdictions We Operate

In the event that any possible implementing regulations of the Foreign Investment Law, any other future laws, administrative regulations or provisions deem the VIE Agreements as a way of foreign investment, or if any of our operations through VIE agreements is classifiedA downturn in the “restricted”Hong Kong, China or “prohibited” industry in the future “negative list” under the Foreign Investment Law, the VIE Agreements may be deemed as invalidglobal economy, and illegal,economic and we may be required to unwind the VIE Agreements and/or disposepolitical policies of any affected business. Also, if future laws, administrative regulations, or provisions mandate further actions to be taken with respect to the VIE Agreements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Furthermore, under the Foreign Investment Law, foreign investors or the foreign investment enterprise should be imposed legal liabilities for failing to report investment information in accordance with the requirements.

In addition, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within a five-year transition period, which means that we may be required to adjust the structure and corporate governance of certain of the PRC operating entities in such transition period. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challengesChina could materially and adversely affect our current corporate structure, corporate governancebusiness and business operations.financial condition.

Changes in the policiesA substantial part of the PRC government could have a significant impact upon the PRC operating entities’ ability to operate profitably in the PRC.

Most of the PRC operating entities’ assets andour operations are currently located in China.Hong Kong. Accordingly, our business, prospects, financial condition and results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in Hong Kong and China through the PRC operating entities generally.generally and by continued economic growth in Hong Kong and China as a whole. The Chinese economy differs from the economies of most developed countries in many respects. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform,respects, including the reductionamount of state ownershipgovernment involvement, level 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. The Chinese government continues to play a significant role in regulating industry development, by imposing industrial policies. The Chinese government also exercises significantgrowth rate, control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy,exchange and providing preferential treatment to particular industries or companies.

allocation of resources. 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 business and operating results, reduce demand for our services and weaken our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example,

Economic conditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy may affect potential clients’ confidence in financial market as a whole and have a negative impact on our financial condition andbusiness, results of operations through the PRC operating entities may be adversely affected by government control over capital investments or changes in tax regulations. In addition,and financial condition. Additionally, continued turbulence 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, whichinternational markets may adversely affect the PRC operating entities’ business and operating results.

The PRC operating entities’ ability to operate profitably in the PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations, or their interpretation, particularly those dealing with the Internet, including censorship and other restriction on material which can be transmitted over the Internet, security, intellectual property, money laundering, taxation, and other laws that affect the PRC operating entities’ ability to operate their website.

Furthermore, our Company, the PRC operating entities, and our investors may face uncertainty about future actions by the government of China that could significantly affect the PRC operating entities’ financial performance and operations, including the enforceability of the VIE Agreements. As of the date of this annual report, neither our Company nor the VIE has received or was denied permission from Chinese authorities to list on U.S. exchanges. However, there is no guarantee that our Company or the VIE will receive or not be denied permission from Chinese authorities to list on U.S. exchanges in the future.

PRC laws and regulations governing the PRC operating entities’ current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair the PRC operating entities’ ability to operate profitable.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing the PRC operating entities’ business and the enforcement and performance of the PRC operating entities’ arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and the PRC operating entities’ business may be affected if they rely on laws and regulations which are subsequently adopted or interpreted in a manner different from their understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on the PRC operating entities’ business.

Uncertainties in the interpretation and enforcement of PRC laws and regulations 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 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. The PRC operating entities 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 and the PRC operating entities 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 or the PRC operating entities enjoy in the PRC legal system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules that may have retroactive effect. As a result, we and the PRC operating entities’ 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.access the capital markets to meet liquidity needs.

GivenThe Hong Kong legal system embodies uncertainties which could limit the Chinese government’s significant oversight and discretion over the conduct of businesslegal protections available to us.

Hong Kong is a Special Administrative Region of the PRC operating entities,PRC. Following British colonial rule from 1842 to 1997, China assumed sovereignty under the Chinese government may intervene or influence their operations at any time, which could result“one country, two systems” principle. The Hong Kong Special Administrative Region’s constitutional document, the Basic Law, ensures that the current political situation will remain in effect for 50 years. Hong Kong has enjoyed the freedom to function in a material changehigh degree of autonomy for its affairs, including currencies, immigration and custom, independent judiciary system and parliamentary system. On July 14, 2020, the United States signed an executive order to end the special status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed were compromised, it could potentially impact Hong Kong’s common law legal system and may in turn bring about uncertainty in, for example, the PRC operating entities’ operations and/or the valueenforcement of our Ordinary Shares.

The Chinese government has significant oversightcontractual rights. This could, in turn, materially and discretion over the conduct of business of the PRC operating entities 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 the operations of the PRC operating entities 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 PRC operating entities’ industry that could adversely affect theour business financial condition and results of operations of the PRC operating entities. Furthermore, if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities, the PRC operating entities may incur increased compliance costs or become subject to additional restrictions in their operations. Certain areas of the law, includingoperation. Additionally, intellectual property rights and confidentiality protections in ChinaHong Kong may also not be as effective as in the United States or other countries. In addition,Accordingly, we cannot predict the effectseffect of future developments in the PRCHong Kong legal system, on the business operations of the PRC operating entities, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof.thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our clients.

Hong Kong laws and regulations related to the cryptocurrency business is still under development and subject to significant changes, and any potential changes in the legal and regulatory landscape may adversely affect our business financial condition and future expansion.

We are headquartered in Hong Kong, where we predominantly rely on the exemptions for trading cryptocurrency derivative products with seasoned professional investors to conduct our cryptocurrency business. Nevertheless, we cannot assure you that Hong Kong regulatory authorities will not tighten or even revoke these exemptions. If these exemptions are tightened or revoked, we may not be able to continue to expand our customer base, and our investors, including you.business model may be materially and adversely affected. We will closely monitor the potential changes in exemptions available to us and laws and regulations related to the cryptocurrency business in Hong Kong.

Any actions by the Chinese government, includingHong Kong regulatory requirement of prior approval for any decision to intervenecompany or influence the operationsindividual becoming a “substantial shareholder” may restrict future takeovers and other transactions.

Section 132 of Securities and Futures Ordinance (Cap. 157 of the PRC subsidiarylaws of Hong Kong) (the “SFO”) requires prior approval from the HKSFC for any company or individual to become a substantial shareholder of an SFC-licensed company in Hong Kong. Under the VIESFO, a person will be a “substantial shareholder” of a licensed company if he, either alone or with associates, has an interest in or is entitled 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 operationsexercise of the PRC subsidiaryvoting power of more than 10% of the total number of issued shares of the licensed company, or exercises control of 35% or more of the VIE,voting power of a company that controls more than 10% of the voting power of the licensed company. Further, all potential parties who will be new substantial shareholder(s) of the HKSFC-licensed subsidiaries are required to seek prior approval from the HKSFC. This regulatory requirement may limitdiscourage, delay or completely hinderprevent a change in control of our abilityCompany, which could deprive our shareholders the opportunity to offer or continue to offer securities to investors,receive a premium for their shares as part of a future sale and may causereduce the valueprice of such securities to significantly decline or be worthless.our shares upon the consummation of a future proposed business combination.

In the meeting of the Political Bureau of the CPC Central Committee held on July 30, 2021, the improvement of the regulatory system for overseas listing of enterprises was first proposed. Although the detailed implementations are still unclear, the supervision of overseas listing of Chinese stocks may continue to tighten. 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 and the VIE 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 on our part to ensure the PRC operating entities’ compliance with such regulations or interpretations. As such, the PRC operating entities 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 denied or rescinded. Although we believe that we and the PRC operating entities are currently not required to obtain permission from any Chinese authorities and have not received any notice of denial of permission to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to the PRC operating entities’ 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 the PRC operating entities 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 operations of the PRC operating entities, 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.

Recent greater oversight by the Cyberspace Administration of China (the “CAC”) over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.

On November 14, 2021, the CAC published the Draft Regulations on the Network Data Security Administration (Draft for Comments) (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 network data security review by the relevant Cyberspace Administration of the PRC. According to the Security Administration Draft, data processing operators who possess personal data of at least one million users or collect data that affects or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC. The deadline for public comments on the Security Administration Draft was December 13, 2021. 

On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the “Review Measures”), which became effective on February 15, 2022. The Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, net platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Review Office of the PRC. According to the Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing. The 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.

As of the date of this annual report, we have not received any notice from any authorities identifying us or the VIE as CIIOs or requiring us to go through cybersecurity review or network data security review by the CAC. According to the Review Measures, and if the Security Administration Draft is enacted as proposed, we believe that the operations of the PRC operating entities and our listing will not be affected and that we will not be subject to cybersecurity review by the CAC, given that the PRC operating entities possess personal data of fewer than one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this annual report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future. There remains uncertainty, however, as to how the 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 Review Measures and the Security Administration Draft. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future. During such reviews, we may be required to suspend our operation or experience other disruptions to our 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.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our management named in this annual report based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.

We are a company incorporated under the laws of the Cayman Islands, and weIslands. We conduct most of our cryptocurrency-based operations in ChinaHong Kong through the PRC operating entities,our subsidiaries, and almost all of our assets are located in China through the PRC operating entities.Hong Kong. In addition, alltwo of our senior executive officers and directors reside withinin mainland China for a significant portion of the time. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRCHong Kong 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 U.S. 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 U.S.

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

The “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the “Opinions,” recently issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council may subject us to additional compliance requirement in the future.

Recently, 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. These 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. The aforementioned policies and any related implementation rules to be enacted may subject us to additional compliance requirement in the future. As the Opinions were recently issued, official guidance and interpretation of the Opinions remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of the Opinions or any future implementation rules on a timely basis, or at all.

Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies or inject capital into the PRC subsidiary and could adversely affect our business. PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase its registered capital or distribute profits to us, or otherwise expose us or our PRC resident shareholders to liabilities or penalties.

In July 2014, the State Administration of Foreign Exchange (the “SAFE”) promulgated the Circular on Issues Concerning Foreign Exchange Administration Over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or “Circular 37,” which replaced Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or “Circular 75.” Circular 37 requires PRC residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, referred to in Circular 37 as a “special purpose vehicle” for the purpose of holding domestic or offshore assets or interests. Circular 37 further requires amendment to a PRC resident’s registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease in the capital contributed by PRC individuals, share transfer or exchange, merger, division, or other material event. 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 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. Under these regulations, PRC residents’ failure to comply with specified registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity, including restrictions on its ability to contribute additional capital to its PRC subsidiaries. Further, failure to comply with the SAFE registration requirements could result in penalties under PRC law for evasion of foreign exchange regulations.

In addition to 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 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.

We cannot assure you that our ultimate shareholders who are PRC residents will complete the required registration with the SAFE in a timely manner, or at all. Such failure or inability of our PRC residents 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 loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using proceeds from our future financing activities to make loans or additional capital contributions to the PRC operating entities, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Any funds we transfer to WFOE, either as a shareholder loan or as an increase in registered capital through our Hong Kong subsidiary, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises, or “FIEs,” in China, capital contributions to WFOE, which is an FIE, are subject to the approval of or filing with MOFCOM or its local counterparts and registration with a local bank authorized by SAFE. There is, in effect, no statutory limit on the amount of capital contribution that we can make to WFOE. The reason is that there is no statutory limit on the amount of registered capital for WFOE, and we are allowed to make capital contributions WFOE by subscribing for their initial registered capital and increased registered capital, provided that the PRC subsidiary complete the relevant filing and registration procedures.

On the other hand, any foreign loan provided by us to WFOE is required to be registered with SAFE or its local branches or filed with SAFE in its information system, and WFOE may not procure foreign loans which exceed the difference between its total investment amount and registered capital (the “Current Foreign Debt Mechanism”) or, as an alternative, only procure loans subject to the calculation approach and limitations as provided in the PBOC’s Circular on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or “PBOC Notice No. 9” (the “PBOC Notice No. 9 Mechanism”), which shall not exceed 200% of the net asset of the relevant PRC subsidiary. According to PBOC Notice No. 9, after a transition period of one year since its promulgation, PBOC and SAFE will determine the cross-border financing administration mechanism for the FIEs after evaluating the overall implementation of PBOC Notice No. 9. As of the date hereof, neither PBOC nor SAFE has promulgated and made public any further rules, regulations, notices, or circulars in this regard. It is uncertain which mechanism will be adopted by PBOC and SAFE in the future and what statutory limits will be imposed on us when providing loans to WFOE. Currently, WFOE has the flexibility to choose between the Current Foreign Debt Mechanism and the PBOC Notice No. 9 Mechanism. However, if a more stringent foreign debt mechanism becomes mandatory, our ability to provide loans to WFOE may be significantly limited, which may adversely affect our business, financial condition, and results of operations.

If we seek to make capital contribution into WFOE or provide any loan to WFOE in the future, we may not be able to obtain the required government approvals or complete the required registrations on a timely basis, if at all. If we fail to receive such approvals or complete such registrations, our ability to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

In February 2015, SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or “SAT Circular 7.” SAT Circular 7 provides comprehensive guidelines relating to indirect transfers of PRC taxable assets (including equity interests and real properties of a PRC resident enterprise) by a non-resident enterprise. In addition, in October 2017, SAT issued an Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or “SAT Circular 37,” effective in December 2017, which, among others, amended certain provisions in SAT Circular 7 and further clarify the tax payable declaration obligation by non-resident enterprise. Indirect transfer of equity interest and/or real properties in a PRC resident enterprise by their non-PRC holding companies are subject to SAT Circular 7 and SAT Circular 37.

SAT Circular 7 provides clear criteria for an assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. As stipulated in SAT Circular 7, indirect transfers of PRC taxable assets are considered as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following situations: i) the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor and the transferee are both 80% or above directly or indirectly owned by the same party; iii) the percentages in bullet points i) and ii) shall be 100% if over 50% the share value of a foreign enterprise is directly or indirectly derived from PRC real properties. Furthermore, SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers PRC taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority and the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding, or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

According to SAT Circular 37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the PRC Enterprise Income Tax Law (the “EIT Law”), the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.

We face uncertainties as to the reporting and assessment of reasonable commercial purposes and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries, and investments. In the event of being assessed as having no reasonable commercial purposes in an indirect transfer transaction, we may be subject to filing obligations or taxed if we are a transferor in such transactions and may be subject to withholding obligations (to be specific, a 10% withholding tax for the transfer of equity interests) if we are a transferee in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

Because our business is conducted in RMB and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.

Our business is conducted in the PRC, our books and records are maintained in RMB, which is the currently of the PRC, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets and the results of our operations in United States dollars. The value of the RMB against the United States 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.

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 more 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.

Under the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the EIT Law that 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, or 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. Further 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 we are deemed as a PRC “resident enterprise,” we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to us from our existing PRC subsidiary and any other PRC subsidiaries which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered a PRC “resident enterprise,” any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our Ordinary Shares, may be considered income derived from sources within the PRC and be subject to PRC 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). It is unclear whether holders of our Ordinary Shares 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. This could have a material and adverse effect on the value of your investment in us and the price of our Ordinary Shares. Although up to the date of this report, we have not been notified or informed by the PRC tax authorities that we have been deemed to be a resident enterprise for the purpose of the EIT Law, we cannot assure you that we will not be deemed to be a resident enterprise in the future.

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

We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from the PRC operating entities through our offshore 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 the PRC operating entities 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 our offshore subsidiaries. In addition, the PRC tax authorities may require the PRC operating entities to adjust their taxable income under the contractual agreements. See “—Risks Relating to Our Corporate Structure—The VIE Agreements may result in adverse tax consequences.”

Current PRC regulations permit the PRC operating entities to pay dividends to our offshore subsidiaries only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, the PRC operating entities 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. The PRC operating entities may also allocate a portion of their respective after-tax profits based on PRC accounting standards to employee welfare and bonus funds at its discretion. These reserves are not distributable as cash dividends. These limitation on the ability of the PRC operating entities to pay dividends or make other distributions to our offshore subsidiaries, and consequently 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.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of the PRC operating entities, and dividends payable by the PRC operating entities 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 Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income (the “Double Tax Avoidance Arrangement”), a withholding tax rate of 10% may be lowered to 5% if the PRC enterprise 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 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.

Further, the SAT promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties on October 27, 2009, which limits the “beneficial owner” to individuals, projects, or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining the “beneficial owner” status. In current practice, a Hong Kong enterprise must obtain a tax resident certificate from the relevant Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. The PRC operating entities is wholly-owned by our Hong Kong subsidiary. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that our Hong Kong subsidiary will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority. As of the date of this annual report, we have not commenced the application process for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that our Hong Kong subsidiary will be granted such a Hong Kong tax resident certificate.

Even after our Hong Kong subsidiary obtain the Hong Kong tax resident certificate, it is required by applicable tax laws and regulations to file required forms and materials with relevant PRC tax authorities to prove that it can enjoy 5% lower PRC withholding tax rate. Long Yun HK intends to obtain the required materials and file with the relevant tax authorities when it plans to declare and pay dividends, but there is no assurance that the PRC tax authorities will approve the 5% withholding tax rate on dividends received from Long Yun HK.

The failure to comply with PRC regulations relating to mergers and acquisitions of domestic projects by offshore special purpose vehicles may subject us to severe fines or penalties and create other regulatory uncertainties regarding our corporate structure.

On August 8, 2006, MOFCOM, joined by the China Securities Regulatory Commission (the “CSRC”), the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the State Administration for Industry and Commerce (the “SAIC”), and SAFE, jointly promulgated the Provisions Regarding Mergers and Acquisitions of Domestic Projects by Foreign Investors (the “M&A Rules”), which took effect as of September 8, 2006, and were amended on June 22, 2009. This regulation, among other things, have certain provisions that require offshore special purpose vehicles formed for the purpose of acquiring PRC domestic companies and controlled directly or indirectly by PRC individuals and companies, to obtain the approval of MOFCOM prior to engaging in such acquisitions and to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock market. On September 21, 2006, the CSRC published on its official website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval.

The application of the M&A Rules with respect to our corporate structure remains unclear, with no current consensus existing among leading PRC law firms regarding the scope and applicability of the M&A Rules. Thus, it is possible that the appropriate PRC government agencies, including MOFCOM, would deem that the M&A Rules required us or our entities in China to obtain approval from MOFCOM or other PRC regulatory agencies in connection with WFOE’s control of Long Yun through contractual arrangements. If the CSRC, MOFCOM, or another PRC regulatory agency determines that government approval was required for the VIE arrangements between WFOE and Long Yun, or if prior CSRC approval for overseas financings is required and not obtained, we may face severe regulatory actions or other sanctions from MOFCOM, the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines or other penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from overseas financings into the PRC, restrict or prohibit payment or remittance of dividends to us or take other actions that could have a material 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 delay or cancel overseas financings, to restructure our current corporate structure, or to seek regulatory approvals that may be difficult or costly to obtain.

Article 224 of the current Securities Law stipulates that domestic enterprises that directly or indirectly issue securities abroad or list their securities for trading abroad shall comply with the relevant regulations of the State Council. Therefore, approval by the CSRC is not currently required. On December 24, 2021, the CSRC issued a notice for public comment on the Administrative Measures for Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Filing Measures”), which mentions the regulation of overseas listing of domestic enterprises and requires filing in accordance with the relevant provisions of the CSRC. The Filing Measures have not yet been formally implemented, but it has been preliminarily indicated that although the Chinese government does not prohibit enterprises to achieve overseas listing through indirect means such as VIE structures and red chips, such forms are still subject to regulation by the Chinese government, and it is likely that we will have to perform filing procedures and report relevant information to the CSRC in the future.

The M&A Rules, along with certain foreign exchange regulations discussed below, will be interpreted or implemented by the relevant government authorities in connection with our future offshore financings or acquisitions, and we cannot predict how they will affect our acquisition strategy. For example, Long Yun’s ability to remit its profits to us or to engage in foreign-currency-denominated borrowings, may be conditioned upon compliance with the SAFE registration requirements by Mr. Limin Liu and Mr. Wei Wang, both shareholders of our Company and Long Yun, over whom we may have no control.

The Draft Rules Regarding Overseas Listings were released by the CSRC for public consultation. While such rules have not yet come into effect, the Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our shares to investors and could cause the value of our shares to significantly decline or become worthless.

On December 24, 2021, the CSRC and relevant departments of the State Council issued the Draft Rules Regarding Overseas Listings, which aim to regulate overseas securities offerings and listings by China-based companies, for public consultation. The Draft Rules Regarding Overseas Listing aim to lay out the filing regulation arrangement for both direct and indirect overseas listing and clarify the determination criteria for indirect overseas listing in overseas markers. Where an enterprise whose principal business activities are conducted in the PRC seeks to issue and list its shares in the name of an overseas enterprise based on equity, assets, income, or other similar rights and interests of the relevant PRC domestic enterprise, such activities are deemed an indirect overseas issuance and listing. According to the Draft Rules Regarding Overseas Listings, among other things, after making initial applications with overseas stock markets for initial public offerings or listings, or after the completion of issuance of overseas listed securities by the overseas listed issuer, all China-based companies shall file the required filing materials with the CSRC within three working days. In addition, overseas offerings and listings may be prohibited for such China-based companies when any of the following applies: (i) if the intended securities offerings and listings are specifically prohibited by the laws, regulations, or provision of the PRC; (ii) if the intended securities offerings and listings may constitute a threat to, or endanger national security as reviewed and determined by competent authorities under the State Council in accordance with laws; (iii) if there are material ownership disputes over applicants’ equity interests, major assets, core technologies, or the others; (iv) if, in the past three years, applicants’ domestic enterprises, controlling shareholders, or de facto controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (v) if, in the past three years, any directors, supervisors, or senior executives of applicants have been subject to administrative punishments for severe violations, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; or (vi) other circumstances as prescribed by the State Council. The Draft Administrative Provisions further stipulate that a fine between RMB1 million (approximately $157,255) and RMB10 million (approximately $1,572,550) may be imposed if an applicant fails to fulfill the filing requirements with the CSRC or conducts an overseas offering or listing in violation of the Draft Rules Regarding Overseas Listings, and in cases of severe violations, a parallel order to suspend relevant businesses or halt operations for rectification may be issued, and relevant business permits or operational license revoked.

At a question and answer session conducted by the CSRC on the issuance of the Draft Rules Regarding Overseas Listings, future plans for the overseas listing filing system was disclosed, including a subsequent filing policy for companies that have completed overseas listings, with a promised transition period for those companies to adapt. Our PRC counsel, Capital Equity Legal Group, has advised us that the CSRC may promulgate a filing policy for companies that are already listed in the future. Our Company, as an overseas listed company, may need to complete the relevant filing procedures within a certain period of time in the future according to the requirements of the CSRC.

As of the date of this annual report, the Draft Rules Regarding Overseas Listings have been released for public comment only and have not been formally promulgated, and neither we, our subsidiaries, nor any of the PRC operating entities have been required to complete the filing procedures. However, uncertainties remain as to its enactment or future interpretations and implementations. Our PRC counsel has advised us that, even if the final rules are promulgated as proposed in the current Draft Rules Regarding Overseas Listings, none of the situations that would clearly prohibit overseas offering and listings would apply to us. In addition, according to the CSRC spokesperson stated at the question and answer session, we would not be subject to the filing requirements as an enterprise already listed overseas unless refinancing activities occur, as the final rules would be targeting companies that are in the process of overseas listing or will be listed overseas in the future. Notwithstanding the above, our PRC counsel has further advised us that uncertainties still exist as to whether we, our subsidiaries, or the PRC operating entities are required to obtain permissions from the Chinese government that is required to approve of our operations and/or listing. In the event that we, our subsidiaries, or the PRC operating entities are subject to the compliance requirements, we cannot assure you that any of these entities will be able to receive clearance of such compliance requirements in a timely manner, or at all. Any failure of our Company, our subsidiaries, or the PRC operating entities to fully comply with new regulatory requirements may subject us to regulatory actions, such as fines, relevant businesses or operations suspension for rectification, revocation of relevant business permits or operational license, or other sanctions, which may significantly limit or completely hinder our ability to continue to list or offer our Ordinary Shares, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our shares to significantly decline in value or become worthless.

To the extent cash or assets of our business, or of our PRC subsidiaries, or the VIE, is in the PRC, such cash or assets may not be available to fund operations or for other use outside of the PRC, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets.

The transfer of funds and assets among the Company, its Hong Kong and PRC subsidiaries, and the VIE is subject to restrictions. The PRC government imposes controls on the conversion of the RMB into foreign currencies and the remittance of currencies out of the PRC. In addition, the PRC Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises, unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident.

As of the date of this annual report, 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 the PRC), 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.

As a result of the above, to the extent cash or assets of our business, or of our PRC subsidiary, or the VIE, is in the PRC (including Hong Kong and Macau), such funds or assets may not be available to fund operations or for other use outside of the PRC, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets.

Risks Relating to Our Corporate Structure 

The VIE Agreements may not be effective in providing control over Long Yun.

We are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, a significant portion of our current revenue and net income is derived from Long Yun and its subsidiaries. For accounting purposes, we control and receive the economic benefits of the VIE and its subsidiaries through the VIE Agreements by WFOE, which enables us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under IFRS. Our Ordinary Shares are shares of the offshore holding company in the Cayman Islands instead of shares of the PRC operating entities.

The VIE Agreements, however, may not be as effective in providing us with the necessary control over Long Yun and its operations, which exposes us to the risk of potential breach of contract by the Long Yun Shareholders. For instance, Long Yun and the Long Yun Shareholders could breach the VIE Agreements by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of Long Yun, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Long Yun, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. Under the VIE Agreements, however, we rely on the performance by Long Yun and the Long Yun Shareholders of their respective obligations under the contracts. The Long Yun Shareholders may not act in the best interests of our Company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements with Long Yun. In the event that Long Yun or the Long Yun Shareholders fail to perform their respective obligations under the VIE Agreements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. Even if legal actions are taken to enforce such arrangements, there is uncertainty as to whether the courts of 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 United States or any state.

If the PRC government determines that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, and our Ordinary Shares may decline in value or become worthless.

On March 15, 2019, the National People’s Congress of the PRC adopted the PRC Foreign Investment Law, which came into force on January 1, 2020. The PRC Foreign Investment Law defines the “foreign investment” as the investment activities in China conducted directly or indirectly by foreign investors in the following manners: (i) the foreign investor, by itself or together with other investors establishes a foreign invested enterprises in China; (ii) the foreign investor acquires shares, equities, asset tranches, or similar rights and interests of enterprises in China; (iii) the foreign investor, by itself or together with other investors, invests and establishes new projects in China; and (iv) the foreign investor invests through other approaches as stipulated by laws, administrative regulations or otherwise regulated by the State Council. The PRC Foreign Investment Law keeps silent on how to define and regulate “variable interest entities,” while adding a catch-all clause that “other approaches as stipulated by laws, administrative regulations or otherwise regulated by the State Council” can fall into the concept of “foreign investment,” which leaves uncertainty as to whether the foreign investor’s controlling PRC onshore variable interest entities via contractual arrangements will be recognized as “foreign investment.”

According to our PRC counsel, Capital Equity Legal Group, based on its understandings of the relevant PRC laws and regulations, (i) the ownership structures of Long Yun in China and WFOE, our wholly-owned subsidiary in China, is currently not in violation of applicable PRC laws and regulations currently in effect; and (ii) each of the VIE Agreements is legal, valid, binding, and enforceable in accordance with its terms and applicable PRC laws. Our PRC counsel, however, has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations, and that the VIE Agreements have not been tested in a court of law in China as of the date of this report. Accordingly, the PRC regulatory authorities may ultimately take a view contrary to the opinion of our PRC counsel. It is uncertain whether any new PRC laws or regulations relating to VIE structures will be adopted or, if adopted, what they would provide.

If our corporate structure and the VIE Agreements are determined to be illegal or invalid by a PRC court, arbitral tribunal, or regulatory authorities, we may lose control of the VIE and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and the VIE Agreements are found to be in violation of any existing or future PRC laws or regulations, or we or Long Yun fails to obtain or maintain any required permits or approvals, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

The imposition of any of these penalties would result in a material and adverse effect on the PRC operating entities’ ability to conduct their business. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of Long Yun in our consolidated financial statements, if the PRC government authorities were to find our legal structure and VIE Agreements to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of Long Yun or our right to receive substantially all the economic benefits and residual returns from Long Yun and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of Long Yun in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of operations and our Ordinary Shares may decline in value or become worthless.

The VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under the VIE Agreements.

As the VIE Agreements are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Disputes arising from the VIE Agreements will be resolved through arbitration in China, although these disputes do not include claims arising under the United States federal securities law and thus do not prevent you from pursuing claims under the United States federal securities law. The legal environment in the PRC is not as developed as in the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce the VIE Agreements, through arbitration, litigation, and other legal proceedings remain in China, which could limit our ability to enforce the VIE Agreements and to consolidate the financial results of Long Yun. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce the VIE Agreements, we may not be able to consolidate the financial results of Long Yun, and our ability to conduct our business may be materially and adversely affected.

We may not be able to consolidate the financial results of Long Yun or such consolidation could materially and adversely affect our operating results and financial condition.

A significant portion of our business is conducted through Long Yun, which currently is considered for accounting purposes as a VIE, and we are considered the primary beneficiary, enabling us to consolidate the financial results of Long Yun in our consolidated financial statements. In the event that in the future Long Yun would no longer meet the definition of a VIE, or we are deemed not to be the primary beneficiary, we would not be able to consolidate line by line its financial results in our consolidated financial statements for PRC purposes. Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary, we would be required to consolidate that entity’s financial results in our consolidated financial statements for PRC purposes. If such entity’s financial results were negative, this could have a corresponding negative impact on our operating results for PRC purposes. However, any material variations in the accounting principles, practices, and methods used in preparing financial statements for PRC purposes from the principles, practices, and methods generally accepted in the United States and in the SEC accounting regulations must be discussed, quantified, and reconciled in financial statements for the United States and SEC purposes.

The VIE Agreements may result in adverse tax consequences.

PRC laws and regulations emphasize the requirement of an arm’s length basis for transfer pricing arrangements between related parties. The laws and regulations also require enterprises with related party transactions to prepare transfer pricing documentation to demonstrate the basis for determining pricing, the computation methodology, and detailed explanations. Related party arrangements and transactions may be subject to challenge or tax inspection by the PRC tax authorizes.

Under a tax inspection, if our transfer pricing arrangements between WFOE and Long Yun are judged as tax avoidance, or related documentation does not meet the requirements, WFOE and Long Yun may be subject to material adverse tax consequences, such as transfer pricing adjustment. A transfer pricing adjustment could result in a reduction, for PRC tax purpose, of adjustments recorded by WFOE, which could adversely affect us by (i) increasing Long Yun’s tax liabilities without reducing WFOE’s tax liabilities, which could further result in interest being levied to us for unpaid taxes; or (ii) imposing late payment fees and other penalties on Long Yun for the adjusted but unpaid taxes according to the applicable regulations. In addition, if WFOE requests the Long Yun Shareholders to transfer their shares in Long Yun at nominal or no value pursuant to the VIE Agreements, such transfer may be viewed as a gift and subject WFOE to PRC income tax. As a result, our financial position could be materially and adversely affected if Long Yun’s tax liabilities increase or if it is required to pay late payment fees and other penalties.

The Long Yun Shareholders have potential conflicts of interest with our Company, which may adversely affect our business and financial condition.

The Long Yun Shareholders may have potential conflicts of interest with us. These shareholders may not act in the best interest of our Company or may breach, or cause Long Yun to breach the VIE Agreements, which would have a material and adverse effect on our ability to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under IFRS. For example, the shareholders may be able to cause the VIE Agreements to be performed in a manner adverse to us by, among other things, failing to remit payments due under the VIE Agreements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor.

Currently, we do not have any arrangements to address potential conflicts of interest between the Long Yun Shareholders and our Company, except that we could exercise our purchase option under the Exclusive Option Agreement with these shareholders to request them to transfer all of their equity interests in Long Yun to a PRC entity or individual designated by us, to the extent permitted by PRC law. If we cannot resolve any conflicts of interest or disputes between us and those shareholders, we would have to rely on legal proceedings, which may materially disrupt our business. There is also substantial uncertainty as to the outcome of any such legal proceeding.

We rely on the approvals, certificates, and business licenses held by Long Yun and any deterioration of the relationship between WFOE and Long Yun could materially and adversely affect our overall business operations.

Pursuant to the VIE Agreements, our business in the PRC will be undertaken on the basis of the approvals, certificates, business licenses, and other requisite licenses held by Long Yun. There is no assurance that Long Yun will be able to renew its licenses or certificates when their terms expire with substantially similar terms as the ones they currently hold.

Further, our relationship with Long Yun is governed by the VIE Agreements, which are intended to provide us, through our indirect ownership of WFOE, with the ability to control and receive the economic benefits of Long Yun’s business operation for accounting purposes, which enables us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under IFRS. The VIE Agreements, however, may not be effective in providing control over the applications for and maintenance of the licenses required for our business operations. Long Yun could violate the VIE Agreements, go bankrupt, suffer from difficulties in its business, or otherwise become unable to perform its obligations under the VIE Agreements and, as a result, our operations, reputation, business, and stock price could be severely harmed.

The exercise of our option to purchase part or all of the shares in Long Yun under the Exclusive Option Agreement might be subject to certain limitations and substantial costs.

Our Exclusive Option Agreement with Long Yun and the Long Yun Shareholders provides WFOE with the option to purchase up to 100% of the shares in Long Yun. Such transfer of shares may be subject to approvals from, filings with, or reporting to competent PRC authorities, such as the MOFCOM, the State Administration for Market Regulation, and/or their local competent branches. In addition, the shares transfer price may be subject to review and tax adjustment by the relevant tax authorities. The shares transfer price to be received by Long Yun under the VIE Agreements may also be subject to enterprise income tax, and these amounts could be substantial.

Risks Relating to Our Ordinary Shares and the Trading Market

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 allwith the majority of their operations in China have been the subject of intensefaced extensive scrutiny, criticism and negative publicity byfrom investors, financial commentators and regulatory agencies such aslike the SEC. Much of the scrutiny, criticism and negative publicity has centered onaround financial and accounting irregularities, and mistakes, a lackthe absence of effective internal financial controls, over financial accounting, inadequate or non-compliant corporate governance policies or a lack of adherence thereto and in manynumerous cases, allegations of fraud. As a result of the scrutiny, criticism, andfraud allegations. Such negative publicity has led to sharp decreases in the publicly traded stock value of many U.S. listed Chinese companies, sharply decreased in value and, inwith some cases, has becomebecoming virtually worthless. Many of theseThese companies are nowoften subject to shareholder lawsuits, and SEC enforcement actions and are conductingboth internal and external investigations into the allegations. It is not clear

We have taken proactive steps to address these concerns. In March 2023, we divested all our operations in mainland China. However, due to our past operational history in mainland China, we may be perceived as a Chinese company, which may subject us to the negative effects of sector-wide scrutiny even though we no longer operate in mainland China. Although we have taken significant measures to distance ourselves from these risks, it remains unclear what effectthe enduring impact of this sector-widewidespread scrutiny, criticism and negative publicity will have on us, our business and our stock price. If we become the subject of any unfavorable allegations, regardless of whether such allegations are proventhey prove to be true or untrue,not, we will havewould need to expend significantconsiderable resources to investigateinvestigating such allegations and/or defend our Company. This situation willand defending ourselves. Such efforts would be costly and time consumingtime-consuming and distractcould potentially divert management attention away from our management from developing our growth. Ifgrowth strategy. Furthermore, if such allegations are not proventurn out to be groundless, we andsubstantiated, our business operations willwould be severelymaterially and adversely affected, and youwhich could sustainlead to a significant decline in the value of our stock.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.PRC or Hong Kong.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC or Hong Kong regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by the CSRC, a PRC regulator that is responsible for oversight ofChina Securities Regulatory Commission or the capital markets in China.HKSFC. Accordingly, you should review our SEC reports, filings, and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings, or any of our other public pronouncements.

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.United States.

Pursuant to the Holding Foreign Companies Accountable Act, or the HFCA Act, if the SEC determines that a company retains a foreign accounting firm that cannot be subject to inspections by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit its securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report relaying to the SEC its determinations that it was unable to inspect or investigate completely registered public accounting firms in mainland China and Hong Kong. In March 2022, the SEC issued its first “Conclusive list of issuers identified under the HFCA Act” indicating that those companies were formally subject to the delisting provisions.

On April 21, 2020, SEC Chairman Jay ClaytonAugust 26, 2022, the PCAOB signed with the CSRC, and the Ministry of Finance of the PRC a Statement of Protocol, which gives the PCAOB Chairman William D. Duhnke III, alongsole discretion to select the firms, audit engagements and potential violations it inspects and investigates and put in place procedures for PCAOB inspectors and investigators to view complete audit work papers 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 accessall information included and for the PCAOB to inspect auditorsretain information as needed. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and audit work papers inremoved mainland China and higher risksHong Kong from the list of fraudjurisdictions where it was unable to inspect or investigate completely registered public accounting firms. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in emerging markets.

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

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable 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, 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 adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the Holding Foreign Companies Accountable Act.

On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the Holding Foreign Companies Accountable Act from three years to two.

On September 22, 2021, the PCAOB adopted a final rule implementing the Holding Foreign Companies Accountable Act, which provides a framework for the PCAOB to use when determining, as contemplated under the Holding Foreign Companies Accountable 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 Holding Foreign Companies Accountable Act.

On December 16, 2021, the PCAOB issued a report on its determinations that it 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 and Hong Kong 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, the 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 firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors to lose confidence in the audit procedures and reported financial information and the quality of the financial statements of those companies who have China-based auditors.

Our auditor, the independent registered public accounting firm that issues the audit report contained in this annual report, 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 San Mateo, California, and has been inspected by the PCAOB on a regular basis with the last inspection in October 2019. 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,November 2021. However, the recent developments would add uncertainties to our offering and weWe 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 the majority of our operations are conducted in China. Furthermore, the Holding Foreign Companies Accountable Act, which requires thatHong Kong. If the PCAOB be permitteddetermines in the future that it no longer has full access to inspect an issuer’sand investigate our auditor, or another independent registered public accounting firm within three years,we may result in the delisting of our Company or prohibition of trading in our Ordinary Sharesengage in the future to issue an audit report on our financial statements filed with the SEC, we may be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if the PCAOB is unable to inspect our accounting firm at such future time. The Accelerating Holding Foreign Companies Accountable Act, if passed by the U.S. House of Representatives and signed into law, would reduce the period of timewe were so identified for foreign companies to comply with PCAOB audits to two consecutive years, instead of three, thus reducing the time period for triggeringwe would become subject to the prohibition on trading.trading under the HFCA Act.

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.

If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline.

The trading market for our Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.

If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely 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.

Our independent registered public accounting firm is currently not required to conduct an audit of our internal control over financial reporting. In the course of auditing our consolidated financial statements as of March 31, 2022, our management has not received from our independent registered public accounting firm any report regarding deficiencies in our internal controls over financial reporting. As a small-scale company, we are in the process of establishing and improving our internal controls. Upon our independent registered public accounting firm’s suggestions, with the development of our business and the increase of our financial personnel, we will improve our internal control management from the following aspects: (1) Internal environment: Our internal environment affects the formulation of our business management objectives. We plan to take the following measures to improve the Company’s governance structure: (a) improve our governance structure, including the establishment of internal institutions and the allocation of powers and responsibilities, (b) improve our human resources related policies, and (c) strengthen our corporate culture; (2) Risk assessment: We will prepare specific assessments and strategic plans for potential risks, including risk tolerance determination, risks identification, and risk analysis and risk response; (3) Control systems: We plan to establish and improve (a) our authorization and approval control system to provide reasonable assurance that transaction receipts and expenditures of our Company are being made only in accordance with the authorization of our management and directors, (b) our accounting control system to maintain our records that, in reasonable detail, to accurately reflect the transactions and dispositions of our assets, and to permit preparation of consolidated financial statements in accordance with GAAP, (c) our property protection control to provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our Company’s assets that could have a material effect on the consolidated financial statements (d) our budget control system, (e) operation analysis and control system, and (f) our major risk early warning and emergency handling mechanism; (4) Information communication: An effective information communication system, within which our financial status and financial operation can be accurately and effectively disclosed in the financial report to our management is important for our internal control over financial reporting. We plan to establish an information communication mechanism to ensure smooth communication between the management and the Company’s external and internal personnel, including communication with our stakeholders, authorities, auditors, and suppliers; and (5) Internal supervision: we plan to conduct internal inspections regarding our internal controls, and make timely improvements to internal control deficiencies that we may find during the inspection.

Our failure to discover and address any material weaknesses 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, 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.

We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report from management on our internal control over financial reporting in this annual report on Form 20-F. In addition, once we cease to beare no longer an “emerging growth company” as such term is defined in Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”),or the JOBS Act, and our independent registered public accounting firm may be required attest to and report on the effectiveness of our internal control over financial reporting, depending on whether we will beare an accelerated filer. In addition, as 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 timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify additional or other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations and lead to a decline in the trading price of our Ordinary Shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.

For more information regarding our internal controls, please see “Item 15. Controls and Procedures.”

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.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from disclosure and other requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company and a smaller reporting company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important. See “Item 4. Information on the Company—B. Business Overview—Emerging Growth Company Status.”

We will incur increased costs after we cease to qualify as an “emerging growtha result of being a public company.”

As a public company, we expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on the corporate governance practices of public companies. As an “emerging growth company” pursuant to the JOBS Act, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. AfterFor example, operating as a public company makes it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. We are no longer an “emerging growth company,”currently evaluating and monitoring developments with respect to these rules and regulations, and we expect tocannot predict or estimate with any degree of certainty the amount of additional costs we may incur significant additional expenses and devote substantial management effort toward ensuring compliance increased disclosure requirements. or the timing of such costs.

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.

As a foreign private issuer, we are 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 are not 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 are not required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. While we currently qualify as a foreign private issuer, we may cease to qualify as a foreign private issuer in the future.

As a foreign private issuer, we are permitted to, and we may rely on exemptions from certain Nasdaq Capital Market corporate governance standards applicable to U.S. issuers. This may afford less protection to holders of our Ordinary Shares.

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq Capital Market listing rules that allow us to follow Cayman Islands law for certain governance matters. Certain corporate governance practices in the Cayman Islands may differ significantly from corporate governance listing standards as, except for general fiduciary duties and duties of care, Cayman Islands law has no corporate governance regime which prescribes specific corporate governance standards. We may follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the Nasdaq Capital Market in respect of the following. Cayman law does not require that we make our interim results available to shareholders, although as a Nasdaq listed company, we are required to publicly file interim results for the first six months of our fiscal year. Furthermore, Nasdaq Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on the Nasdaq Capital Market prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company’s common stock or voting power for less than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended.amended; and (iv) in connection with the acquisition of the stock or assets of another company under certain conditions. However, Nasdaq Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval requirements, and the Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. The Company has chosen to follow its home country practices with respect to the requirements set forth under Nasdaq Listing Rules 5635(a), 5635(b), 5635(c), and 5635(d), and therefore is not required to obtain shareholder approval prior to (1) the acquisition of stock or assets of another company, (2) the issuance of 20% or more of its outstanding ordinary shares, (2)(3) the issuance of securities pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended, and (3)(4) the issuance of securities when the issuance or potential issuance will result in a change of control of the Company. Also, Nasdaq Listing Rule 5605(b)(1) requires 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. Currently, a majority of our board members are independent. However, we may consider following home country practice in lieu of the requirements under Nasdaq Listing Rules with respect to certain corporate governance standards. Since a majority of our board of directors may not consist of independent directors, fewer board members may be exercising independent judgment and the level of board oversight on the management of our Company may decrease as a result. In addition, the 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. We may consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect to certain corporate governance standards. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers. For more information regarding our corporate governance, please see “Item 16G. Corporate Governance.”

The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance.

The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

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 action 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.

If we cannot continue to satisfy listing requirements and other rules of Nasdaq Capital Market, although we exempt from certain corporate governance standards applicable to U.S. issuers as a Foreign Private Issuer, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.

Our Ordinary Shares are listed on the Nasdaq Capital Market. We cannot assure you that our Ordinary Shares will continue to be listed on the Nasdaq Capital Market.

In order to maintain our listing on the Nasdaq Capital Market, we are required to comply with certain rules of Nasdaq Capital Market, including those regarding minimum shareholder’s equity, minimum share price, and certain corporate governance requirements. We may not be able to continue to satisfy continuing listing requirements and other applicable rules of the Nasdaq Capital Market. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

We received a written notification on September 21, 2022 from the Nasdaq Listing Qualifications Department that we were not in compliance with the minimum bid price requirement set forth under the Nasdaq Listing Rule 5550(a)(2), or the Minimum Bid Price Requirement, as the closing bid price of our Ordinary Shares was below $1.00 per share for a period of 30 consecutive business days. We were provided 180 calendar days, or until March 20, 2023, to regain compliance with the Minimum Bid Price Requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), to regain compliance, our Ordinary Shares must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. On March 31, 2023, we received a notice from Nasdaq notifying us that we regained compliance with the Minimum Bid Price Requirement when the closing bid price of the Company’s Ordinary Shares maintained $1.00 per share or greater for 19 consecutive business days. In the event that we lose compliance with Nasdaq Listing Rule 5550(a)(2) again and do not regain compliance prior to the expiration of the compliance period, we will receive written notification that our securities are subject to delisting. At that time, we may appeal the delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules.

We received a written notification on August 13, 2023 from the Nasdaq Listing Qualification Department stating that, as a result of not having timely filed this annual report on Form 20-F, we were not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing of all periodic financial reports with the SEC. On November 1, 2023, we obtained an extension from Nasdaq permitting us to regain compliance with Nasdaq Listing Rule 5250(c)(1) provided we file this annual report on Form 20-F on or before February 12, 2024. We believe that we will regain compliance with Nasdaq Listing Rule 5250(c)(1) after the filing of this annual report.

If we fail to meet any of Nasdaq’s listing standards, our securities may be delisted from the Nasdaq Capital Market. If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including:

We have a substantial number of outstanding warrants. The exercise of our outstanding warrants  can have a dilutive effect on our Ordinary Shares.granted, and may continue to grant, share incentive awards, which may result in increased share-based compensation expenses.

We have a substantial numberAs of March 31, 2023, we had warrants outstanding.

On October 29, 2021, the Company issued warrants to Natural Selection Capital Holdings Limited in four equal tranchesand outstanding to purchase an aggregate of 14,000,00032,600,000 Ordinary Shares, which became exercisable on the later of (i) the one-year anniversary of the issuance and (ii) the applicable vesting dates, with exercise prices between $1 and $2.5 per share, and will expire on the 10th anniversary from the date on which they become exercisable.

On November 31, 2021, the Company issued warrants to Ming Ni to purchase an aggregate of 2,000,000 Ordinary Shares, which became exercisable once issued, and would expire five years after issuance.

On October 27, 2021, the Company entered into a Consulting and Warrant Issuance Agreement and agreed to issue warrants to four individuals providing consulting services to the Company to purchase in aggregate 1,800,000 Ordinary Shares, which will become exercisable once issued.

On May 10, 2022, the Company entered into an Employee Warrant Issuance Agreement with Yingjun Zhou, and agreed to issue warrants to Yingjun Zhou to purchase an aggregate of 200,000 Ordinary Shares, which will become exercisable once issued.

On May 26, 2022, the Company entered into a Consulting and Warrant Issuance, and agreed to issue warrants to three individuals providing consulting services to the Company to purchase in aggregate 500,000 Ordinary Shares, which will become exercisable once issued.

On June 30, 2022, the Company entered into a Securities Subscription and Warrant Purchase Agreement and agreed to issue warrants to 11 individuals and one company to purchase in aggregate 6,600,000 Ordinary Shares, which will become exercisable once vested. The vesting of the warrants is conditioned upon the attainment of certain performance goals of the Company. As of the date of this annual report, no warrants have vested pursuant to the Securities Subscription and Warrant Purchase Agreement.

The exercise of our outstanding warrants and conversion of our outstanding convertible notes can have a dilutive effect on our common stock.Shares. The issuance of shares of Ordinary Shares upon exercise of outstanding warrants and or conversion of outstanding convertible notes could result in substantial dilution to our shareholders, which may have a negative effect onshareholders. On June 30, 2022, our Company implemented our 2022 Share Incentive Plan to foster the pricesuccess of our Company and to increase shareholder value by providing an additional means, through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons, and to enhance the alignment of the interests of such selected participants with the interests of our shareholders. An aggregate of 3,300,000 Ordinary Shares. ForShares are reserved for issuance under the 2022 Share Incentive Plan. Any future grants will result in more information regarding our outstanding warrants, please see “Item 10. Additional Information––C. Material Contracts.”stock-based compensation expenses and additional dilution.

We believe the granting of share incentive awards is of significant importance to our ability to attract and retain our management, employees and consultants, and we will continue to grant stock incentive awards to our management, employees and consultants in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. In addition, the granting, vesting and exercise of the awards under these stock incentive plans will have a dilutive effect on your shareholding in our Company.

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

Some provisions of our second amended and restated memorandum and articles of association, which became effective on July 25, 2017,November 15, 2022, prior to the date of this report, 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:

Our board of directors may decline to register transfers of Ordinary Shares in certain circumstances.

Our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as Nasdaq Capital Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

This, however, is unlikely to affect market transactions of the Ordinary Shares held by our public shareholders. Since our Ordinary Shares are listed, the legal title to such Ordinary Shares and the registration details of those Ordinary Shares in the Company’s register of members remain with the Depository Trust Company. All market transactions with respect to those Ordinary Shares are carried out without the need for any kind of registration by the directors, as the market transactions are all conducted through the Depository Trust Company systems.

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.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, by the Companies Law (2021 Revision) of the Cayman Islands, 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. Decisions of the Privy Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. 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.

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

Cayman Islands law 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. However, these rights may be provided in a company’s articles of association. Our 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 21 clear days is required for the convening of our annual general shareholders’ meeting and at least 14 clear days’ notice 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 in nominal value of the total issued voting shares in our Company.

If we are classified as a passive foreign investment company (“PFIC”), United States taxpayers who own our Ordinary Shares may havebe subject to adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselvesgenerally will be classifiedtreated as a PFIC for anyU.S. federal income tax purposes if either (i) at least 75% of its gross income in a taxable year, if,including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income or (ii) at least 50% of its assets in a taxable year (ordinarily determined based on fair market value and averaged quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for such year, either

the production of, or produce, passive income. 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.

IfBased on our analysis of our income, assets, activities and market capitalization, we believe that we were a PFIC for our taxable year ended March 31, 2023. However, the determination of whether a non-U.S. corporation is a PFIC is a fact-intensive determination made on an annual basis and the applicable law is subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans, which are subject to change. In addition, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of Ordinary Shares from time to time, which may fluctuate considerably. As a result, there can be no assurance with respect to our status as a PFIC for any taxable year, (or portion thereof which we are currently unableand our U.S. counsel expresses no opinion with respect to determine) 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 have raised in our initial public offering, together with any other assets heldPFIC status for the production of passive income, it is possible that, for our 2023 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. Although the law in this regard is unclear, we are treating Long Yun as being owned by us for United States federal income tax purposes, not only because we control their management decisions, but also because we are entitled to the economic benefits associated with Long Yun, and as a result, we are treating Long Yun as our wholly-owned subsidiary for U.S. federal income tax purposes. 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. Therefore, the income and assets of Long Yun should be included in the determination of whether or not we are a PFIC in any taxable year.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Item 10. Additional Information—E. Taxation—United States Federal Income Taxation—PFIC.Passive Foreign Investment Company Rules.”

ItemITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

We are not an operating company but a Cayman Islands holding company. A substantial portion of our operations in the PRC are conductedPrior to March 2023, we, through Long Yun, or the VIE, based in China, pursuant to VIE Agreements. The VIE structure provides contractual exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the PRC operating entities.

We do not have any equity interests in the VIE, but whose financial results have been consolidated by us for in accordance with IFRS because we are deemed to have effective control over and to be the primary beneficiary of these companies, for accounting purposes only, via the VIE Agreements. However, the VIE Agreements have not been tested in a court of law in China as of the date of this annual report. Investors of our Ordinary Shares do not own any equity interest in the VIE in China, but instead own equity interest in a Cayman Islands holding company. For details of the VIE Agreements, see “Item 4. Information on the Company––B. Business Overview––The VIE Agreements.”

We are subject to risks associated with our VIE structure. Investors may never directly hold equity interests in the VIE. If the PRC government finds that the contractual arrangements which establish the structure of our business operations do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, which would result in the VIE being deconsolidated. A substantial portion of our assets, including the necessary licenses to conduct business are held by the VIE and its subsidiaries. A substantial portion of our revenue is generated by the VIE. The deconsolidation of the VIE would have a material adverse effect on our operations and substantially diminish the value of our Ordinary Shares. There are uncertainties about potential future actions by the PRC government that could affect the enforceability of our contractual arrangements with the VIE and, consequently, significantly affect our financial performance. The value of the Ordinary Shares may significantly decline or become worthless as a result. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information––D. Risk Factors––Risks Relating to Our Corporate Structure.”

We face various legal and operational risks and uncertainties associated with having a substantial portion of our operations in China and with the complex and evolving PRC laws and regulations, and as a result these risks may result in material changes in the operations of our subsidiaries, the VIE, and its 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. For example, we face risks associated with PRC governmental authorities’ significant oversight and discretion over the businesses and financing activities of the VIE, the requirement of regulatory approvals for offerings and listings conducted overseas and foreign investment in China-based issuers, the use of VIE, the enforcement of anti-monopoly regime, the regulatory oversight on cybersecurity and data privacy as well as the risk of delisting if the PCAOB is unable to conduct inspection on our auditors, which may impact our ability to conduct certain businesses, accept foreign investments, or continue to list on a United States or other foreign exchange. 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 such securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks related to doing business in China, see “Item 3. Key Information––D. Risk Factors––Risks Relating to Doing Business in the PRC.”

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. As of the date of this report, none of our Company, our subsidiaries, nor the VIE and its subsidiaries have been involved in any investigation or 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 Review Measures. On December 28, 2021, 13 governmental departments of the PRC, including the CAC, issued the Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures (the “Review Measures”) provide 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. As of the date of this annual report, according to our PRC counsel, Capital Equity Legal Group, our operations in the PRC and our continued listing are not subject to the review or prior approval of the CAC or the CSRC. Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. In the event that (i) the PRC government expanded the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC and that we are required to obtain such permissions or approvals; or (ii) we inadvertently concluded that relevant permissions or approvals were not required or that we did not receive or maintain relevant permissions or approvals required, any action taken by the PRC government could significantly limit or completely hinder our operating subsidiaries’ operations in the PRC and our ability to offer or continue to offer our Ordinary Shares to investors and could cause the value of such securities to significantly decline or be worthless. 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 and the VIE and its subsidiaries, our ability to accept foreign investments, and our listing on a U.S. exchange. The Standing Committee of the National People’s Congress or PRC regulatory authorities may in the future promulgate laws, regulations, or implementing rules that require us, our subsidiaries, or the VIE and its subsidiaries to obtain regulatory approval from Chinese authorities before listing in the U.S. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC— Recent greater oversight by the Cyberspace Administration of China (the ‘CAC’) over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering” and “Item 3. Key Information—D. Risk Factors— Risks Relating to Doing Business in the PRC — Changes in the policies of the PRC government could have a significant impact upon the PRC operating entities’ ability to operate profitably in the PRC.”

As a holding company, we conduct a portion of our operations in China through the VIE in China. In addition, some of our senior executive officers and directors, namely Limin Liu, Xiaohua Gu, Ming Ni, Bingzhong Wang, Wei Wang, Bin Liu, Jingxin Tian, Kim Fung Lai, and Sen Lin, reside in the PRC (including Hong Kong and Macau) for a significant portion of the time and are PRC nationals. As a result, it may be difficult to effect service of process upon those persons. It may be difficult to enforce judgements obtained in U.S. courts based on civil liability provisions of the U.S. federal securities laws against us and our officers and directors, as none of them currently resides in the U.S. or has 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. See “Item 3. Key Information—D. 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 management named in this annual report based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.”

In addition, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect the workpapers prepared by our auditor, and that as a result an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would reduce the period of time for foreign companies to comply with PCAOB audits to two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On December 16, 2021, the PCAOB issued a report on its determination that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in the PRC or Hong Kong. As of the date of this annual report, this list does not include our auditor, WWC, P.C.. Our auditor, the independent registered public accounting firm that issues the audit report contained in this annual report, 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 San Mateo, California, and has been inspected by the PCAOB on a regular basis with the last inspection in October 2019. 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 continued listing and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial statements. Furthermore, the Holding Foreign Companies Accountable Act, which requires that the PCAOB be permitted to inspect an issuer’s public accounting firm within three years, may result in the delisting of our Company or prohibition of trading in our Ordinary Shares in the future if the PCAOB is unable to inspect our accounting firm at such future time. The Accelerating Holding Foreign Companies Accountable Act, if passed by the U.S. House of Representatives and signed into law, would reduce the period of time for foreign companies to comply with PCAOB audits to two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading.

Dividend Distribution

For the fiscal years ended March 31, 2022, 2021, and 2020, there were no dividends distributed between the holding company and its subsidiaries and consolidated VIE or to investors. 

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 if this would result in the company being unable to pay its debts due in the ordinary course of business. 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, or any funds will be transferred from one entity to another on a regular basis. As such, we have not installed any cash management policies that dictate how funds are transferred among the Company, its subsidiaries, and the consolidated VIE, or to investors.

If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, Long Yun HK.

Current PRC regulations permit our PRC subsidiary, WFOE, to pay dividends to Long Yun HK only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our operating entities in China 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. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in complying with the administrative requirements necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our operating entities in the PRC 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 subsidiary, WFOE, 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. Long Yun HK may be considered a non-resident enterprise for tax purposes, so that any dividends WFOE pays to Long Yun 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 “Item 10. Additional Information—E. Taxation—People’s Republic of China Enterprise Taxation.”

In order for us to pay dividends to our shareholders, we will rely on payments made from the PRC operating entities, to WFOE, pursuant to VIE Agreements between the applicable entities, and the distribution of such payments to Long Yun HK as dividends from WFOE. Certain payments from the PRC operating entities to WFOE are subject to PRC taxes, including business taxes and value-added taxes. In addition, if any of the PRC operating entities incurs debt on their own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or 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 Arrangement with respect to any dividends paid by our PRC subsidiary, WFOE, to its immediate holding company, Long Yun HK. As of the date of this annual report, we have not commenced the application process for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that our Hong Kong subsidiary will be granted such a Hong Kong tax resident certificate. Even after our Hong Kong subsidiary obtain the Hong Kong tax resident certificate, it is required by applicable tax laws and regulations to file required forms and materials with relevant PRC tax authorities to prove that it can enjoy 5% lower PRC withholding tax rate. Long Yun HK intends to obtain the required materials and file with the relevant tax authorities when it plans to declare and pay dividends, but there is no assurance that the PRC tax authorities will approve the 5% withholding tax rate on dividends received from Long Yun HK. See “Item 3. Key Information—D. 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 the PRC operating entities, and dividends payable by the PRC operating entities to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

Under existing PRC foreign exchange regulations, payment 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 the State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements. Therefore, our PRC subsidiary is 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 regulations, 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. Current PRC regulations permit our PRC subsidiary to pay dividends to the Company only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. As of the date of this annual report, 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 the PRC), except for transfer of funds involving money laundering and criminal activities. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC— To the extent cash or assets of our business, or of our PRC subsidiaries, or the VIE, is in the PRC, such cash or assets may not be available to fund operations or for other use outside of the PRC, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets.”

Recent Regulatory Developments

On July 6, 2021, the relevant PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions are recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC— The Draft Rules Regarding Overseas Listings were released by the CSRC for public consultation. While such rules have not yet come into effect, the Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our shares to investors and could cause the value of our shares to significantly decline or become worthless.” As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding offshore offering and listing from the CSRC or any other PRC governmental authorities.

The Cybersecurity Review Measures (the “Review Measures”), which became effective on February 15, 2022, provides that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, data processing 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 Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing. The Review Measures further requires that CIIOs and data processing operators that possess personal data of at least one million users must apply for a review by the Cybersecurity Review Office of the PRC before conducting listings in foreign countries. As of the date of this annual report, we have not received any notice from any authorities identifying any of our PRC subsidiary or VIEs as a CIIOs or requiring us to go through cybersecurity review or network data security review by the CAC. We believe our PRC operations will not be subject to cybersecurity review by the CAC for this offering, because our PRC subsidiaries are not CIIOs or data processing operators with personal information of more than 1 million users. There remains uncertainty, however, as to how the Review Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Review Measures. For further details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC—Recent greater oversight by the Cyberspace Administration of China (“CAC”) over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business.”

On December 24, 2021, the CSRC released the “Regulations of the State Council on the Administration of the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comment)” and “Administrative Measures for the Recordation of Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comment)” for public opinion, and if they become law, will require Chinese companies applying to list on overseas exchanges to report and file certain documents with the CSRC within three working days after submitting listing applications and subsequent amendments. Given the current PRC regulatory environment, it is uncertain whether we, our PRC subsidiary, or the VIE will be required to obtain approvals from the PRC government to offer securities to foreign investors in the future, and whether we would be able to obtain such approvals. Ifoperated supply chain management services. Currently, we are unable to obtain such approvals if required in the future, or inadvertently conclude that such approvals are not required then the valuea provider of our Ordinary Shares may depreciate significantly or become worthless. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC— Any actions by the Chinese government, including any decision to intervene or influence the operations of the PRC subsidiary or the VIE 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 the PRC subsidiary or the VIE, 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.”

See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC—The Draft Rules Regarding Overseas Listings were released by the CSRC for public consultation. While such rules have not yet come into effect, the Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our shares to investors and could cause the value of our shares to significantly decline or become worthless.” As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding offshore offering and listing from the CSRC or any other PRC governmental authorities.

We have been advised by our PRC legal counsel that in the event that we conduct a follow-on offering of securities, if the Draft Administrative Provisions and the Draft Filing Measures are adopted in their current form, we would likely be required to submit filings to the CSRC. We believe that we are currently not required to obtain any permission or approval from the CSRC and the CAC in the PRC to issue securities to foreign investors. However, there is no guarantee that this will continue to be the case in the future in relation to our future offerings or the continued listing of our securities on a U.S. securities exchange, or even in the event such permission or approval is required and obtained, it will not be subsequently revoked or rescinded. If we do not receive or maintain the approvals, or we inadvertently conclude that such approvals are 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 securities, 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

As of the date of this annual report, we and our PRC subsidiaries and the VIE have received from the PRC authorities all requisite licenses, permissions, or approvals that are required for conducting our operations in China, such as business licenses, prepaid card issuance license and prepaid card payment acceptance license. However, it is uncertain whether we, our PRC subsidiaries, or the VIE, will be required to obtain additional approvals, licenses, or permits in connection with our business operations pursuant to evolving PRC laws and regulations, and whether we would be able to obtain and renew such approvals on a timely basis or at all. Failing to do so could result in a material change in our operations, and the value of our Ordinary Shares could depreciate significantly or become worthless. See “Risk Factors––Risks Relating to Our Business––We rely on the approvals, certificates, and business licenses held by Long Yun and any deterioration of the relationship between WFOE and Long Yun could materially and adversely affect our overall business operations.”

History and Developmentwealth management services.

We were incorporated in the Cayman Islands on June 19, 2015. Our wholly-owned subsidiary, Sweet Lollipop, was incorporated in the British Virgin Islands on May 8, 2014. Long YunMetalpha HK was incorporated in Hong Kong on May 2, 2015. WFOE, Sweet Lollipop’s wholly owned subsidiary,Metalpha Limited was organized pursuant to PRC laws on February 27, 2017. Long Yun was establishedincorporated in the British Virgin Islands on October 9, 2014 in the City of Hangzhou, the PRC, pursuant to PRC laws and is owned by the Long Yun Shareholders.

On29, 2021. In November 3, 2017, WFOE entered into a Strategic Cooperation Agreement under a joint venture, where it holds 60% of the equity interests in Taikexi.

On March 20, 2018, WFOE entered into the VIE Agreements with Long Yun and its then owners. For accounting purposes, WFOE controls and receives the economic benefits of Long Yun’s business operation through the VIE Agreements, which enables2022, we changed our corporate name from Dragon Victory International Limited to consolidate the financial results of Long Yun and its subsidiaries in its consolidated financial statements under IFRS. The VIE Agreements are described under “—B. Business Overview—The VIE Agreements.”

On August 3, 2018, WFOE entered into a strategic cooperation agreement with Shenzhen Jintai Tourism Development Co., Ltd. pursuant to which we formed a new joint venture company on August 3, 2018 under PRC laws, Shenzhen Guanpeng. WFOE holds 51% of the equity interests in Shenzhen Guanpeng.

On May 5, 2019, WFOE participated in the establishment of Zhejiang Shengyuan Business Consulting Co., Ltd (“Shengyuan”). WFOE held 49% of the equity interests in Shengyuan. On September 19, 2019, WFOE sold its interest in Shengyuan to a third party. WFOE had not paid up any capital and Shengyuan had not begun operations; accordingly, no gain or loss was incurred as a result of the transfer of ownership.

On July 7, 2019, Long Yun incorporated a subsidiary, Dacheng Liantong Zhejiang InformationMetalpha Technology Co., Ltd (“Dacheng Liantong”). Long Yun currently holds 100% of Dacheng Liantong. Dacheng Liantong is engaged in the business of providing a supply chain management platform for automotive parts suppliers, automobile repair shops, and logistics companies.Holding Limited.

On August 22, 2019, we incorporated a wholly owned subsidiary, Zhejiang Shengqian Business Consulting Co., Ltd. (“Shengqian”). We dissolved Shengqian on August 19, 2021.

On April 1, 2021, Long YunHangzhou Longyun Network Technology Co., Ltd., a company previously controlled and beneficially owned by an indirect wholly owned subsidiary of our Company by means of a series of contractual arrangements, entered into an equity transfer agreement with Mr. Qiang Huang, who owned 100% of the equity interests in Hangzhou Xuzhihang Supply Chain Management Co., Ltd. (“Xuzhihang”), a limited liability company organized under the laws of the PRC. Xuzhihang provides supply chain management and other logistics related services. Pursuant to the equity transfer agreement, Mr. Qiang Huang transferred 60% of the equity interests in Xuzhihang to Long Yun for a consideration of RMB600,000.

On June 28, 2021, we, through Sweet Lollipop, formed a wholly owned subsidiary, Meta Rich Limited (“Meta Rich”), in the British Virgin Islands.

On July 7, 2021, we, through Long YunMetalpha HK, formed a wholly owned subsidiary, LSQ Capital Limited, in Hong Kong.

On October 29, 2021, Meta Rich, together with Antalpha, Technologies Limited, a British Virgin Islands business company (“Antalpha”), formed Metalpha.Metalpha Limited. Meta Rich holdsheld 51%, and Antalpha holdsheld 49%, of the equity interests in Metalpha.Metalpha Limited. On November 28, 2022, we entered into a sale and purchase agreement with Antalpha Technologies Limited, Antalpha Technologies Holdings Limited (“Antalpha Tech”) and Meta Rich to acquire 49% equity interest held by Antalpha in Metalpha Limited. The total consideration is US$2,500,000, satisfied by the allotment and issuance of 2,500,000 Ordinary Shares of the Company to Antalpha Tech. The deal was closed in November 2022 and Metalpha Limited is now a wholly-owned subsidiary of the Company.

On December 29, 2021, the Company,we, through Meta Rich, formed a wholly owned subsidiary, Radiant Alpha Limited (“Radiant Alpha”), in the British Virgin Islands. We disposed of Radiant Alpha on September 21, 2022.

On March 18, 2022, the Company,we, through Long YunMetalpha HK, formed a wholly owned subsidiary, LSQ Investment Limited (“LSQ Investment”), in Hong Kong.

On November 28, 2022, we entered into a securities subscription and warrant purchase agreement (the “Antalpha Purchase Agreement”) with Antalpha Tech. Pursuant to this Antalpha Purchase Agreement, Antalpha Tech subscribed for and purchased 4,500,000 Ordinary Shares of the Company. Antalpha was also granted a type A warrant to purchase up to 4,500,000 Ordinary Shares (the “Type A Warrant”) and a type B warrant to purchase up to 3,000,000 Ordinary Shares (the “Type B Warrant”), upon the terms and conditions in the Antalpha Purchase Agreement, the Type A Warrant and the Type B Warrant.

On January 20, 2023, our board of directors approved our plan to discontinue and cease all business operations in mainland China (collectively, the “Mainland China Business”), which were conducted through certain operating entities in the PRC, and to dispose of the Mainland China Business by selling it to one or more third parties (the “Disposition”). On February 20, 2023, Metalpha HK, Limin Liu and Wei Wang entered into a sale and purchase agreement with Yang Xu and Liqing Zheng (collectively, the “Purchasers”), to sell all the interest in the PRC operating entities to the Purchasers and to discontinue the Mainland China Business. The aggregate consideration was US$1.00, which had been approved and authorized by our board of directors. Upon the completion of the Disposition on March 31, 2023, we discontinued and ceased the Mainland China Business and terminated the VIE structure.

In February 2023, our board of directors approved and authorized a share repurchase program (the “Share Repurchase Program”), to buy back our Ordinary Shares from the open market for an aggregate purchase price of no more than US$5,000,000. The purpose of the Share Repurchase Program is to reduce our issued share capital. The Share Repurchase Program will last a period of twelve months upon the date on which it was approved.

Our principal executive offices are located at Suite 1508, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong, China, and our phone number is +852-35652922. We maintain a corporate website at http://www.dvintinc.com/www.metalpha.net/. The information contained in, or accessible from, our website or any other website does not constitute a part of this report. We have appointed Cogency Global Inc., with its address at 122 East 42nd Street, 18th Floor, New York, NY 10168 to serve as our agent to receive service of process.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.

B. Business Overview

The VIE Agreements

On March 20, 2018, WFOE entered into the VIE Agreements with Long Yun and its shareholders. For accounting purposes, we control and receive the economic benefits of the VIE and its subsidiaries through the VIE Agreements, which enables us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under IFRS.

Each of the VIE Agreements is described in detail below:

B. Exclusive Business Cooperation AgreementOverview

Pursuant to the Exclusive Business Cooperation Agreement between Long Yun and WFOE, WFOE provides Long Yun with technical support, consulting services, and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, human resources, and information. Additionally, Long Yun granted an irrevocable and exclusive option to WFOE to purchase from Long Yun, any or all of Long Yun’s assets at the lowest purchase price permitted under PRC law. Should WFOE exercise such option, WFOE, Long Yun, and the Long Yun Shareholders will enter into a separate asset transfer or similar agreement. For services rendered to Long Yun by WFOE under the Exclusive Business Cooperation Agreement, WFOE is entitled to collect a service fee calculated based on the amount time spent by WFOE to render such services, multiplied by the corresponding billing rate of WFOE, plus a services fee determined by the board of directors of WFOE based on the value of the services rendered by WFOE and taking into account the actual net income of Long Yun.

The Exclusive Business Cooperation Agreement will remain in effect for 10 years unless it is terminated by WFOE with 30-day prior notice. Long Yun does not have the right to terminate the agreement unilaterally. WFOE may unilaterally extend the term of the Exclusive Business Cooperation Agreement with prior written notice.

The CEO and president of WFOE, Mr. Limin Liu, effectively manages Long Yun pursuant to the terms of the Exclusive Business Cooperation Agreement. WFOE has absolute authority relating to the management of Long Yun, including but not limited to decisions with regard to expenses, salary raises and bonuses, hiring, firing, and other operational functions, through the VIE Agreements. The Exclusive Business Cooperation Agreement does not prohibit related party transactions, provided, however, that the audit committee of the Company is required to review and approve in advance any related party transactions, including transactions involving WFOE or Long Yun.

Share Pledge Agreement

Under the Share Pledge Agreement among the Long Yun Shareholders and WFOE, the Long Yun Shareholders pledged all of their equity interests in Long Yun to WFOE to guarantee the performance of Long Yun’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the Share Pledge Agreement, should Long Yun or the Long Yun Shareholders breach their respective contractual obligations under the Exclusive Business Cooperation Agreement, WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. The Long Yun Shareholders also agreed that upon the occurrence of any event of default, as set forth in the Share Pledge Agreement, WFOE is entitled to dispose of the pledged equity interest in accordance with applicable PRC law. The Long Yun Shareholders further agreed not to dispose of the pledged equity interests or take any actions that would prejudice WFOE’s interest.

The Share Pledge Agreement will be effective until all payments due under the Exclusive Business Cooperation Agreement have been paid by Long Yun. WFOE will cancel or terminate the Share Pledge Agreement upon Long Yun’s full payment of all fees payable under the Exclusive Business Cooperation Agreement.

The Share Pledge Agreement serves several functions: (1) guarantee the performance of Long Yung’s obligations under the Exclusive Business Cooperation Agreement and (2) ensure the Long Yung Shareholders do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice WFOE’s interests without WFOE’s prior written consent. In the event that Long Yun or the Long Yun Shareholders breach their respective contractual obligations under the Exclusive Business Cooperation Agreement, WFOE will be entitled to foreclose on the Long Yun Shareholders’ equity interests in Long Yun and may (1) exercise its option to purchase or designate third parties to purchase part or all of their equity interests in Long Yun and in this situation, WFOE may terminate the VIE Agreements after acquisition of all equity interests in Long Yun or form new VIE structure with the third parties designated by WFOE; or (2) dispose of the pledged equity interests retain the proceeds from such sale. In the event of such a sale of the pledged equity interests, the VIE structure evidenced by the VIE Agreements will be terminated.

Exclusive Option Agreement

Under the Exclusive Option Agreement, the Long Yun Shareholders irrevocably granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their equity interests in Long Yun. The option price is equal to the capital paid in by the Long Yun Shareholders subject to any appraisal or restrictions required by applicable PRC laws and regulations. As of the date of this report, if WFOE exercised such option, the aggregate option exercise price that would be paid to the Long Yun Shareholders would be approximately $1.5 million, which is the aggregate registered capital of Long Yun. The option exercise price may increase in the event the Long Yun Shareholders make additional capital contributions to Long Yun.

The Exclusive Option Agreement, together with the Share Pledge Agreement and the Power of Attorney, enable WFOE to, for accounting purposes, control and receive the economic benefits of Long Yun’s business operation through the VIE Agreements, which enables us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under IFRS.

The Exclusive Option Agreement remains effective for a term of 10 years and may be renewed at WFOE’s election.

Powers of Attorney

Under the Powers of Attorney, each of the Long Yun Shareholders authorizes WFOE to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders, including but not limited to: (a) attending shareholders’ meetings; (b) exercising all the shareholder’s rights, including voting, that shareholders are entitled to under the laws of China and the articles of association, including but not limited to the sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf of shareholders the legal representative, the executive director, supervisor, the chief executive officer, and other senior management members of Long Yun.

Although it is not explicitly stipulated in the Powers of Attorney, the term of the Powers of Attorney shall be the same as the term of that of the Exclusive Option Agreement.

Each Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution, so long as the applicable Long Yun Shareholder is a shareholder of Long Yun.

Risks Associated with Our Corporate Structure and the VIE Agreements

Because we do not hold equity interests in the VIE and its subsidiaries, we are subject to risks and uncertainties of the interpretations and applications of PRC laws and regulations, including but not limited to, regulatory review of overseas listing of PRC companies through special purpose vehicles, and the validity and enforcement of the VIE Agreements. We are also subject to the risks and uncertainties about any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material change in our operations, and the value of our Ordinary Shares may depreciate significantly or become worthless. The VIE Agreements have not been tested in a court of law in China as of the date of this annual report.

The VIE Agreements may not be effective as direct ownership in providing operational control. For instance, Long Yun and the Long Yun Shareholders could breach their VIE Agreements with WFOE by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. The Long Yun Shareholders may not act in the best interests of our Company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements with Long Yun. In the event that Long Yun or the Long Yun Shareholders fail to perform their respective obligations under the VIE Agreements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. In addition, even if legal actions are taken to enforce such arrangements, there is uncertainty as to whether the courts of 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 United States or any state. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure— The VIE Agreements may not be effective in providing control over Long Yun” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—The VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under the VIE Agreements,” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government determines that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, and our Ordinary Shares may decline in value or become worthless.”

We are subject to certain legal and operational risks associated with being based in China, which could cause the value of our securities to become worthless. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and as a result these risks may result in material changes in the operations of the VIE and its subsidiaries, significant depreciation 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. As of the date of this annual report, we, our subsidiaries, and the VIE and its subsidiaries have not 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. As confirmed by our PRC counsel, Capital Equity Legal Group, we are not subject to cybersecurity review with CAC when the Measures for Cybersecurity Censorship became effective on February 15, 2022, since we currently do not have over one million users’ personal information and do not anticipate that we will be collecting over one million users’ personal information in the foreseeable future, which we understand might otherwise subject us to the Measures for Cybersecurity Censorship. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC—Recent greater oversight by the Cyberspace Administration of China (the ‘CAC’) over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.” According to our PRC counsel, no relevant laws or regulations in the PRC explicitly require us to seek approval from the CSRC for our overseas listing. As of the date of this annual report, we, our subsidiaries, and the VIE and its subsidiaries have not received any inquiry, notice, warning, or sanctions regarding our overseas listing from the CSRC or 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 and VIE, our ability to accept foreign investments, and our listing on a U.S. exchange. The Standing Committee of the National People’s Congress or PRC regulatory authorities may in the future promulgate laws, regulations, or implementing rules that require us, our subsidiaries, or the VIE to obtain regulatory approval from Chinese authorities for listing in the U.S. If we do not receive or maintain the approval, 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 or over-the-counter under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021. Our auditor has been inspected by the PCAOB on a regular basis with the last inspection on October 2019 and it is not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our Ordinary Shares is prohibited under the Holding Foreign Companies Accountable 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 or prohibit the trading of our Ordinary Shares. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would reduce the period of time for foreign companies to comply with PCAOB audits to two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. See “Item 3. Key Information—D. 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.”

Overview

Our primary business operation centers around wealth management services, which we offer through our subsidiaries. We operate through the PRC operating entities and Metalpha. The PRC operating entities currently have one line of business, namely, supply chaininitiated digital asset-based wealth management platform services. Historically, they also engaged in auto-parts procurement services and incubation services. Metalpha operates the cryptocurrency derivative product services.

The PRC operating entities ended the auto-parts procurement services in April 2019,December 2021 and generate income primarily from the following business description regarding such business is historical information only.

The PRC operating entities commencedexecution of cryptocurrency-related transactions, which includes the issuance of derivative products to over-the-counter (OTC) clients and our proprietary trading activities. In the fiscal year ended March 31, 2023, we partnered with a leading crypto exchange to provide crypto derivative market making services for our clients, facilitating the trading of crypto derivative products. In addition, to meet their supply chaindiverse wealth management platform services, which were developed and upgraded from their former auto-parts procurement services, in October 2019 94.31% and 100% of the business revenue generated fordemands, we also offer certain clients traditional financial derivative products. For the fiscal years ended March 31, 2021, 2022 and 2021, respectively, was2023, income from our wealth management services accounted for nil, 5.7% and 93.8% of our total income for the supply chain management platform services.same fiscal years, respectively.

5.69% of the business revenue generated forMoreover, our Hong Kong subsidiary LSQ Capital Limited, is licensed by SFC to provide asset management services in Hong Kong. For the fiscal yearsyear ended March 31, 2022, respectively, was from Metalpha’s cryptocurrency derivative product services.

Historically, the operating entities’ revenue was generated from the following sources: 

Currently, the operating entities’ revenue is generated from the following sources:

Former Lines of Business

The PRC operating entities used to offer incubation services pursuant to agreements on an ongoing and as-needed basis. The PRC operating entities offered these services, commencing from the time when a project first initiates a contribution campaign using their platform to the completion of project prototypes and/or product/service, and continuing until the project became profitable or no longer required or desired their services. These services included business and operation advisory services relating to marketing, sales and strategic planning, and guidance and general resources in ancillary services, such as human resources, legal, accounting, assisting with feasibility studies, and other types of services that projects need. The PRC operating entities did not intend to substitute for professional service providers, such as business operation professionals, accountants, or lawyers, and made referrals to third-party providers when needed. Due to market conditions, the PRC operating entities terminated the incubation services. During the fiscal years ended March 31, 2022, 2021, and 2020, the PRC operating entities2023, we did not generate any revenue through their incubationor income from such asset management services. As we further develop and expand this business, we anticipate generating revenue or income from the asset management services in the future.

In January 2018,Before the completion of the Disposition in March 2023, we, through certain operating entities in the PRC, operating entities commenced providing auto-parts related services. Historically, theyalso provided procurement services, in the form of sourcing, accounts receivable financing, and logistics services to auto-repair shops that had demand for auto-parts from auto-parts suppliers, and auto-parts suppliers transacting with auto-repair shops. They received a 0.8% procurement fee based upon the total transaction amount of auto-parts that they procured or sourced for the auto-parts suppliers and the auto-repair shops, in addition to any logistics fees applicable. The PRC operating entities suspended such services in April 2019 and did not generate any revenue from such services during the fiscal years ended March 31, 2022, 2021, and 2020. 

The Supply Chain Management Platform Services

The PRC operating entities began to provide supply chain management platform services to several auto parts suppliers and one auto parts logistics company in October 2019. The PRC operating entities aim to address the existing supply chain management issues in the Chinese auto parts industry—namely, there is no systematic purchase and payment processing platform for auto parts procurement in China. Conventionally, auto repair shops that purchase from auto parts suppliers have to rely on a series of unregulated and disarranged practices that vary greatly from transaction to transaction. This has resulted in substantive business problems for both auto parts suppliers and auto repair shops alike, such as high transaction costs, high liquidity risks, high default risks, inequitable accountability, and many others.

The PRC operating entities started to build their supply chain management platform in May 2019 with their own research and development team. The Supply Chain Management Platform is an integrated online supply chain processing center that provides auto parts suppliers, auto repair shops, and logistics companies with transaction data management, shipping and handling information management, and transaction financing. These services cover the most important aspects of auto parts procurement transactions in China. Auto parts suppliers can initiate theBy providing supply chain management platform services on the PRC operating entities’ platform by first engaging one of their qualified logistics partners. They then enter into an electronic procurement and shipping contract on the platform by logging in detailed transaction and shipping information. From there on, the Supply Chain Management Platform consolidates transaction information and shipping information forto auto parts suppliers, the logistic partner, and auto repair shops.

Auto parts logistics companies in China are small-sized business entities that transport auto parts purchased by auto repair shopswe generated revenue from transaction fees paid to them, as a designated delivery address while collecting payments from auto repair shops. These logistics companies typically transfer the payment received from auto repair shops to the relevant auto parts suppliers for their purchases within 15 to 30 days. Such delay in payment may create liquidity issues for auto parts suppliers, who would prefer to pay a premium for receiving purchase payments within five days. The PRC operating entities created the Supply Chain Management Platform to address this business need. The PRC operating entities typically advancecertain percentage of fees based on the aggregate amounts of purchase payments in full tofrom such auto parts suppliers within three days, upon confirmation from the logistics partner that it has collected purchase payments from auto repair shops. The PRC operating entities charge auto parts suppliers they work with a service fee based on a certain percentage of the aggregate amounts of purchase payments made by the auto repair shops. The PRC operating entities do not directly charge auto parts suppliers for the service fee, but rather, when their logistics partner confirms auto repair shops’ receipt of auto parts and its collection of payments, they advance only a certain percentage of the aggregate amounts of purchase payments to the auto parts suppliers and keep a certain percentage of the aggregate amounts as service fee. After the logistics partner collects the payment from the repair shop, it returns 100% of the payment to the PRC operating entities, usually within three days. The PRC operating entities do not obtain promissory notes or other financial instruments from the logistics partner for the purchase advance; however, they require the legal representative of such logistics partner to sign an unlimited personal liability agreement for each separate transaction, so that they can seek repayment from such legal representative through court proceedings in case of a payment default by the logistics partner.

During the fiscal year ended March 31, 2022, the PRC operating entities offered supply chain management platform services for 43,283 transactions ranging from RMB1,200 to RMB99,975 per transaction, with an average amount of RMB23,681.42. During the fiscal year ended March 31, 2021, the PRC operating entities offered supply chain management platform services for 17,742 transactions ranging from RMB130.00 to RMB138,000.00 per transaction, with an average amount of RMB7,778.93. To repay purchase advances made by the PRC operating entities to auto parts suppliers, the auto repair shop partners pay by electronic transfer. The PRC operating entities have not experienced any delays or delinquencies from the auto repair shop partners since October 2019.suppliers. For the fiscal years ended March 31, 2021, 2022 and 2021, we2023, 100.0%, 94.3% and 6.2% of the business income generated revenue of $2,032,916 and $225,749, respectively,was from the PRC operating entities’ supply chain management platform services, business.respectively.

The PRC operating entitiesWealth Management Services

Since December 2021, we have embarked on our digital asset-based wealth management business, aiming to provide structured derivative products and related services to institutional investors and high-net-worth individuals interested in cryptocurrency investment. By closely observing market trends and understanding customer needs, we have crafted a range of unique structured derivative products for potential clients in the market. These derivatives are based on mainstream cryptocurrencies such as Bitcoin, Ethereum, Tether tokens, USD Coin and more. Compared to direct purchases of cryptocurrencies, these structured investment products offer risk-adjusted returns, shielding customers from the substantial volatility typically associated with the cryptocurrency market. After issuing these structured derivative products to our clients, we ensure risk hedging of our trading positions through several industry trading platforms. This approach prevents us from forming a large one-sided position due to issued products, thereby protecting our results of operations from unilateral market fluctuations.

In the fiscal year ended March 31, 2023, we partnered with a leading crypto exchange to provide crypto derivative market making services for our clients, facilitating the trading of crypto derivative products. In addition, to meet their diverse wealth management demands, we also offer certain clients traditional financial derivative products.

We recognize the fair value change of (i) trading of digital assets and derivative contracts and (ii) investment in trusts as our income from our wealth management business. Income from such business was nil, $122,711 and $5.7 million for the fiscal years ended March 31, 2021, 2022 and 2023, respectively.

The Securities Advising and Asset Management Business

Our Hong Kong subsidiary, LSQ Capital Limited, provides securities advising and asset management services to customers in Hong Kong. LSQ Capital Limited holds the Type 4 (Advising on Securities) and Type 9 (Asset Management) licenses as per the SFC regulations. We are currently pursuing a Type 1 (Dealing in Securities) license. In December 2023, LSQ Capital Limited successfully obtained all necessary permitsan uplift to its existing Type 4 license from the SFC, which enables it to issue analysis and licensesreports on virtual assets to conduct their supply chainqualified investors in addition to offering securities advising services. Our securities advising and asset management platform services business.business is at early stage and we did not generate revenue or income from such business for the fiscal year ended March 31, 2023.

Registration ProcessIn April 2023, we partnered with NextGen Digital Venture Limited in managing the Next Generation Fund I SP, or the Fund. The Fund focuses on structured investments in the Supply Chain Management Platformsuite of products offered by Grayscale Investments LLC, or Grayscale, a leading crypto asset manager in the world. The Fund will strategically make direct investments in Grayscale’s investment products and indirect investments in structured derivatives products related to Grayscale’s investment products. This innovative approach provides institutions, family offices and high-net-worth individuals with compliant and indirect access to the cryptocurrency market.

The logistics partnerIn May 2023, the Fund achieved a significant milestone by securing a substantial $5.0 million anchor investment from a leading crypto company and auto part suppliersas a result of this investment, the PRC operating entities work with go throughsize of the following procedures to register their accounts on theFund reached $20.0 million.

Discontinued Business – The Supply Chain Management Platform and are required to:Services

As a general rule, the PRC operating entities do not set limits or restrictions to the aggregate purchase amounts that a customer can engage in the supply chain management platform. However, they do refrain from providingWe previously provided supply chain management platform services in mainland China. This platform, launched in May 2019, served as an integrated online hub for transaction data management, shipping and handling information management, and transaction financing, catering to anyauto parts suppliers, auto repair shop who have recordsshops, and logistics companies. Our operations in payment delays or delinquencies.mainland China were ceased in January 2023 and fully divested by March 2023.

Upon completing review of all required items for application, the approval process is complete and a supply chain management platform account is created. At that point, all transactions and related shipping, handling, and logistics information are recorded in the Supply Chain Management Platform. The PRC operating entities charge a certain percentage of service fee per auto parts transaction for the supply chain management platform services payable by the partnered auto parts suppliers.Marketing

BeyondOur clientele for our wealth management services comprises institutional investors and high-net-worth individuals who meet the steps described above,criteria of professional investors. Given the PRC operating entitiescompliance requirements and our client demographic, we do not, make any further determinationand cannot, advertise our business to the public. Our marketing efforts have therefore been focused solely on promoting our company itself through limited online channels, without referring specifically to our digital asset-based operations. Looking ahead, under the guidance of the eligibility of potential business partners. The PRC operating entities rely mostly on their business partners’ representation to them and their on-site due diligence procedures. In general, the due diligence procedures and background checks are very different from those used by banks or other financial institutions, which typically go to greater length to minimize the risk of default. Even though the PRC operating entities have yet to experience any delay or defaults in payments,our legal team, we cannot guarantee that they will continue experience zero or lower default rate than that of financial industry’s practice.

Risks Associated with Supply Chain Management Platform Services—Default and Collection

The PRC operating entities do not obtain security for their advances principally because, even assuming their logistics partner would have potential collateral to offer as security, the small size of each particular transaction does not justify the time, effort and expense of identifying the collateral and properly obtaining a security interest in such collateral. As a result, all of their payments made to auto parts suppliers are unsecured. This means that, absent court or other legal action compelling the logistics partner to repay the PRC operating entities, they rely principally on the willingness and ability of their logistic partner to send them the payment it collected from the auto repair shops.

The PRC operating entities have not experienced any delay or default in payment in the short period of time since they started the supply chain management platform services business in October 2019. In case of a default, they will first engage in industrial collection practices that include attempts to contact the logistics partner and obtain payment, and attempts to contact the logistics partner’s legal representative to satisfy the owed amount. The costs involved in these initial collection efforts are minimal as they only involve some employee time. If initial collection efforts prove to be futile, they would then proceed through litigation and court procedures, for which the default logistics partner would pay for all legal costs the PRC operating entities would incur in the process according to the laws of the PRC. According to the signed unlimited personal liability agreement, the legal representative or the controller of the logisticsmarket our company would be liable for the default amount, and his or her personal assets such as bank deposits, real assets, or personal properties would be used to pay off the amount owed to the PRC operating entities.

Marketing

With respect to the supply chain management platform service, the PRC operating entities’ marketing efforts focus on establishing working relationships through frequent on-site visits with local logistic companies, who have close business relationship with local auto-parts suppliers and repair shops. Such personal marketing method involves minimal expenses, and they did not engage in any marketing activities with third-parties or incur any marketing expenses with respect to the supply chain management platform services. As of the date of this annual report, the PRC operating entities have served a total of 6 auto-parts suppliers as clients, whose business coverages include over 1,000 auto-repair shops located in most cities in Zhejiang Province.

Competition

The PRC operating entities have temporarily suspended their incubation services on October 1, 2019 and they have not generated any revenue from such business since then. They expect to resume this segment of business when market conditions improve. We believe that the PRC operating entities are one of the few platforms in the PRC market that provides high-quality incubation services to entrepreneurs, although we are aware that there are a number of incubation facilities, including those with which the PRC operating entities have a formal or informal relationship. By providing these value-added services, we believe that projects on the PRC operating entities’ platform could have a better chance of success in both product development and completing a fundraising campaign. We believe that the PRC operating entities are the leading company for incubation projects, facing only moderate level of competition in PRC.

The Chinese auto parts procurement industry has a large yet fragmented market. The Chinese auto parts procurement industry does not have a standard model of auto parts procurement, handling, delivery and transactions, resulting a highly fragmented, decentralized, and inefficient market. With breakthroughs in computer technology, the PRC operating entities are able to integrate all essential aspects of auto parts procurement procedures and consolidate information as well as economic resources. The end product, Supply Chain Management Platform, is a one of its kind supply chain management platform in the industry. Even though the PRC operating entities have found business opportunities in a niche market, they will very likely face competition with respect to their integrated supply chain management platform services from major auto parts suppliers in China in their effort to further reduce operation costs and improve their cash flows. Some of the PRC operating entities’ major competitions in supply chain management platform service are as follows:

Strategy

The current business strategies of supply chain management platform are to: (1) expand their partnership with local and regional logistic companies while attracting business cooperation opportunities with major auto parts suppliers. The PRC operating entities’ supply chain management platform services depend on highly qualified and well-connected logistic partners and auto parts suppliers, through which they will further engage in auto parts procurement and transactions of different sizes at local and national scales. Currently, the PRC operating entities work with four logistic partners and 6 auto parts suppliers. The PRC operating entities plan to expand their marketing efforts and reach more logistic partners and auto parts suppliers in Hangzhou, Zhejiang Province and beyond, attracting auto repair shops and fulfilling their procurement needs through the PRC operating entities’ connection with logistic partners and auto parts suppliers via their platform.

PRC Regulations

This section summarizes the principal regulations in relevant jurisdictions related to the PRC operating entities’ business.

Regulation on Supply Chain Management Platform Services

The operation of our supply chain management platform services includes operations related to commercial internet information services via the Internet. Certain categories of practices related to the Internet, such as telecommunications, Internet information services, international connections to computer information networks, information security and censorship, are covered extensively by a number of existing laws and regulations issued by various PRC governmental authorities, including:

The State Council issued the Administrative Measures on Internet Information Services, effective in September 2000, and amended in January 2011. Pursuant to these measures, “internet information services” refer to provision of internet information to online users, and are divided into “commercial internet information services” and “non-commercial internet information services.” A commercial internet information services operator must register for an ICP License, approved by relevant government authorities, before engaging in any commercial internet information services related operations in China. The ICP License has a term of five years and can be renewed within 90 days before expiration.

The PRC operating entities have obtained their ICP License in August, 2019.

The online payment processing is an integral part of the PRC operating entities’ platform service. They use Allin Pay. Allin Pay helps the PRC operating entities handle the payment flows on their platform. Allin Pay is subject to numerous regulations relating to such matters as privacy, receipt and transmission of payments and money laundering.

Regulations on PRC Employment

The principle regulations that govern employment and labor matters in the PRC include: (i) Labor Law of the PRC, which was promulgated on July 5, 1994, and became effective on January 1, 1995 and last amended on December 29, 2018; (ii) the Labor Contract Law of the PRC which was promulgated on June 29, 2007 and last amended on December 28, 2012, and (iii) the Implementing Regulations of the Labor Contract Law of the PRC which was promulgated by the State Council on September 18, 2008;

According to the regulations above, labor relationships between employers and employees must be executed in written form, and wages shall not be lower than local standards on minimum wages and shall be paid to employees timely. In addition, all employers are required to establish a system for labor safety and sanitation, strictly comply with state rules and standards and provide employees with workplace safety training. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative penalties. For serious violations, criminal liability may arise.

Regulations on PRC Social Welfare

Employers in PRC are required by PRC laws and regulations to provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance and housing funds. According to the Social Insurance Law of the PRC promulgated on October 28, 2010, and became effective on July 1, 2011 and last amended on December 29, 2018, together with other relevant laws and regulations, any employer shall register with the local social insurance agency within 30 days after its establishment and shall register for the employee with the local social insurance agency within 30 days after the date of hiring. An employer shall declare and make social insurance contributions in full and on time. The occupational injury insurance and maternity insurance shall be only paid by employers while the contributions of basic pension insurance, medical insurance and unemployment insurance shall be paid by both employers and employees. Any employer that fails to make social insurance contributions may be ordered to pay the required contributions within a stipulated deadline. If the employer still fails to rectify the noncompliance within the stipulated deadline, it may be subject to a fine ranging from one to three times the amount overdue.

According to the Regulations on Administration of Housing Fund promulgated on April 3, 1999, and last amended on March 24, 2019, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, a petition may be made to a local court for enforcement.

Provisions on Foreign Investment

All limited liability companies and joint stock limited companies incorporated and operating in the PRC are governed by the Company Law of the People’s Republic of China, or the Company Law, which was amended and promulgated by the Standing Committee of the National People’s Congress on December 28, 2013 and came into effect on March 1, 2014. In the latest amendment, paid-in capital registration, minimum requirement of registered capital and timing requirement of capital contribution were abolished. Foreign invested projects must also comply with the Company Law, with exceptions as specified in foreign investment laws.

With respect to the establishment and operation of wholly foreign-owned projects, the MOFCOM and the NDRC promulgated the Catalogue of Industries for Guiding Foreign Investment, or the Catalogue, as amended on September 30, 2019, which came into effect on September 30, 2019. The Catalogue serves as the main basis for management and guidance for the MOFCOM to manage and supervise foreign investments. The Catalogue divides industries for foreign investment into three categories: encouraged, restricted and prohibited. Those industries not set out in the Catalogue shall be classified as industries permitted for foreign investment. According to the Catalogue, the supply chain management platform services are not prohibited.

On September 3, 2016, the Standing Committee of the National People’s Congress promulgated the Decision of the Standing Committee of the National People’s Congress on Amending Four Laws Including the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises (the “Decision”), which provides record-filing in lieu of administrative approval for the establishments and alterations of foreign invested enterprises (the “FIEs”) not subject to special administrative measures. On October 8, 2016, the MOFCOM issued the Interim Measures for Record-filing for the Establishment and Alteration of Foreign-invested Enterprises (the “Interim Measure”), and the MOFCOM and the NDRC jointly issued a statement (the “Joint Statement”), clarifying that the special administrative measures in this case are implemented by referencing the Catalogue. To be specific, the special administrative measures to be implemented are the restricted and prohibited industry categories as well as encouraged industry categories having shareholding and executive management requirements prescribed in the Catalogue. Since then, FIE establishments and alterations that are not subject to special administrative measures have been changed from a pre-approval system to a more standardized and convenient filing process.

Foreign Ownership Restrictions

Foreign direct investment in telecommunications companies in China is regulated by the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which limit foreign ownership of companies that provide value-added telecommunications services, including Internet content provision, to 50% of the outstanding equity.

On July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunication Services, or the MIIT Circular 2006. The MIIT Circular 2006 requires that (i) foreign investors can only operate a telecommunications business in China by establishing a telecommunications enterprise with a valid telecommunications business operation license; (ii) domestic ICP license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, or providing any resource, sites or facilities to foreign investors to facilitate the illegal operation of telecommunications business in China; (iii) ICP license holders (including their shareholders) must directly own the domain names and registered trademarks they use in their daily operations; (iv) each ICP license holder must have the necessary facilities for its approved business operations and to maintain such facilities in the regions covered by its license and (v) all value-added telecommunication service providers must improve the network and information security, draft relevant information safety administration regulations and set up networks and information safety emergency plans. The provincial communications administration bureaus in charge of telecommunications services are required to ensure that existing ICP license holders would conduct a self-assessment of their compliance with the Notice and to submit status reports to the MIIT before November 1, 2006, and may revoke the operating licenses of those who fail to comply with the above requirements and fail to rectify such non-compliance within the limited period set by provincial communications administration bureaus. Due to the lack of further necessary interpretation from the regulator, it remains unclear what impact the Notice will have on us or the other Chinese Internet companies that have adopted the same or similar corporate and contractual structures.

In order to comply with such foreign ownership restrictions, we operate a part of our business in China through Long Yun. We operate our remaining business in China through Taikexi, in which our wholly owned subsidiary WFOE owns 60% of equity interest.

Information Security

Internet content in China is regulated and restricted from a state security standpoint. The National People’s Congress, China’s national legislative body, has enacted a law that may subject to criminal punishment in China any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information or (v) infringe intellectual property rights.

The Ministry of Public Security has promulgated measures that prohibit using the Internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content. The Ministry of Public Security has supervision and inspection rights in this regard, and we may be subject to the jurisdiction of the local security bureaus. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites.

PRC Regulation of Intellectual Property Rights

The State Council and the NCAC have promulgated various rules and regulations and rules relating to protection of software in China. Under these rules and regulations, software owners, licensees and transferees may register their rights in software with Copy Protection Center of China or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are encouraged to go through the registration process and registered software rights may be entitled to better protections.

The PRC Trademark Law, adopted in 1982 and revised in 2001 and 2013, respectively, with its implementation rules adopted in 2002 and revised in 2014, protects registered trademarks. The Trademark Office of the SAIC handles trademark registrations and grants a protection term of ten years to registered trademarks.

Privacy Protection

In recent years, PRC government authorities have enacted laws and regulations on the use of Internet to protect personal information from any unauthorized disclosure. The Administrative Measures on Internet Information Services prohibit ICP service operators, like our platform, from insulting or slandering a third party or infringing upon the lawful rights and interests of a third party. Additionally, under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in 2011, an ICP service operator may not collect any user personal information or provide any such information to third parties without the consent of a user. An ICP service operator must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only such information necessary for the provision of its services. An ICP service operator is also required to properly store users’ personal information, and in case of any leak or potential leak of users’ personal information, the ICP service operator must take immediate remedial measures and, in extraordinary circumstances, report immediately to the telecommunications regulatory authority. In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the Standing Committee of the National People’s Congress in December 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection and use of users’ personal information are subject to the consent of the users, abide by the principlesconfines of legality rationality and necessity and be within the specified purposes, methods and scopes. An ICP service operator must also maintain such information strictly confidential, and is further prohibited from divulging, tampering or destroying of any such information, or selling or proving such information to other parties. Any violation of the above decision or order may subject the ICP service operator to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or even criminal liabilities. The PRC operating entities require their users to accept a user agreement whereby they agree to provide certain personal information to the PRC operating entities, and have established information security systems to protect users’ privacy.

Regulations of Foreign Exchange

Under the PRC Foreign Exchange Administration Regulations promulgated on January 29, 1996 and amended on August 5, 2008 and various regulations issued by the SAFE and other relevant PRC government authorities, Renminbi is convertible into other currencies for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct equity investments, loans, repatriation of investment, and investments in securities abroad, unless prior approval is obtained from the SAFE and prior registration with SAFE is made.

SAFE promulgated the Notice of the SAFE on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign invested Enterprises, or the SAFE Circular 19, in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFE further promulgated the Notice of the SAFE on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or the SAFE Circular 16, effective on June 9, 2016, which among other things, amend certain provisions of Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of SAFE Circular 19 or SAFE Circular 16 could result in administrative penalties.

From 2012, SAFE has promulgated various circulars to substantially amend and simplify the current foreign exchange procedure. According to these circulars, the opening of various special purpose foreign exchange accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE. In addition, domestic companies are allowed to provide loans not only to their offshore subsidiaries, but also to their offshore parents and affiliates. SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on registration information provided by SAFE and its branches. In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment, or the SAFE Circular 13, which delegates the power to enforce the foreign exchange registration in connection with inbound and outbound direct investments under relevant SAFE rules from local branches of SAFE to banks, thereby further simplifying the foreign exchange registration procedures for inbound and outbound direct investments.

On January 26, 2017, SAFE issued the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control, or the SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statement; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts, and other proof when completing the registration procedures in connection with an outbound investment.

Regulations on Dividend Distribution

The principal laws and regulations govern the distribution of dividends of foreign-invested enterprises in the PRC include the Company Law of the PRC, as amended in 2004, 2005 and 2013, the Wholly Foreign-owned Enterprise Law promulgated in 1986 and amended in 2000 and 2016 and its implementation regulations promulgated in 1990 and subsequently amended in 2001 and 2014. Under these laws and regulations, wholly foreign-owned enterprises in the PRC may pay dividends only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Wholly foreign-owned companies are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on China accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.

The Cryptocurrency Derivative Products Services

Metalpha commenced its current cryptocurrency derivative products services in December›2021. Metalpha makes markets incompliance, without explicitly advertising our cryptocurrency-related products, including over-the-counter (OTC) derivative instruments and structured products. Metalpha also works with clients to create specially-tailored instruments to enable sophisticated investors to establish or liquidate investment positions or undertake hedging strategies. Metalpha generates revenue from executing cryptocurrency-related transactions and from its proprietary trading activities.

On December 23, 2021, Metalpha entered into a Product Purchase Agreement and a Trading Account Management Agreement with Antalpha, pursuant to which Antalpha purchased from Metalpha various cryptocurrency derivative products. The underlying assets of the cryptocurrency derivative products included Bitcoin, Ethereum, Binance Coin, Tether, etc.Strategy

Fair value gain of approximately US$122,711 (2021: Nil) from remeasurement of digital assets at March 31, 2022, to the extent it is not offset by remeasurement of digital asset payables to customers at the same date, is presented as part of the “fair value change of proprietary trading digital assets” in the consolidated statements of profit or loss and other comprehensive income. Net fair value gain of approximately US$124,611 (2021: Nil) from remeasurement of digital assets at March 31, 2022, to the extent it is offset by remeasurement of digital asset payables to customers at the same date.

Marketing

The company has not conducted any extensive marketing for cryptocurrency-related businesses, and has only conducted trial lines of Internet advertising. The related business is still in the early stage of development, and we will market it within the scope of legal requirements once the business model and compliance structure are in place.

Strategy

The operating entities’Our business strategies for their current two business segments (namely,the cryptocurrency derivative product services by Metalpha and supply chain management platform services by the PRC operating entities) are constantly being tested by the market.

The current business strategies of cryptocurrency derivative product services are: (1) keeping up with the rapid developmentfast-paced evolution of the digital currency industry and the web3 industry; (2) settingCatering primarily to large institutions and high net worth individuals inwithin the cryptocurrency world as the main target customers.world.

Oversea Regulations

This section summarizes the principal regulations in relevant jurisdictions related to the Metalpha’our business.

Regulation on Cryptocurrency Related Services in the British Virgin Islands

The British Virgin Islands adopts the Financial Action Task Force’s (“FATF”) definition of virtual asset, which is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purpose, but does not include digital representations of fiat currencies.

Existing Financial Service Legislation in the British Virgin Islands

The British Virgin Islands has not developed a specific regulatory framework for virtual assets (“VA”). The British Virgin Islands Financial Service Commission (“FSC”), which is the main regulator for virtual assets, published the Guidance on Regulation of Virtual Assets on July 10, 2020 (the “Guidance”), in accordance with which licensing, authorization or approval for virtual assets shall be considered under existing financial service legislation. Under the existing financial service legislation, virtual asset products may be captured from regulatory perspective in one of two ways:

The FSC has confirmed that virtual assets and virtual assets-related products used as a means of payment for goods and services which provide the purchaser with an ability to only purchase goods and services would not be captured by financial service legislation. However, where a virtual asset product or service provides a benefit or right beyond a medium of exchange, it may be captured under the Securities and Investment Business Act of the British Virgin Islands (as amended) (the “SIBA”).

The SIBA provides that no person shall carry on “investment business” of any kind in or from within the British Virgin Islands unless licensed or authorised by the FSC to carry on such investment business unless otherwise excluded under Schedule 2. In case that the virtual asset related products constitute, including but not limited to, the mutual fund, shares or interests in an entity, debentures, instruments giving entitlement to shares, interests or debentures, certificates representing investments, options, futures, contracts for differences, long-term insurance contracts, and rights and interests in investments, the initial issuance of the same is likely to subject to the SIBA and, therefore, licence, authorisation and approval is required.

After issuance, activities involving virtual assets and virtual asset-related products that may be considered regulated activity and therefore require licensing in accordance with the following legislations:

When a virtual asset product fits the definition of an investment, persons carrying on an investment business activity will require a licence. The following two conditions must be satisfied to determine whether a licence is required (1) whether the product satisfies the definition of an “investment” as outlined above under “Regulated Activities – At Initial Issue Investments” above; and (2) provided the definition of “investment” is met, an assessment is required to determine whether the investment activity is captured and not excluded pursuant to the SIBA.

The FMSA provides that licensing, registration and supervision of persons carrying on financing business and “money” services business in or from within the British Virgin Islands. “Money” is defined in the Regulatory Code (as amended) of the British Virgin Islands as including notes and coins; postal orders; cheques of any kind, including travellers’ cheques; bankers’ drafts and other payable orders; and money deposited in an account; in each case, in any currency. “Coin” is defined in the Interpretation Act (as amended) of the British Virgin Islands to mean any coin that is legally current in the British Virgin Islands. Given the definitions outlined above, the transmission of virtual assets or virtual asset related products would not require a money services business licence. However, considering the impending launch of the Sandbox (as defined below), the views and guidance of the FSC should first be secured before proceeding with the activity in or from within the British Virgin Islands.

Financial Services (Regulatory Sandbox) Regulations(as amended) of the British Virgin Islands

Notwithstanding the existing financial service legislation, the FSC also introduces the Financial Services (Regulatory Sandbox) Regulations(as amended) (the “Sandbox Regulations”) in the British Virgin Islands to launch a regulatory sandbox designated to support and facilitate innovation in the financial technology sector and allow businesses to trail new products and services which amount to “innovative FinTech” (the “Sandbox”), for a limited period, without the need to apply for a licence to conduct financial service business in the British Virgin Islands. Pursuant to the Sandbox Regulations, “innovative FinTech” is defined as the “development or implementation of a new system, mechanism, idea, method, or other arrangement through the use of technology to create, enhance or promote a product or service with respect to the conduct or provision of a financial services business”. The Sandbox is open to a (i) BVI business company; (ii) a foreign company; (iii) a limited partnership; (iv) a micro business company; (v) the licensee; and (vi) any other person that the FSC wishes to consider for participating in the Sandbox. In approving an applicant as a Sandbox participant, the FSC must be satisfied that:

The maximum period permitted under the Sandbox Regulations is 18 months; although, an application to extend this by up to 6 months may be submitted to the FSC (by no later than 30 days before the end of the period). At the end of a Sandbox participant’s period, the participant may elect to either apply to become a fully licensed entity under applicable BVI regulatory legislation, or cease its Sandbox operations. The FSC may revoke a Sandbox participant’s approval to participate in the Sandbox in certain circumstances as specified in the Sandbox Regulations.

The ML/TF/PF (defined below) Regime in the British Virgin Islands

The British Virgin Islands, as an international finance centre, remains committed to the global fight against money laundering (“ML”), terrorist financing (“TF”) and proliferation financing (“PF”) by ensuring that it is in compliance with FATF’s International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation (the “FATF Recommendations”). Under the ML/TF/PF regime in the British Virgin Islands, in conducting “relevant business”, a relevant person shall comply with certain obligations, including but not limited to maintaining identification procedures, record keeping procedures, internal reporting procedures and internal control and communication procedures, and taking appropriate measures to make employees aware of the legislations and providing training for employees, before forming a business relationship or carrying out a one-off transaction with or for another person. The virtual assets provider service is not within the scope of “relevant business” for the time being.

However, in response to FATF’s Recommendation 16 prescribing that originating virtual asset service providers must obtain, and hold required accurate originator information along with the required beneficiary information on virtual asset transfers, the FSC has solicited public consultations on the amendments to the Anti-money Laundering Regulations and Anti-money Laundering and Terrorist Financing Code of Practice (the “AML Consultation Papers”) since July 2022. The AML Consultation Papers contain provisions pertaining to the identification, verification, production, record keeping and other relevant obligations relating to the business of carrying on or providing virtual asset service within the meaning of the Virtual Assets Service Providers Act (as amended) of the British Virgin Islands, when a transaction involves virtual assets valued at $1,000 or more.

Regulation on Cryptocurrency Related Services in Hong Kong

Currently, there is no specific legislative framework in Hong Kong which regulates VA and therefore no single regulatory body governs such VAs. However, a number of financial regulators have issued guidance relating to VAs, including the Securities and Futures Commission (the “SFC”)SFC and the Hong Kong Monetary Authority (the “HKMA”).

Securities and Futures Commission

Entities conducting activities relating to VAs where the relevant VA fits the definition of “securities” or “futures contracts” under the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) are subject to the offering or marketing restrictions, licensing and registration requirements therein and must comply with the anti-money laundering (“AML”) and counter-terrorist financing (“CTF”) requirements under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance of Hong Kong (Cap. 615) (the “AMLO”). The vast majority of VAs (such as Bitcoin) do not fit the definition of “securities” or “futures contracts”, but the SFC has imposed specific regulatory requirements on VA portfolio managers and distributors of VAs.

On November 1, November 2018, the SFC published a Statement on Regulatory Framework for Virtual Assets Portfolio Managers, Fund Distributors and Trading Platform Operators (the “Regulatory Framework Statement”). The Regulatory Framework Statement brings portfolio manager and distributors of funds dealing with VAs under the SFC’s regulation and seeks to imposes further regulatory requirements on such licensed corporations that the SFC currently regulates.

On October 4 October 2019, the SFC published a Proforma Terms and Conditions for Licensed Corporations which Manager Portfolios that Invest in Virtual Assets (the “Terms and Conditions”). The Terms and Conditions apply to licensed corporations which manage or plan to manage funds (or portfolio of funds) with a stated investment objective to invest in VAs or an intention to invest 10% or more of the gross asset value of the fund in VAs. The Terms and Conditions plans to subject the VA fund managers to the same regulatory requirements irrespective of whether the VAs under their management constitute “securities” or “futures contract” and sets forth principles that are based on existing requirements under the rules and guidelines published by the SFC but are adapted to address the particular risks related to VAs, including restrictions on distribution of any VA fund, custody of assets and disclosure or reporting requirements.

On January 28 January 2022, the SFC and the HKMA issued a Joint Circular on Intermediaries’ Virtual Asset-Related Activities (the “Joint Circular”). The Joint Circular replaces the Regulatory Framework Statement on distribution of VA funds. The Joint Circular applies to intermediaries that wish to engage in the distribution of VA-related products and the provision of VA dealing and advisory services. The Joint Circular sets out new requirements (such as additional investor protection measures) and reminds intermediaries of the existing requirements that apply to the relevant activities: